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2021 (3) TMI 312 - AT - Income TaxRevision u/s 263 - TP Adjustment - CIT (IT&TP) has found that there was error in the calculation of the PLI of the assessee company i.e. adoption of the operating cost and also allocation of operating cost between the branded food segment and SIT segment and the assessee has not been able to point out that these discrepancies are not arising out of the TPO’s order - HELD THAT:- There is clearly an error committed by the TPO, in computing the operating revenue while determining the ALP. Thus, the TPO order was clearly erroneous in so far as it was prejudicial to the interest of the revenue. Whether the CIT (IT&TP) could have revised the TPO order? - Where the direction of the DRP have been held to be part of the assessment order, then, there can be no doubt that TP order is also part of assessment order and is thus amenable to jurisdiction of the CIT u/s.263 of the Act and particularly on the issues which were not considered by the TPO and DRP. Thus, assessee’s grounds of appeal No.1 to 3(i), (ii) & (iii) are rejected. Assessee’s objection that the Tasty Bites and Eastables Ltd does not satisfy the filter adopted by the TPO - We find that the TPO has himself adopted the RPT filter of more than 25% and in the case of Tasty Bites and Eatables Ltd., it’s RPT is clearly beyond the range fixed by the TPO, its RPT transactions are much more than 50%, but nearly 75%. In such circumstances, the TPO ought not to have considered the said company as a comparable company. Though the assessee may not have challenged the same before the TPO, assessee has challenged it before the DRP, but the DRP has not adjudicated the same and since there was no demand arising due to the consequential order passed by the AO, there was no occasion for the assessee to file an appeal before the ITAT. Therefore, in our opinion, the CIT (IT&TP) ought to have directed the TPO to consider assessee’s objections to Tasty Bites and Eatables Ltd before concluding the assessment proceedings. We direct the AO to examine and verify whether the RPT transaction of Tasty Bites Eatables Ltd with its AE is more than 25% and if it is found to be correct, then the said company shall be excluded from the final list of comparables. With these directions, the order of the CIT u/s 263 is modified and the AO/TPO is directed to recompute the ALP by excluding the Tasty Bites Eatables Ltd, and if thereafter the PLI of the assessee is less than +-5% of the comparable companies, then no TP adjustment is called for. With these directions, the appeal of the assessee against the order u/s.263 of the Act, is partly allowed.
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