Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (10) TMI 602 - AT - Income TaxPenalty u/s 271(1)(c) - TP Adjustment - price being charged by the assessee to its Associated Enterprises for services rendered for the future assessment years - HELD THAT:- On the levy of penalty, we are in agreement with the arguments put forward by the counsel for the assessee to the effect that the assessee has consistently taken the position that the lower mark-up charged in respect of services rendered to associated enterprises, for the reason that transfer pricing provisions are not attracted in cases where there is no base erosion, so far as taxes are concerned. Assessee had made adequate disclosure of all the material facts in Form 3CEB, TPSR and also during the course of the transfer pricing assessment proceeding and scrutiny assessment proceedings. Therefore, there is no furnishing of any inaccurate particulars of income by the assessee. We also observe that it has been held by various Courts that Explanation 7 to Section 271(l)(c) of the Act cannot be invoked while levying penalty in relation to the transfer pricing adjustment, when the said Explanation was neither referred nor relied upon at the time of initiation of the penalty proceedings under the Act. Another noteworthy point is that in our view, the additions on which penalty has been levied is a debatable issue. This is evident from the fact that 'Base Erosion' [2016 (7) TMI 760 - ITAT KOLKATA] issue was dealt by the Special Bench -Kolkata ITAT. Further, Pune ITAT has also upheld argument of Base Erosion and hence, two views are possible since at the time of hearing before Pune ITAT, it took an independent view since Kolkata SB decision was rendered after the Pune ITAT decision. The fact that Gujarat High Court has admitted the issue for consideration also supports the assessee’s contention that the issue involved is debatable. So far as penalty with regards to reimbursement of expenses is being treated as FTS is concerned, in our view, it is a debatable issue whether reimbursement of expenses qualifies as FTS and there are various decisions which have held that reimbursement of expenses does not qualify as FTS. Accordingly, we are of the considered view that no penalty can be levied u/s 271(1)(c) of the Act on account of treating reimbursement of expenses as FTS. We are of the considered view, that in the instant set of facts, no penalty u/s 271(1)(c) of the Act is liable to be imposed on the assessee. Accordingly, we direct that the penalty u/s 271(1)(c) of the Act be deleted in the instant set of facts. Levy of penalty u/s 271(1)(c) - addition made on account of higher profit attributable to project office (PO) - HELD THAT:- While preparing the profit attributable report by third-party consultant, view was taken that single year data would not adequately capture the market and business cycle of the broad range of comparables. Therefore, multiple year data for undertaking a compatibility analysis was taken since it would produce better results and therefore use of such data is more appropriate than using a single year approach. As in the instant set of facts, while determining the profits attributable to project office, the assessee placed reliance on profit attribution report prepared by third-party consultant. Further, the complete basis for determining the profits attributable to the PO were adequately documented and prepared by third-party consultant. Only because there was a difference of opinion between the approach adopted by the assessee and the Ld. Assessing Officer for determining the profits attributable to the PO, this would itself not a sufficient to impose penalty u/s 271(1)(c) of the Act. In fact, from the observations of the Ld. Assessing Officer, it is evident that this is not a fit case for imposing penalty u/s 271(1)(c) of the Act.
|