TMI Blog2011 (12) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... ctober 2009 and the underlying approval of the Commissioner dated 30 September 2009, both of which have been issued over two years ago. Petitioner has a remedy of moving appeal against the draft order before the Dispute Resolution Panel. - Decided against the assessee. - WRIT PETITION (L) NO. 2782 OF 2011 - - - Dated:- 23-12-2011 - DR. D.Y. CHANDRACHUD and A.A. SAYED, JJ. JUDGMENT Dr. D.Y. Chandrachud, J. In these proceedings under Article 226 of the Constitution, the Petitioner has sought to challenge (i) An order dated 31 October 2011 passed by the Additional Commissioner of Income-tax, Transfer Pricing Officer -1(5); (ii) A reference made on 9 October 2009 by the Assistant Commissioner of Income-tax to the Transfer Pricing Officer; and (iii) The approval granted by the Commissioner of Income-tax - VI. 2. The Petitioner filed a return of income on 30 September 2008. Together with the Return of Income, Form 3CEB prescribed under Section 92E of the Income-tax Act, 1961 read with Rule 10E of the Income-tax Rules 1962 was enclosed which reflected international transactions worth Rs.2267 crores of the Petitioner with its Associated Enterprises (AE's) namely Aditya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 in the amount of Rs.15,988 crores. The notice adverted to the fact that the Transfer Pricing report furnished on 11 March 2011 stated as follows :- "As a part of its global expansion strategy Hindalco acquired a giant company Novelis Inc. Canada on 15 May 2007, in a transaction aggregating US $ 3.48 billion. In order to consummate this transaction, Hindalco had to avail borrowing and financing from international lenders. Hindalco therefore created 100% subsidiary company in the Netherlands known as AV Minerals, Netherlands ('BVCo'). BVCo in turn created another 100% subsidiary in Canada, A V Metals ('Sub Co'). Both BVCo and SubCo were specifically created as Special Purpose Vehicles ('SPVs') by Hindalco for the purpose of this acquisition. The acquisition of Novelis was funded by a bridge loan from a consortium of international banks. This loan was drawn by BVCo (the 100% SPV created by Hindalco). Hindalco, as the parent company had the prime responsibility to arrange the availability of funds to these SPVs. Hindalco, in discharge of this obligation, provided a corporate guarantee to the international banks for due performance of the facility agreement entered into b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on standalone basis; 4. The rate of interest and the duration of the loan extended by the Bank to your AE; 5. The rate of interest that could have been charged by the Bank, if the guarantee is not provided by the AE. If this information is not available, the credit rating of the AEs and the equivalent rate of interest of unsecured debt in the AE country for the equivalent credit rating of your AE. If this information is not available, please submit the complete audited financial statements of the AE for the last three years upto and including the financial year in which the guarantee is provided by the taxpayer." Details of guarantees furnished earlier by the Petitioner to its AEs in the preceding years and outstandings as on 1 April 2007 were also sought. 5. In the proceedings before the Transfer Pricing Officer, the Petitioner was duly represented by its Joint President Taxation. The Transfer Pricing Officer conducted proceedings on 10 August 2011, 30 August 2011, 7 September 2011, 14 September 2011, 26 September 2011, 5 October 2011, 14 October 2011 and 21 October 2011. During the course of the proceedings, the Petitioner submitted replies. Among those on the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements of the Proviso to Section 92C(3) were not fulfilled; (iii) A reference under Section 92CA(1) can be made only where an Assessee has entered into an international transaction. In the present case, the guarantee was issued by the bank at the behest of the Petitioner and as between the bank and the Petitioner there is no international transaction. Moreover, the expression "international transaction" is defined in Section 92B and the issuance of a guarantee does not involve either the sale of goods or the provision of a service. On this ground, it has been urged on behalf of the Petitioner that the interference of this Court in the exercise of its jurisdiction under Article 226 of the Constitution is warranted. 8. On the other hand, it has been urged on behalf of the Revenue that (i) Form 3CEB under Section 92E which was enclosed with the return of income reflected international transactions and the fact that the Petitioner has entered into an international transaction is evident from the Form which has been certified by the Chartered Accountant on 29 September 2008; (ii) The exercise of the Writ Jurisdiction under Article 226 of the Constitution is not warranted at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 92C provides for the computation of the Arm's Length Price. Under sub-Section (3) of Section 92C, the Assessing Officer is empowered to determine the Arm's Length Price in relation to an international transaction on the basis of the provisions of sub-Sections (1) and (2) taking account of such material, information or documents as is available with him, where he is of the opinion inter-alia that the price charged or paid in an international transaction has not been determined in accordance with sub-Sections (1) and (2), or where the information and documents relating to the transaction have not been kept by the Assessee in accordance with the statutory provisions; or where the information or data used in the computation is not reliable or correct or the Assessee has failed to furnish within a specified time any document which he is required to furnish. Section 92CA empowers the Assessing Officer to make a reference to the Transfer Pricing Officer. Under sub-Section 1 of Section 92CA, where any person being an Assessee has entered into an international transaction in any previous year and the Assessing Officer considers it necessary or expedient so to do, he may, with the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Dispute Resolution Panel is subject to an appeal before the Appellate Tribunal. 11. In the present case, the Assessing Officer, while making a reference to the Transfer Pricing Officer stated in her order dated 9 October 2009 that she considered it necessary or expedient so to do. While seeking the approval of the Commissioner, the Assessing Officer relied upon an instruction of the CBDT which stipulates that all cases where international transactions exceeding Rs. 15 crores are involved, shall within the meaning of Section 92 be selected for compulsory scrutiny. The Commissioner granted his approval on 30 September 2009. The Transfer Pricing Officer issued a notice to the Assessee as far back as on 3 March 2010 upon receipt of the reference. The Petitioner participated in the proceedings before the Transfer Pricing Officer. Eight hearings took place before the Transfer Pricing Officer in the course of which the Petitioner submitted its representations. The Transfer Pricing Officer has now rendered a determination on 31 October 2011. At this stage, we are of the considered view that it would be inappropriate for this Court to exercise its writ jurisdiction under Article 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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