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TMI Blog2013 (5) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whether prior to insertion of second proviso to Section 92C(2), the benefit of 5% tolerance margin as prescribed under proviso to Section 92C(2) of the IT Act, 1961 for the purposes of determining the arm's length price of an international transaction is allowable as a standard deduction in all cases, or is allowable only if the difference is less than 5%." 2. However, the Special Bench has been reconstituted under Section 255(3) of the Income-tax Act, 1961 by the Hon'ble President, Income Tax Appellate Tribunal, vide order dated 22nd February, 2013, consisting of Shri G.D. Agrawal, Vice President, Shri S.V. Mehrotra, Accountant Member and Shri Rajpal Yadav, Judicial Member to consider and decide the aforesaid question. 3. At the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the ITAT has no power to adjudicate upon the constitutional validity of any provisions of the Income-tax Act. With regard to the decision of ITAT Pune Bench cited supra, he stated that such decision has not considered the amendment by the Finance Act, 2012. Therefore, this decision is per incuriam because it failed to consider the provisions of the Income-tax Act, i.e., the amendment made by the Finance Act, 2012 to Section 92C(2) with retrospective effect. He, therefore, stated that the question before the Special Bench should be answered in favour of the Revenue i.e., the benefit of 5% tolerance margin is allowable only if the difference is less than 5%. 5. We have carefully considered the arguments of both the sides and peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceed five per cent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price.]." 7. That Finance Act, 2012 with retrospective effect from 1.4.2002 has modified the second proviso to Section 92C. The position of Section 92C(2) after the Finance Act, 2012 reads as under:- "(2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm's length price, in the manner as may be prescribed : [Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices : Provided further that if the variation between the arm's length p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the subject, the present Special Bench was constituted by the Hon'ble President to resolve the controversy. However, in the meanwhile, second proviso to Section 92C has been modified by the Finance Act, 2012 with retrospective effect from 1.4.2002, which is extracted above in paragraph No.7. 9. From the above second proviso to Section 92C(2), it is evident that if the variation between the arm's length price and the price at which international transaction was actually undertaken does not exceed the specified percentage, then only the price at which the international transaction has actually been undertaken shall be deemed to be arm's length price. Thus, the benefit of tolerance margin would be available only if the variation is withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Act. On this aspect, we uphold the plea of the assessee. However, as we have remanded the matter to the file of the Assessing Officer with regard to the benchmarking of transactions of Category 'B' and 'C' undertaken by the assessee with its AEs, on the instant aspect also, the Assessing Officer shall pass an order afresh considering the aforesaid precedent and the concurrent legal position prevailing on this subject." 11. From the above, it is evident that the ITAT Pune Bench has followed the decision of ITAT Pune Bench and Delhi Bench which were rendered prior to amendment of second proviso to Section 92C(2) by the Finance Act, 2012 with retrospective effect. Though the decision of ITAT Pune Bench is after coming into force of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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