TMI Blog2013 (5) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... only when the variation between the arm's length price as determined under Section 92C(1) and the price at which the international transaction has actually been undertaken does not exceed the tolerance margin. Once it exceeds the tolerance margin, no benefit under the proviso would be available to the assessee and the ALP as determined under Section 92C(1) shall be considered. The question referred is answered accordingly, in favour of the Revenue and against the assessee. Assessee has also challenged the constitutional validity of retrospective amendment to second proviso to Section 92C(2). Held hat:- Income Tax Appellate Tribunal is a creation of the Income-tax Act and not a constitutional authority. It has to interpret the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the assessee fairly admitted that after the amendment by Finance Act, 2012 with retrospective effect from 1.4.2002, the question posed before the Special Bench appears to have been settled against the assessee. He, however, submitted that the Pune Bench of ITAT, vide order dated 23rd July, 2012 in the case of Piagio Vehicle P. Ltd. v. DCIT in ITA No.1480/PN/2010, has taken the view that the assessee is entitled to benefit of adjustment of +/- 5% variation while computing the arm's length price (ALP). That the above decision of ITAT is after coming into force the Finance Act, 2012, by which, second proviso to Section 92C of the Income-tax Act, 1961 has been modified with retrospective effect. He, therefore, submitted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us. Before we proceed to consider the arguments of the parties, it would be appropriate if we narrate the history of Section 92C(2) of the Income-tax Act, 1961. Section 92C(2), before the amendment by Finance (No.2) Act, 2009, 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, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent of such arithmetical mean.]." 6. Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and price at which the international transaction [or specified domestic transaction] has actually been undertaken [does not exceed [such percentage of the latter, as may be notified] by the Central Government in the Official Gazette in this behalf], the price at which the international transaction [or specified domestic transaction] has actually been undertaken shall be deemed to be the arm's length price.] [Explanation. For the removal of doubts, it is hereby clarified that the provisions of the second proviso shall also be applicable to all assessment or reassessment proceedings pending before an Assessing Officer as on the 1st day of October, 2009.]." 8. From the above, it is evident that before the amendment by the Finance (No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce margin. Once the variation exceeded the tolerance margin, then there would be no benefit even up to tolerance margin. Then, the ALP as worked out under Section 92C(1) shall be taken as ALP without any benefit of tolerance margin. 10. We have gone through the decision of ITAT Pune Bench in the case of Piagio Vehicle P. Ltd. (supra) wherein the ITAT held as under:- "17. In view of the precedent, the stand of the Revenue in the present case to deny the assessee benefit for adjustment of +/-5% variation while computing ALP is not justified. As per the Tribunal, though the amended proviso to section 92C(2) was applicable with effect from 10.10.2009, so however, for the reasons contained therein, it would not cover such like cases as is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 2012, but, the amendment by the Finance Act, 2012 which has retrospective effect has not been considered by the ITAT Pune Bench. Therefore, in our opinion, the decision of ITAT Pune Bench is per incuriam and cannot be said to be good law after the retrospective amendment to the second proviso to Section 92C(2) by the Finance Act, 2012. 12. The learned counsel for the assessee has challenged the constitutional validity of retrospective amendment to second proviso to Section 92C(2). However, Income Tax Appellate Tribunal is a creation of the Income-tax Act and not a constitutional authority. It has to interpret the provisions of the Income-tax Act as it stands. It cannot adjudicate upon constitutional validity or otherwise of any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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