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TMI Blog2016 (8) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner is a company registered under the Companies Act. For the assessment year 2013-14, the petitioner filed a return of income on 27.09.2013 disclosing total income of Rs. 330.00 crores (rounded off). A revised return was filed for the said year on 31.03.2015, however, the declaration of income did not change. Such return was taken in scrutiny by the Assessing Officer. During the course of scrutiny assessment, the Assessing Officer referred the case of the petitioner for computation of arm's length price to the TPO under Section 92CA(1) of the Act. The petitioner, under communication dated 07.03.2016, raised objections before the respondents to the reference made to the TPO and the subsequent notice issued by the TPO in this regard. The Assessing Officer made a report dated 08.03.2016 as to why such objections are not valid. Respondent No.3, Principal Commissioner of Income Tax, rejected the petitioner's objections by an order dated 10.03.2016. The petitioner raised further objections under letter dated 18.03.2016 which were also rejected by an order dated 22.03.2016. At which point, the petitioner has approached this Court. 3. Case of the petitioner is that the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Bijoor Sitting Fees 62472 10 Ashwani SInghal Sitting Fees 186124 23233356 From the submission of the assessee it can be seen that the assessee has only considered the expenditure defined in clause (i) of Section 92BA of the Act obviously for the reason that clause (vi) of Section 92BA of the Act has not be prescribed. The averment of the assessee in this respect is found to be incorrect. As stated above, clause (v) of Section 92F of the Act defined the transaction as transaction includes an arrangement, understanding or action in correct. In view of the above, the assessee clearly misinterpreted the provisions of Section 92BA of the Act. As any other transaction has been clearly defined in Section 92F(V) of the Act the assessee ought to have taken the transactions of the kind enumerated in clause (v) of Section 92F of the Act in arriving at the quantum of specified domestic transaction. The assessee has entered into with various specified persons/AEs the details of which are as under: No. Name of the Person/AE Nature Amount Remarks 1 R C Printers Rent 12275136 40A(2)(b) as per assessee's submission 2 I Media Corp Ltd. Adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer with a special focus on the above noted portion thereof, learned counsel Mr. Soparkar for the petitioner submitted that the petitioner had not entered into any international transaction with associated enterprise. Attempt on part of the Assessing Officer, therefore, to bring the petitioner's case within the transfer pricing wholly erroneous. He submitted that the reasons cited by the Assessing Officer in the said report dated 08.03.2016 only referred to the associated enterprise, particularly, with respect to item No. 11 i.e. the transactions of the petitioner-company with Writers and Publishers Pvt. Ltd and Bhaskar Infrastructure Ltd. Drawing our attention to the affidavits filed in this petition in which, the Assessing Officer has sought to rely on these transactions to bring them within the fold of specified domestic transactions, the counsel submitted that after having recorded elaborate reasons, the Assessing Officer cannot switch stand and take a diametrically opposite position. 6. Alternatively, counsel submitted that even these transactions referred to in para 11 of the report would not fall within the scope of Section 40A(2)(b) of the Act. He submitted that C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... associated enterprise. In addition, it had also to having made payments referred to in Section 40A(2)(b) of the Act which aggregated more than Rs. 5 crores and therefore, the case of the petitioner would fall within the meaning of specified domestic transaction, as referred to in Section 92A(2)(b) of the Act. The Assessing Officer had the power to make a reference in terms of the sub section (1) of Section 92C of the Act. In this context, the counsel relied heavily on Clause (vi) of Section 40A(2)(b) of the Act and submitted that the provision nowhere prohibits aggregation of the holding of the directors of the company. Counsel relied on the decision of Veer Gems vs. Assistant Commissioner of Income Tax and anr (supra) to contend that at this stage, the minute scrutiny urged by the petitioner should not be undertaken. 10.Having thus heard learned counsel for the parties and having perused the documents on record, we may briefly refer to some of the statutory provisions. Chapter X of the Act pertains to special provisions relating to avoidance of tax. Section 92 contained therein pertains to computation of income from international transaction having regard to arm's length pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made, it is open for the Assessing Officer to make deduction. Relevant portion of the clause (b) of Section 40A(2) reads as under: (b) The persons referred to in clause (a) are the following, namely:- (vi) any person who carries on a business or profession,- (A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or (B) where the assessee being a company, firm, association of person or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person. Explanation.- For the purposes of this sub section, a person shall be deemed to have a substantial interest in a business or profession, if- (a) in a case where the business or profession is carried on by a company, such person is, at any time during the previous year, the beneficial owner of shares (not being shares ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference is made by the Assessing Officer to the TPO, the TPO would not be competent to decide the issue of correctness of the reference. His duty would be to determine the arm's length price in accordance with Section 92C of the Act. It was further held that Chapter X does not contained any provision under which, the Assessing Officer would require to hear assessee and consider the objections before making a reference to the TPO. However, it requires certain safeguards. The Assessing Officer to consider it necessary or expedient to make a reference and the reference has to be made with the prior approval of the Commissioner. It was further held that while framing the assessment in terms of the report submitted by the TPO under sub section (3) of Section 92C of the Act, there is nothing to prevent the Assessing Officer from considering the objections of the assessee that, in fact, there had no international transaction between the assessee and any other person. It was further noted that the assessee would have one more opportunity to contest the question of international transaction under Section 144C of the Act before the dispute resolution panel. The dispute resolution panel w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub-section (5) of Section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is authorized to issue such direction as it thinks fit for the guidance of the Assessing Officer. Under subsection (6) of Section 144C of the Act, such directions will have to be issued after considering various details provided in Clauses (A) to (G) thereof. Sub-section (8) of Section 144C of the Act provides that the Dispute Resolution Panel may confirm, reduce or enhance the variations proposed on the draft order. Sub-section (11) of Section 144C of the Act provides that no direction under sub-section (5) shall be issued unless an opportunity is given to the assessee and the Assessing Officer. Sub-section (13) of Section 144C of the Act provides that upon receipt of directions issued under sub-section (5) of Section 144C of the Act, the Assessing Officer shall in conformity with the directions complete the assessment proceedings. Section 144C of the Act, thus, provides for complete dispute resolution mechani ..... X X X X Extracts X X X X X X X X Extracts X X X X
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