TMI Blog2017 (9) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has referred to the statement of one Ms. Rita Dasgupta recorded in the course of the search to justify that Shri Satish Chawla was deciding the selling and purchase price. The relevant question put to Ms. Rita Dasgupta in the course of the search and her reply has been reproduced by the Assessing Officer. We have perused the same and find that there is no justification to infer that Shri Satish Chawla was deciding the selling and purchase price on behalf of the assessee as well as on behalf of General Woods and Durian. Therefore, in our view, the Assessing Officer misdirected himself in understanding the reply of Ms. Rita Dasgupta in a wrong perspective and coupled with the other factual matrix brought out in the earlier paragraphs, we find no reason to hold that General Woods was an ‘associated enterprise’ of the assessee within the meaning of Sec. 92A of the Act. Therefore, for the said reasons, the lower authorities erred in subjecting the transactions of the assessee with General Woods to the provisions of Chapter X of the Act. Therefore, on the basis of the preliminary issue, which is contained in Grounds of appeal no. 1 & 2, the impugned addition deserves to be deleted. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIL ) in the United States of America was an International Transaction within the meaning of section 92B(1) of the Act. 2. He failed to appreciate and ought to have held that: i. Section 92B{1) of the Act applies to transactions between two or more AE's either of whom is a non-resident; ii. DIL being an Indian Company is a resident of India, the transactions of the Appellant, though with the branch of DIL in USA, do not fall within the purview of section 92B(1) of the Act at all. 3. The Appellant, therefore, prays that it be held that the transactions between the Appellant and OIL do not fall within the meaning of International Transaction under section 92B(1) of the Act. WITHOUT PREJUDICE TO GROUND I II: GROUND III: Making adjustment under section 92C of the Act 1. On the facts and circumstances of the case and in law, assuming without accepting that the allegation that the above mentioned transactions fall within the purview of section 92B(1) of the Act, the Id. CIT(A) erred in upholding the action of the A.O. in making transfer pricing adjustment of ₹ 1,44,70,074/- to the total sales revenue received by the Appellant on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer sought to determine the arm's length price of the transactions entered into with the two parties in terms of section 92(1) of the Act. The Assessing Officer determined an adjustment of ₹ 1,44,70,074/-, which according to him, was required to be made to the purchase price paid by the assessee for the transactions with the aforesaid two concerns, so as to bring the stated value of the transactions to their arm's length price. The addition so determined by the Assessing Officer to the returned income was subject matter of appeal before the CIT(A), who has primarily affirmed the stand of the Assessing Officer. Not being satisfied with the order of the CIT(A), assessee is in further appeal before us on the aforestated Grounds of appeal. 5. The first and foremost submission of the appellant is that the income-tax authorities have erred in treating the transactions with M/s.General Woods and Durian as international transactions within the meaning of section 92B of the Act. More specifically, it is sought to be asserted by the appellant that General Woods is not an associated enterprise as understood for the purposes of section 92A of the Act and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any of the factual matrix brought out by the learned representative for the assessee. Sec. 92B(1) of the Act refers to an international transaction to be a transaction between two or more associated enterprises, either or both of whom are non-residents . In the present case, the transactions have been entered by the assessee with the USA branch of Durian. Because the transactions have been entered into with the USA branch of Durian, it is sought to be treated as an international transaction within the meaning of Sec.92B(1) of the Act. In our considered opinion, there is no denying the fact that Durian is an Indian tax resident, being a company incorporated under the provisions of the Companies Act, 1956 in India. As assessee is also an Indian tax resident, therefore, neither the assessee and nor Durian are nonresident so as to include the transactions between them as international transaction for the purposes of Sec. 92B(1) of the Act. Therefore, in our view, the lower authorities erred in applying the provisions of Chapter X with respect to the impugned transactions. Thus, on this aspect, assessee succeeds. 9. The second limb of assessee s plea is that even the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assertions of the assessee. Since the aforesaid aspect was sought to be thrashed out initially, same was put across to the ld. DR when the matter was initially heard on 15.5.2017. The ld. DR sought time so as to reply appropriately to the aforesaid plea. However, when the matter has been finally concluded on 18.5.2017, no material has been brought out by the Revenue to justify the assertion of the Assessing Officer that S/Shri Satish Chawla and Stevan Elefant are the shareholders and Directors in General Woods. Notably, the assessee has also furnished an Affidavit of Shri Satish Chawla, who is a Director of the assessee-company, dated 10.6.2016 averring that he is neither a shareholder nor a Director of General Woods. In our considered opinion, the observations of the Assessing Officer in this regard are quite bland and devoid of any factual support. Therefore, we proceed further on the basis that neither Shri Satish Chawla nor Shri Stevan Elefant are the shareholder/Director of General Woods. 11. The other aspect taken by the Assessing Officer is based on clause (h) of Sec. 92A(2) of the Act to say that assessee and General Woods are associated enterprises within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid, there is no material brought out by the Assessing Officer to establish that the purchase and selling prices for and on behalf of General Woods are determined by Shri Satish Chawla and Shri Stevan Elefant. Therefore, in the absence of any substantiation by the Assessing Officer, it could not be said that the test provided in clause (i) of Sec. 92A(2) of the Act is satisfied so far as it concerns the transactions between assessee and General Woods. 13. The other aspect referred to by the Assessing Officer is with reference to clause (j) of Sec. 92A(2) of the Act, which reads as under :- 92A(2) For the purposes of sub-section (1), two enterprises shall be deemed to be associated enterprises if, at any time during the previous year,- ............. ( j) where one enterprise is controlled by an individual, the other enterprise is also controlled by such individual or his relative or jointly by such individual and relative of such individual On this aspect, there is no material led by the Revenue as to how the test prescribed in the said clause is satisfied in the present case. Before parting, we may refer to another aspect contained in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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