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TMI Blog2019 (8) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the Assessing Officer, the brokerage charged by the respondent was only 0.05% which was found to be at a lower rate as compared to the prevalent rates in market. The Assessing Officer, therefore, while computing the assessment under Section 143(3) of the Income Tax Act, 1961 ('the Act', for short), by his order dated 27.12.2007 made an addition of Rs. 2,89,82,746/- under Section 92 of the Act. B) The respondent being aggrieved preferred an appeal before the CIT(A) Commissioner of Income Tax (Appeals), who by his order dated 16.02.2009 confirmed the addition made by the Assessing Officer and dismissed the appeal. The matter was carried further by filing ITA No.2399/Mum/2009 before the Tribunal. C) The Tribunal by its order dated 22.04.2015 set aside the findings rendered by the first two authorities and held that transfer pricing adjustment made by the Assessing Officer was contrary to the mandatory instructions issued by CBDT (Central Board of Direct Taxes) in its Instruction No.3/2003 dated 20.05.2003. While allowing the appeal, the Tribunal observed as under:- "16.1 After considering the entire judicial discussion discussed hereinabove, in our considered opinion, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o transfer price contained in sections 92 to 92F of the Income-tax Act, have come into force with effect from assessment year 2002-03. In terms of the provisions, income from an international transaction is to be computed having regard to arm's length price between the associated enterprises. Further, in terms of Section 92CA, a Transfer Pricing Officer, on a reference received from the Assessing Officer, is required to determine arm's length price of an international transaction by an order and the Assessing Officer is required to compute the income having regard to the price so determined by the TPO. The notification regarding jurisdiction of TPOs and their controlling officers have been issued by the Central Board of Direct Taxes and the copies thereof are enclosed for ready reference as Annexure II. In order to maintain uniformity of procedure and to ensure that work in this important area proceeds smoothly and effectively, the following guidelines are hereby issued: (i) Reference to Transfer Pricing Officer (TPO):- The Power to determine arm's length price in an international transaction is contained in sub-section (3) of section 92C. However, section 92CA provides that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes, therefore, have decided that wherever the aggregate value of international transaction exceeds Rs. 5 crores, the case should be pricked up for scrutiny and reference under section 92CA be made to the TPO. If there are more than one transaction with an associated enterprise or there are transactions with more than one associated enterprises the aggregate value of which exceeds Rs. 5 crores the transaction should be referred to TPO. Before making reference to the TPO, the Assessing Officer has to seek approval of the Commissioner/Director as contemplated under the Act. Under the provisions of section 92CA reference is in relation to the international transaction. Hence all transactions have to be explicitly mentioned in the letter of reference. Since the case will be selected for scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment. The threshold limit of Rs. 5 crores will be reviewed depending upon the workload of the TPOs. The work relating to selection of cases fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at subsequent stages of appellate or penal proceedings. (iii) Role of the Assessing Officer after receipt of "arm's length price": Under sub-section (4) of section 92C, the Assessing Officer has to compute total income of the assessee having regards to the arm's length price so determined by the TPO. While sub-section (4) of section 92CA clearly provides that such computation of income will be made having regard to the arm's length price so determined by the TPO, it is imperative that a formal opportunity is given to the taxpayer before making adjustments to the total income. The opportunity with regard to the determination of arm's length price has already been given by the TPO and, therefore, opportunity by the Assessing Officer, for final determination of income under sub-section (4) of section 92C, read with sub-section (4) of section 92CA is to be given by the Assessing Officer. (iv) Maintenance of database: It is to be ensured by the DIT (Transfer Pricing) that the reference received from the Assessing Officer is dealt with expeditiously so as to leave the Assessing Officer with sufficient time to offer an opportunity of being heard of the taxpayer before computing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le case that he must refer the issue of computation of the Arm's Length Price to the TPO (Transfer Pricing Officer). 6. However, the following expressions employed in Instruction No.3/2003 put the matter in a different perspective: - "... ...The Assessing Officer can arrive at prima facie belief on the basis of these details whether a reference is considered necessary. No detailed enquiries are needed at this stage and the Assessing Officer should not embark upon scrutinizing the correctness or otherwise of the price of the international transaction at this stage... ... If there are more than one transaction with an associated enterprise or there are transactions with more than one associated enterprise the aggregate value of which exceeds Rs. 5 crores, the transactions should be referred to the TPO. ... ... Since the case will be selected for scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment. ... ... (vi) Role of the Assessing Officer after receipt of "arm's le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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