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TMI Blog2016 (7) TMI 1587X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was prejudicial to the interest of the revenue. 1.5 On the facts and in the circumstances of the case In law, the learned Commissioner, while revising the assessment, erred in not appreciating the fact and the law that the view taken by the learned AO was sustainable in law, therefore, the order passed was after due application of mind by the learned AO and keeping in view the law of the land existing at the time of framing the assessment. 1.6 The learned Commissioner erred in revising the assessment under S.263 on the grounds that the AO did not refer the case to the TPO to determine the ALP, CUP data of Mar 2008 ignored by the AO and two invoices were accounted by the assessee only in the subsequent assessment years. Export to MIs Gla Trading International Pte Ltd, Dubai 2.1 The learned Commissioner erred in coming to a conclusion that there is suppression of sales and under invoicing of sales to M/s Gla Trading International PTE Ltd when there is no evidence whatsoever of any suppression of sales or under invoicing of any such sales. 2.2 The learned Commissioner ought to have accepted that the sales to Gla Trading were at market prices prevailing at that tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.3 dated 20-05-2003 is contrary to the decision being taken and regarding the judgment of Hon'ble Delhi High Court rendered in the case of M/s Sony India Pvt. Ld., as reported in 288 ITR 52 (Del.), it was held that this decision of the Hon'ble Delhi High Court in the case of M/s Sony India Pvt. Ld.,(Supra) is not applicable after the amendment in 2007. He further submitted that in the present case, the assessment year involved in 2008-09 i.e. after the amendment of 2007 and therefore, this Board Instruction No.3 dated 20-05-2003 is not valid in the present case. 4. The ld. DR of the revenue supported the order of the ld.CIT. 5. We have considered the rival submissions. We find that in para-9.3 of the impugned order passed by the ld. CIT as re-produced below, it was held by the ld. CIT that the assessment order is erroneous and prejudicial to the interest of revenue for this reason alone that he has not referred the international transaction between the assessee and its associated company i.e. M/s GLA Trading International PTE Ltd. for determination of ALP. " 9.3 Thus, it is seen the above that the order passed by the AO is erroneous and prejudicial to the interest of the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced because of amendments in sec.92CA(4) with effect from 01-06-2007. 7. Now, we examine the applicability of the tribunal order rendered in the case of DCIT Vs Tata Consulting Services Ltd., (Supra). In this case, the dispute before the Tribunal was whether the CIT(A) has erred in deleting the additions on account of TP adjustment in relation to transaction with AE. Para-25 to 55 of this Tribunal order are relevant for the decision on this issue and therefore, these paras are re-produced herein below for the sake of ready reference. "25. As per Ground No.5, the ld. CIT(A) has erred in deleting the additions on account of TP adjustments in relation to transaction with AE, M/s Tata America International Corporation Inc. ( TAlC) 26. Apropos Ground No.5, invoking the provisions of Rule 27 of I.T.A.T Rules, the assessee has sought to support the order of the ld. CIT(A) by raising a plea that under section 92C or 92CA of the Act, it is the statutory duty of the AO to decide independently, whether the determination of arm's length price by the assessee should be accepted, or whether or not after applying the provisions of section 92CA, the transfer pricing adjustment Should be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verride it. It is neither arbitrary, nor unreasonable. It was held to be constitutionally valid. 29. So far as regards "Aztec tax software & technology Services Ltd." (supra), it has been contended that the Special Bench of the Tribunal, in the said case, has held that in view of the plain and ambiguous language of the Act, tax avoidance is not required to be proved before invoking the provisions of Chapter X of the Act. The TP provisions are applicable even if income is exempt u/s 1OA & 10B of the Act. No prior hearing is to be given to the assessee by the AO, or the ld. CIT(A) before making reference to the TPO. The conditions in section 92CA(3) of the Act are not required to be fulfilled before making reference to the TPO. CBDT Instruction No.3/2003 is binding on the AO and hence, it becomes necessary or expedient for him to refer the case to the TPO u/s 92CA(l) of the Act, if the international transaction or transactions exceeds, or exceed the limit mentioned therein. The initial burden is on the assessee to select the most appropriate method. It is also the assessee's onus to show that the price was at arm's length. In case the TPO redetermines the ALP, the burden sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible reason for absence of such requirement of formation of a prior considered opinion by the AO is that the TPO is expected to perform the same exercise, as envisaged u/s(s) 92C(1) to 92C(3) of the Act, while determining the ALP u/s 92CA(3). It was further held that the AO is not bound to accept the ALP as determined by the TPO and always persuaded by the assessee at that stage to reject the TPO's report and still proceeds to determine the ALP himself and, therefore, the AO is the authority to finalise the assessment and the said power of the AO cannot be usurped. It was also held that therefore, it cannot be said that the AO's decision is supplanted by the decision of the TPO. Still further, it was held that that the Instruction in question, i.e., CBDT Instruction No.3, dated 20.05.2013, is consistent with the statutory objective underlying section 92CA(l) of the Act and acts as guidance to the AO in the exercise of discretion in referring an international transaction to the TPO for determination of its ALP and it is neither arbitrary, nor unreasonable and is not ultravires the act. 31. It has rightly been contended on behalf of the assessee with regard to "Sony India P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablished thereafter and before the completion of the assessment. It was held that the Instruction detracts from the provisions of law. 34. "Coca Cola India Pvt. Ltd." (supra), rendered by the Hon'ble Punjab & Haryana High Court, was appealed against before the Hon'ble Supreme Court. The Hon'ble Supreme Court, in its judgment, reported in "Coca Cola India Inc. vs. Addl. CIT", 336 ITR 1 (SC), directed that the authorities below should decide the matter afresh, uninfluenced by any of the observations made in the High Court judgment. 35. The position obtaining with regard to these three judgments sought to be relied on by the Department is, that none of these judgments is applicable. "Sony India Limited" has been held to be not applicable by "Vodafone India" (Supra), rendered by the jurisdictional High Court. "Aztec Software & Technology Services" (supra), has also no application in view of "Vodafone India Services P. Ltd." (supra). "Coca Cola India Inc." (supra) is also inapplicable, the Hon'ble Supreme Court having directed the authorities to decide the matter afresh uninfluenced by the observations made by the Hon'ble High Court. Further, in "Sony Ericsson M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n manner that authority has to exercise those powers only in a manner provided in the statute itself. It has been so held by the Hon'ble Supreme Court in "CIT vs. Anjum Ghaswala", 252 ITR 1 (SC). The Hon'ble Jurisdictional High Court has also taken a similar view in the case of "Ghanshyam K. Kharbani", 346 ITR 443 (Bombay). 38. The Department has, then, also sought to place reliance on "Ranabaxy Laboratories vs. Addl. CIT" , 110 ITD 428 (Del.). In that case, it was held, with regard to assessment year 2004-05, that it is not right to contend that in not referring the question of determination of arm's length price to the TPO, as required by CBDT Instruction No.3 of 2003 (supra), the AO merely committed a procedural error. "Vodafone India Services P. Ltd.", (supra) was rendered by the Hon'ble jurisdiction High Court post the decision of the. Tribunal in "Ranabaxy Laboratories" (supra) and therefore, the Tribunal, clearly did not have the benefit of "Vodafone India", (supra). To reiterate, in "Vodafone India", (supra). CBDT Instruction NO.312003 has been held to detract from the provisions of law. In "Vodafone India" (supra), it has been held that necessary hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and documents relating to the international transaction have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made there under; or the information or data used in computation of the arm's length price is not reliable or correct; or the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub- section (3) of section 92D. If anyone of such circumstances exists, the AO may reject the price adopted by the assessee and determine the arm's length price in accordance with the same rules. However, an opportunity has to be given to the assessee before determining such price. Thereafter, as provided in sub section (4) of sec. 92C, the AO may compute the total income on the basis of the arm's length price so determined by him." 43. In the case of "Sirpur Paper Mills", 237 ITR 41 (SC), it has been held that section 119 of the Act permits the CBDT to specify conditions, but conditions cannot have the effect of curtailing the scope of the deduction granted by the section; that the amplitude of the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be more than that; that the assessee's profits were exempt uls1lOB; and that hence, there was no case that the assessee would benefit by shifting profits outside India. 50. In the case of "Indo-American jewellery", 41 SOT 1 (Mum), the Mumbai Bench of the Tribunal found merit in the submissions on behalf of the assessee that since the tax rates were higher in the USA compared with those of India, there would not be any incentive to transfer the profits to a higher tax chargeable region, especially when the company enjoyed deduction u/s 80HHE of the Act. 5l. In" DCIT vs. Lumax Industries Ltd.", 36 Taxman.com.380, it was observed that the TPO had nowhere made out a case that the profit was shifted from a higher tax jurisdiction to a lower tax jurisdiction; that in fact, there was no motive for any such shifting of profits at the hands of the assessee-company and there could have been any reason for the majority stake holder in India, i.e., the assessee, to over pay even a single paise to the minority stake holder in Japan; that the TPO fell in error in ignoring the position that it was if and only if it stood proved that there was manipulation of prices to avoid taxes in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the ld. CIT(A) is confirmed. Ground No.5 is rejected. 8. From the above paras of this Tribunal order and particularly para- 31 of the Tribunal order, it is seen that as per this tribunal order, CBDT Instruction No. 3 dated 20.05.2003 is not binding on the A.O. Hence, the action of the A.O. of himself determining the TP adjustment without referring the matter to the TPO in the present case is a possible view as per this tribunal order. In this view of the matter, the assessment order cannot be said to be erroneous because the view taken by the A.O. of not referring the matter to the TPO is a possible view as per this tribunal order. Learned DR of the revenue could not point out any other basis indicated by the learned CIT in the impugned order to say that the assessment order is erroneous. This is a settled position of law by now that revisionary powers of CIT u/s 263 can be invoked only when the assessment order is erroneous as well as prejudicial to the interest of the revenue. Since, in the present case, the assessment order could not be established to be erroneous, the impugned order of learned CIT u/s 263 is not sustainable and therefore, we quash the same. 9. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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