9911796707
TMI Blog2021 (9) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% EOU status and their income was exempted from tax. The petitioner company states that on 17.3.2010, the Income Tax Department conducted a survey under Section 133 (A) of the Act on the company. Consequently, the petitioner on 31.03.2010, had filed its revised return of income for the Assessment Year 2004-05 to 2009-10 were valid by virtue of provision under Section 139 (5) of the Act. 3. After filing of the revised return, the petitioner company moved the Income Tax Settlement Commission, to settle the disputes. Accordingly, an application under Section 245(C) of the Act was filed before the first Respondent on 16.09.2010 for the Assessment Year 2006-07 to 2010-2011 and had offered income as detailed in the application. 4. The first Respondent by order dated 20.9.2010 under Section 245D(1), allowed the Settlement application to be proceed with. The application was found to be valid and allowed to be proceeded with by the first respondent under Section 245D(2C) dated 01.11.2010. Under the provisions of the Act, reports were called for from the competent authority as well as from the Transfer Praising Officer. The petitioner states that in respect of the Transfer Pricing issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegories (namely Development, Manufacture and Marketing) and since the petitioner undertakes both development and manufacture of the products and also shares some of the marketing responsibilities the profit sharing ratio is fixed at 70:30 (70 to the petitioner and 30 to the Dps) following the PSM as against 50:50 agreed between the Petitioner and the DPs. 6. The first Respondent erred in rejecting the preliminary objection of the Petitioner that the Fourth Respondent has passed an order under Section 92CA determining the Arm's Length Price ['ALP'] while only the First Respondent is empowered to determine the income to be settled in respect of the application before it. Since, the Fourth Respondent passed the order, the First Respondent ought to have been rejected it and not to have treated the order as a report. In the impugned order the First Respondent held that: Even if an enterprise is not covered by Section 92A(1) it can still be deemed to be an associated enterprises if any one of the conditions specified in Section 92A(2) is satisfied. 7. The Petitioner made a submission that the aforesaid conclusion is contrary to the provisions of the Act. Evidently on pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o constitute AE Relationship between two enterprises. Even otherwise, the other condition of the price and other conditions relating to supply being influenced by the other enterprise is absent in the Petitioner's case. Admittedly the prices which the DPs sell in the market are based on free market forces and consequently it cannot be said that the prices in respect of sale by the Petitioner to its DP is influenced by the DPs. The First Respondent without any material arbitrarily concluded that the DPs have influenced over the price and hence are AEs of the Petitioner as per clause 92A (2) (i). 9. The First Respondent also grossly erred in holding that DPs have equal representation on the management committee/executive committees and that the DPs influence the prices and other conditions in relation to sale of goods by the Petitioner. The First Respondent misdirected itslef in concluding the presence of the DPs on the management/executive committiees results in the participation in the management/control of the Petitioner. On the contrary, their presence is on account of expertise in local knowledge and technical skills to ensure optimized production and deciding product mix i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In absolute disregard of Rule 10B, the First Respondent concluded PSM as MAM and accordingly to that extent the order is arbitrary and preserve. 12. The First Respondent determined the profit sharing ratio between at fixed at 70:30 (70 to the petitioner and 30 to the Dps), considering that the Petitioner undertook development and manufacturing and that the marketing responsibilities were undertaken by the DPs. In effect, the First Respondent apparently gave equal weightage to the purported three functions carried out by the parties. It is well settled and required under the law that the transfer pricing is to be determined considering the functions assets and risks ['FAR']. The Petitioner's transfer pricing study considering all these were rejected and arbitrary equal weightage was considered only in respect of functions. Further, the First Respondent also did not take into account that the First stage invoice raised by the Petitioner includes manufacturing cost and agreed profit in respect of Indian functions, namely R&D and Manufacturing is taken into consideration duly in the First stage of pricing. The petitioner has rightly proposed that the Second stage invoice w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission to be judicial proceedings. We have hardly any doubt that it is a Tribunal. Its powers are considerable; its determination affects the rights of parties; its obligations are quasi-judicial; the orders it makes at every stage have tremendous impact on the rights and liabilities of parties. xxxxxxxxx In short, Settlement Commissions are Tribunals. The preliminary point fails." Thus the Settlement Commission is held to be a Tribunal. That being the position, the petitioner is entitled to seek judicial review of the order of the Settlement Commission in a petition under Articles 226 and 227 of the Constitution of India. For these reasons, we answer the first question in the affirmative." (b) In the case of Swadeshi Industries Vs. Income Tax Settlement Commission, reported in (1993) 199 ITR 293 (Gujarat), the Court held that the writ petition would be entertainable and in the case of Jyotendrasinhji Vs. S.I.Tripathi, reported in (1993) 201 ITR 611 (SC), the Apex Court held that High Court under Article 226 or the Hon'ble Supreme Court of India under Article 32 or 136 can interfere with the order of Settlement Commission, if the order of Settlement Commission is contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission, reported in (2012) 18 taxmann.com 19 (Madras), the Hon'ble High Court of Madras made the following observations: "9. Secondly, on the self-same issue, the petitioner had already moved the Settlement Commission for rectification, which was rejected under order dated 12.4.2002 which was not in any manner challenged. Thus I do not find any legal justification in accepting the case of the assessee, which is more in the nature of rectification of an order dated 12.4.2002 dismissing the rectification petition filed on 27.2.1998. Thus with the catena of decisions are to the effect that the jurisdiction of this Court under Article 226 of the Constitution of India as against the order of the Settlement Commission is not that of an appellate forum, this Court does not sit as an appeal to get into the process to take an ultimate decision. Unless the reasoning is abusive or contrary to the provisions of law, which is prejudicial to the interest of the assessee, this Court does not assume any jurisdiction to interfere with the order of the Settlement Commission. Admittedly, the petitioner had had no grievance as against the order originally passed by the Settlement Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is passed as per Section 245-I of the Act. The decision of a Settlement Commission could be interfered with only: (i) if grave procedural defect such as violation of the mandatory procedural requirements of the provisions in Chapter XIX-A and/or violation of rules of natural justice is made out. (ii) if it is found that there is no nexus between the reasons given and the decision taken by the Settlement Commission; (iii) High Court cannot interfere either with an error of fact or error of law, alleged to have been committed by the Settlement Commission. 18. The Settlement Commission has passed a detailed order on 27 issues. The petitioner herein is challenging the order of the Settlement Commission in respect of one issue only, which means that the petitioner is dissecting the order of the Settlement Commission. The petitioner cannot selectively accept the portion of the order passed by the Settlement Commission and dispute corrections of the other portions of the order, which in the opinion of the petitioner is not favourable. The petitioner cannot be permitted to dissect the Settlement Commission's order with a view to accept what is favourable to them and reject wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also entrusted with the power to modify or correct the award on the ground of imperfect form or clerical errors, or decision on questions not referred, which were severable from those referred. The Court had also power to remit, the award when it had left some matters referred undetermined or when the award was indefinite, where the objection to the legality of the award was apparent on the face of the award. The Court might also set aside the award on the ground of corruption or misconduct of the arbitrator, or that a party had been guilty of fradulent concealment or wilful deception. But the Court could not interfere with the award if otherwise proper on the ground that the decision appeared to it to be erroneous. The award of the arbitrator was ordinarily final and conclusive, unless a contrary intention was disclosed by the agreement. The award was the decision of a domestic Tribunal chosen by the parties, and the Civil Courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decision. Wrong or right the decision was binding, if it be reached fairly after giving adequate opportunity to the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of a quasi- judicial Tribunal. It is much more limited, as indicated hereinafter. All legal errors do not come under the pale of scrutiny by the High Court in exercise of jurisdiction under article 226 or 227. In coming to this conclusion, we are not without precedential support." (c) In the case of Supreme Agro Foods (P) Limited Vs. Income-tax Settlement Commission, reported in [2013] 35 taxmann.com 588 (Punjab & Haryana), the High Court held as follows: "Since, the material was available before the Commission and such material has been taken into consideration for returning a finding which is relevant for determining undisclosed income of the petitioner. We do not find such order warrants interference in exercise of the writ jurisdiction of this Court as a part of the process of judicial review." (d) The Hon'ble High Court of Madras in the case of M/s.Fitness One Group India Limited, Vs. Customs, Central Excise and Service Tax Settlement Commission, reported in 2016 SCC OnLine Mad 9950, held as follows: "6. First and foremost what is to be borne in mine is that the petitioner cannot selectively accept the portion of the order passed by the Settlement Commission and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to consider the mixed question of law and facts. But, while considering the same, the Commission is not competent to exercise the powers and the procedures contemplated beyond the scope of the provisions of the Act. Thus, the powers of the Settlement Commission to deal with facts, circumstances in consonance with the provisions of the Act are permitted. However, the Settlement Commission cannot make an assessment or exercise the powers conferred on the other Authorities under the provisions of the Act. 24. As far as the original power of the Assessing Officer under Section 153(A) of the Act is concerned, the Division Bench of this Court in the case of CANARA JEWELLERS vs. SETTLEMENT COMMISSION reported in [2009] 184 Taxman 491 (Madras) held that "the Settlement Commission is empowered to have all the powers, which are vested in an income-tax Authority under the Act, in addition to the power conferred under Chapter XIX-A, but such power can be exercised for the purpose of procedure of settlement of application under Section 245C and not for reasssessment of tax of a particular year which is vested with the Assessing Authority". 25. The very concept of settlement is depending ..... X X X X Extracts X X X X X X X X Extracts X X X X
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