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TMI Blog2022 (12) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... er was justified in given effect, vide his order dated 31st May 2021, to the directions contained in the said order, and, (iii) whether, based on this rectification order passed by the Dispute Resolution Panel and based on the TPO‟s resultant order giving effect thereto, and, whether the Assessing Officer was justified in, based on these order, passing the impugned order dated 2nd June 2021 making an addition of Rs 6,68,10,000 as an arm‟s length price adjustment. 3. To adjudicate on these grievances, only a few material facts need to be taken note of. The assessee before us is a domestic company incorporated on 29th October 2010 as a joint venture between Forbes & Co Ltd, India, and Bui Armada Berhad, Malaysia. The assessee was awarded a contract by the Oil And Natural Gas Ltd (ONGC India) for the supply of floating, production, storage and offloading (FPSO) vessels, and, for providing, inter alia, operations and maintenance (O&M) services to ONGC for a period of seven years. It was in this backdrop that the assessee had entered into a "bareboat charter party‟ with its associated enterprise, Armada D1 Pte Ltd, Singapore. During the relevant previous year, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence, and yet relied upon to delete TP adjustment made by the TPO; (viii) no opportunity given by the TPO to offer comments on documents submitted by the assessee on 27.08.2020; (ix) no restriction on benchmarking ALP without comparable(s) under the Other Method, as claimed by the DRP; (x) restricting application of second criterion of Other Method to when comparables are not available; (xi) obverse interpretation of Rule 10B(2)(b); and (xii) other miscellaneous points. A copy of this petition was forwarded, on 19th February 2021, to the assessee. The assessee, vide letter dated 24th February 2021, made detailed submissions on the point of Dispute Resolution Panel‟s limited jurisdiction to rectify only such mistakes as are "mistakes apparent on record‟, even if those actually be mistakes, in the proposed rectification proceedings, and also on the point that, as a matter of fact, and in law, what are perceived as mistakes are not mistakes at all. It was pointed out that what is being sought by the Transfer Pricing Officer is not the rectification of mistakes apparent on record but a review of its directions. It was also submitted that, in the garb of seeking rectificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that estimated life of 7 years for the FPSO vessel, with insignificant residual value, was a correct assumption on the peculiar facts of this case; (vi) as regards the point of internal comparability, it was pointed out that, firstly, wrong nomenclature, even if that be so, would not vitiate the conclusions, and, secondly, this transaction was between a group company and an independent party which was a valid comparable; (vii) as regards the point that documents filed by the assessee on 27.8.2020 treated by the learned DRP to be not in the nature of evidence, and yet relied upon to delete TP adjustment made by the TPO, it was pointed out that what has been relied upon by the DRP was the certificate and the documents referred to were in support of that certificate, and, therefore, the grievance of the TPO is incorrect; (viii) as regards the lack of opportunity to the TPO to offer comments on the documents submitted on 27.8.2020, an effort was made to demonstrate as to how the scheme of the law does not visualize each new evidence to the confronted to the TPO, and, that, in any event, the TPO was given enough opportunity yo present his case; (ix) and (x) as regards the claim that "n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder dated 02.03.2021.Two virtual hearings were held on 25.02.2021 and 03.03.2021. In the virtual hearings the Addl. CIT (TP) 4(1). Mumbai, the TPO and the assessee presented their say with regard to the MA filed by the TPO. The matters/ issues were discussed in detail. The assessee vehemently pleaded for rejection of each point of the MA. 4. After careful perusal of the MA, the assessee's submission and the rejoinder of the TPO, we find that the MA is based on incorrect facts and circumstances as well as incorrect appreciation of the provisions of law and procedure, such as: (i) The name of M/s. Husky-CNOOC Madura Ltd. (HCML) was not 'redacted' in the agreement. It was specifically mentioned in para 9 of the affidavit dated 26.08.2020 furnished by the assessee with the redacted copy of the agreement. This fact is also mentioned in para 9 and 10 of the direction. Besides, it is also mentioned on pages 12, 17 and 18 of the redacted FPSO lease contract. (Refer para 3.1 of the MA) (ii) The agreement has two parts, one, 'FPSO lease contract for BD field development' and two, 'FPSO lease contract'. The second part provides for supply of 'operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to para 3.4.2(ii)/ 3.4.3 of the MA) (ix) The TPO has himself worked out a new ratio 18.57:81.43 for revenue split between the assessee and the AE in AY 2017-18, instead of 46.80:53.20 in the instant AY 2016-17 after referring our directions. (Refer para 4 of the MA) (x) "Jurisprudence‟ is "science of law‟. Any kind of "arbitrariness‟ is anathema to "jurisprudence‟. The decisions/orders based on arbitrary exercise of a discretion would never help in development of "TP jurisprudence‟. (Refer to para 3.9.2 to 3.9.7) (xi) The TPO ignored the second additional evidence furnished which, was the clause C.3 of the bid evaluation, criteria in the bid tender, document issued by the ONGC at the time of initiating the tender for the project, offering price preferences of 10% to domestic bidders. (xii) In the second virtual hearing the Addl. CIT (TP)/ TPO accepted that there were no case of apparent mistake/ error in the directions except on two points, namely, consideration of actuals in benchmarking the actual transaction of the instant assessment year, two, consideration of element of service tax in the payment by the ONGC. (Refer para 3.4.2/ 3.4.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case in the light of the applicable legal position. 8. We find that under section 144C(14) of the Act, the Central Board of Direct Taxes "may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee". In exercise of these powers, and vide notification no. 84/2009 [F.NO. 142/22/2009-TPL]/S.O. 2958(E) dated 20-11-2009, the Central Board of Direct Taxes has notified the Income-tax (Dispute Resolution Panel) Rules, 2009 (hereinafter referred to as the DRP Rules). We further find that rule 13 of the DRP Rules prescribes that "After the issue of directions under rule 10, if any mistake or error is apparent in such direction, the panel may, suo motu, or on an application from the eligible assessee or the Assessing Officer, rectify such mistake or error, and also direct the Assessing Officer to modify the assessment order accordingly". As a plain and careful reading of rule 13 makes it unambiguous, the rectification powers, under rule 13, by the Dispute Resolution Panel can be exercised only in one of the three circumstances - namely, (a) suo motu, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord‟. As to what does the scope of a mistake "apparent from the record‟ covers, we can do no better than to reproduce the words of the landmark judgment of the Hon‟ble Supreme Court, in the case of ITO Vs Volkart Brothers [(1971) 82ITR 50 (SC)], to the effect that ".....A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions. ............ this court while spelling out the scope of the power of a High Court under article 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record....". While on this issue, one may also usefully take note of Hon‟ble jurisdictional High Court‟s judgment in the case of CIT Vs Ramesh Electric & Trading Co [(1993) 203 ITR 497 (Bom)] wherein Their Lordships have, inter alia, observed that the power of rectification of mistake appa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etailed MA, the detailed response by the assessee, the detailed rejoinder by the TO and para 4 of this order (supra), that no 'mistakes/errors apparent‟ are made out as such in the DRP's direction dated 03.11.2020 for AY 2016-17 (Emphasis, by underlining, supplied by us; paragraph 5 of the DRP's order extracted earlier), it is beyond any dispute or controversy that there was no occasion for the Dispute Resolution Panel to pass the directions dated 22nd April 2021- not only because the rectification proceedings in question were on the basis of an application made by an authority which was not permitted to file such an application, but also because it was a common position that there was no mistake apparent in the directions issued by the Dispute Resolution Panel. We have noted that the Dispute Resolution Panel, having rejected the rectification application filed by the Transfer Pricing Officer and having held that there is no mistake apparent in the direction dated 3rd November 2020, have proceeded to rectify these DRP directions nevertheless. Undoubtedly, if the DRP was of the opinion that there are mistakes apparent in the directions issued by the DRP, they could hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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