TMI Blog2019 (10) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational transaction as envisaged in sub-section (1) of Sec. 92B, nor is covered by the extended meaning of a deemed international transaction as provided in sub-section (2) of Sec. 92B, therefore, the adjustment made by the A.O under Sec. 92C cannot be principally sustained, and is liable to be vacated. Before parting, we may also observe, that as the provisions pertaining to transfer pricing of specified domestic transactions as envisaged in Sec.92BA of the Act, had been made available on the statute vide the Finance Act, 2012 w.e.f 01.04.2013 i.e from A.Y. 2013-14, therefore, the same would not be applicable to the case of the assessee before us for the year under consideration i.e A.Y. 2012-13. Be that as it may, we may herein observe that it is not even the case of the revenue that the A.O had made the aforesaid T.P Adjustment under Sec.92BA of the Act. On the basis of our aforesaid observations, we delete the addition made by the A.O under Sec.92C of the Act. Accordingly, the order of the CIT(A) is set aside. Decided in favour of assessee. - ITA No.1842/Mum/2017 - - - Dated:- 16-10-2019 - SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terprise (for short AE ) i.e M/s Reach Network India Pvt. Ltd., had e-filed its return of income declaring a loss of (-) Rs.3,07,233/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2). 3. In the course of assessment proceedings, it was observed by the A.O that the assessee company had shown trade receivable of Rs.20,68,60,069/- from its related party i.e, M/s Reach Network India Pvt. Ltd. In the backdrop of the aforesaid fact, the A.O called upon the assessee to explain as to why a transfer pricing adjustment under Sec. 92 may not be carried out in respect of the interest income receivable from M/s Reach Network India Pvt. Ltd. In reply, it was inter alia submitted by the assessee, that as the transactions were between the two domestic related parties viz. (i) M/s Reach Data Services India Pvt. Ltd. (the assessee); and (ii) M/s Reach Network Pvt. Ltd., therefore, the same did not qualify as an international transaction, failing which no adjustment on the said count was called for in its hands. However, the explanation of the assessee did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee at the very outset of the hearing of the appeal took us through the facts of the case. It was submitted by the ld. A.R, that as the transaction entered into between the two domestic related parties viz. M/s Reach Data Services India Pvt. ltd. (the assessee) and M/s Reach Network India Pvt. ltd. did not qualify as an international transaction, therefore, the authorities below had gravely erred in law in making an adjustment of Rs,1,86,17,406/- under Sec.92C of the Act. In order to drive home his aforesaid contention that a transaction entered into between two domestic related parties cannot be construed as an international transaction, the ld. A.R took us through the definition of international transaction as envisaged in Sec.92B of the Act. Also, it was submitted by him, that as the Specified domestic transactions u/s 92BA of the Act, had been made available on the statute, vide the Finance Act, 2012 w.e.f 01.04.2013, therefore, the same were not applicable to the case of the assessee for the year under consideration, i.e A.Y. 2012-13. In support of his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both of them are non-residents irrespective of whether such other person is a non-resident or not]. [Explanation. For the removal of doubts, it is hereby clarified that (i) the expression international transaction shall include (a) the purchase, sale, transfer, lease or use of tangible property including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing; (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; (d) provision of services, including provision of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international transaction, the same has to be viz. (i) a specified transaction between two or more associated enterprises, either or both of whom are non-resident, shall be an international transaction within the meaning of sub-section (1) of Sec. 92B of the Act; or (ii) a transaction entered into by an enterprise with a person other than an associated enterprise, shall for the purpose of sub-section (1) of Sec. 92B of the Act, be deemed to be a transaction entered into between two associated enterprises, if there existed a prior agreement in relation to the relevant transaction between such other person and the associated enterprise or the terms of the relevant transactions are determined in substance between the such other person and the associated enterprise. Admittedly, as neither the assessee or its related party i.e M/s Reach Network India Pvt. Ltd. is a non-resident, therefore, the transaction entered into between them would not fall within the basic meaning of an international transaction as envisaged in sub-section (1) of Sec. 92B. Now, adverting to the extended meaning of an international transaction, as is envisaged in sub-section (2) of Sec. 92B, we find, that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No.840/Hyd/2012, dated 16.01.2015, had observed, that after considering the provisions of Sec. 92B of the Act, for coming within the expression international transaction at least one of the parties should be a non-resident. The Tribunal while concluding as hereinabove, had observed as under: 5. We have heard the arguments of both the sides and also perused the relevant material on record. Although the learned D.R. has strongly relied on the order of the TPO in support of the Revenue s case that the relevant transactions between the assessee company and M/s. Mylan Laboratories Ltd., involving payment of management fees are in the nature of deemed international transactions, it is observed that a similar issue in assessee s own case for A.Y. 2009-2010 has been decided by the Tribunal in favour of the assessee vide its order dated 25.03.2015 passed in ITA.No.198/Hyd/2014 vide paragraph No.4 which reads as under : 4. Coming to the Revenue s appeal, as seen from the orders of the authorities, the TPO vide his show cause notice dated 22.10.2012 has stated that the transactions entered into by Astrix and Matrix are deemed international transactions and sought to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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