9911796707
TMI Blog2024 (7) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... income on 14.09.2011 declaring income of Rs. 73,81,430/-. The case was selected for scrutiny and the Assessing Officer made adjustment of Rs. 02.26 Cr. u/s 92CA of the Income Tax Act, 1961 on account of provisions for sales & marketing support services. The undisputed facts arising from the analysis of these are that the appellant furnished a TP Report justifying the ALP in respect of its transactions with its AE. The MAM as well as the PLI adopted by the appellant in its TP study were also not disputed by the AO/TPO. The TPO has also noted that the appellant has used the current year data in its TP study and accepted the same as the correct approach. However, the AO/TPO did not agree with the appellant in respect of the choice of comparables as adopted by the appellant in its TP study. Accordingly, the TPO replaced / substituted some of the comparables used by the appellant and used / introduced a fresh set of comparable on the basis of which he proceeded on to compute the ALP and recommend adjustments under section 92CA of the Act. 5. Aggrieved, the assessee filed appeal before the ld. CIT(A). On appeal, the Ld. CIT(A) directed for the adoption of a fresh set of comparables and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of transfer pricing adjustment shall be deemed to represent income in respect of which particulars have been concealed or inaccurate particulars have been furnished in terms of section 271(1)(c), thereby inviting penalty under this provision. However, the exception enshrined in this provision itself states that no penalty will be imposed pursuant to the addition on account of transfer pricing adjustment, if the assessee proves to the satisfaction of the authority that the price charged or paid in such a transaction was in accordance with the provisions of section 92C and such price was computed as per the manner prescribed under that section in good faith and due diligence. This divulges that penalty u/s 271(1)(c) in respect of addition on account of transfer pricing adjustment is not imposable only when the assessee proves to the authority that the price paid by it was computed in terms of section 92C and in a manner prescribed under the section and this exercise was done in good faith and due diligence. 9. Section 92C of the Act deals with the 'Computation of arm's length price.' Sub-section (1) provides that the arm's length price in relation to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been made on account of transfer pricing adjustment in respect of these three international transactions, but, the same cannot be deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished because the assessee has proved that the price paid by it under such transactions was computed in accordance with the provisions of section 92C and in the manner prescribed under the TNMM in good faith and with due diligence. Further the action of the TPO in changing the most appropriate method from TNMM to CUP without bringing on record any comparable instance, is itself faulty. In any case, it was the AO who was to determine whether or not such expenses were deductible in terms of section 37(1) and not the TPO, as has been done. We have noticed above that the exercise done by the TPO in determining Nil ALP on the premise that either no services were availed by the assessee or in any case it was a case of duplication of services, is not only unsubstantiated but contrary to the material on record. The mere fact that the TPO determined Nil ALP of the international transactions cannot be a reason to impose penalty u/s 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid was computed as per provisions of Section 92C and the assessee. had acted in good faith and with due diligence. Conduct of the assessee is the distinguishing and relevant factor to be adjudicated in the penalty proceedings. Onus to establish bonafide and exercise of due diligence is on the assessee. Explanation of the assessee on the computation of arms length price may be the same, but appreciation and consideration is from a different point of view, i.e. bona fides and due diligence. 17. Respondent-assessee had applied CUP method to compute the arms length price of the international transactions with the associated enterprises. Revenue has not disputed that the CUP method was the preferred or appropriate method to be applied. Revenue no doubt states that there was lack of reliable data for application of the CUP method, but the method adopted and applied by the respondent- assessee was not rejected. 18. As noticed above, the respondent-assessee had justified and explained why the independent transaction was disregarded as an internal comparable, for two reasons. Firstly, the transaction was of low value in comparison with transactions with associated entities. Secondly, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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