9911796707
TMI Blog2024 (9) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... to law. 1.2. For that the Assessing Officer erred in making the reference under section 92CA of the Act to the Transfer Pricing Officer, without recording his objective satisfaction as prescribed under section 92CA and/or recording that any of the conditions prescribed in section 92C(3) of the Act, were satisfied. 1.3 For that the Hon'ble Dispute Resolution Panel ("DRP") erred in not holding that the order dated 29 January 2015 passed by Transfer Pricing Officer as well as the draft assessment order issued by the Assessing Officer (in so far it relates to transfer pricing proceedings) are void ab initio as none of the conditions of section 92C(3) of the Act or the condition of recording an objective satisfaction as required under section 92CA(1) have been satisfied. 2. Error in upholding the adjustment with respect to payment of Cylinder Rental Charges 2.1 For that the authorities below failed to consider and appreciate that in the instant case, the transfer pricing adjustment proposed by the Ld. TPO of INR 56,00,556/- in respect of cylinder rental charges is erroneous and contrary to law. 3. Erred in disregarding the economic analysis for purchase of fixed asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the impugned assessment year, the ld. TPO vide his order dated 29.01.2016 proposed transfer pricing adjustment. The matter travelled before the ITAT and Hon'ble ITAT passed the order but only the two issues, namely Cylinder Rental Charges amounting to Rs. 56,00,556/- and purchase of Capital/Fixed Assets amounting to Rs. 6,86,42,156/-, which were out of the focus of the Hon'ble Bench. The assessee filed a Miscellaneous Application bearing M.A. No.56/KOL/2019 pointing out apparent errors in the aforesaid order passed on 06.11.2019 and the said Miscellaneous Application was recalling earlier order of the ITAT dated 19.09.2018 to extend the prudent of the following issues referring paragraph no. 3 thereof- (a) TP adjustment of Rs. 56,00,556/- pertaining to international transaction of Cylinder Rental Charges paid and (b) TP adjustment of Rs. 6,86,42,156/- pertaining to international transaction of import of Fixed Assets. On specific direction of the fact, the appellant vide letter dated 28.01.2020 filed copies of the said revised grounds of appeal, which were accepted by the Bench. 4. The assessee had made transactions of Rs. 2,81,28,919/- with AE towards Cylinder Rental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph of the observation of the ld. TPO at pages no. 150 to 151 of the paper book is reproduced as below: - "37.1. In response to the rebuttal reasons put forward by the assessee, it is to be mentioned here that the companies that have been selected as comparable which are broadly functioning in the gas industry. The major condition for Transfer Pricing Analysis is comparability criteria, thus while price got affected when there are differences in products, gross margins are affected by differences in functions but net margins are comparatively less affected by the differences in products and functions. This does not mean that net margins are applicable to enterprise which carry similar functions In different market or different sectors of the economy. The sectoral and market similarity is the must for the applicability of net margin and this gives a leeway for comparison with a wide range of enterprise in the same sector and market. Net Profit indicators are less sensitive to the differences in the level of risks and extent and complexity of functions while doing a comparable analysis and hence as per the above criteria the companies selected as comparable are appropriate in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO in all these earlier years accepted the same to be at arm's length after examining the documentary evidence submitted for each of such transactions. DRP has duly considered submissions of the assessee. It is settled principle of law that doctrine of resjudicata is not applicable to proceedings under IT Act. Application of TP provisions will depended facts and circumstances of the case. Therefore, objection of the assessee is dismissed. 3. Erroneous Rejection of the Transfer Pricing Documentation by the TPO 3.1. The TPO erred in concluding that a transfer pricing adjustment of INR 25,61,96,698.11 needs to be made to the international transactions of the Assessee; 3.2. The TPO erred on facts and in law in rejecting the comparable companies arrived at in the Transfer Pricing Study without considering the functional and risk analysis of the Assessee; 3.3. The TPO erred in law and on facts in disregarding the application of multiple-year data while computing the margins of alleged comparable companies; Directions: DRP has duly considered submissions of the assessee. It is seen that TPO has rejected economic analysis of the assessee after giving cogent reasons i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar data should be used. The usage of single year data of contemporaneous period has been upheld in a number of judgments including Aztec Software Technology Ltd 294 ITR (AT) 32 SB Bangalore. The objection is therefore rejected. Rule 10B(4) very clearly states that the data of the comparable transactions should be the data pertaining to the financial year in which the taxpayer has entered into international transactions. The word used is "shall" and not "may". It implies that neither the tax payer nor the department has any choice regarding the use of relevant financial data. The issue regarding use of single year vs multiple year data has been decided by Hon'ble Jurisdictional Delhi High Court in case of Chrys capital Investment Advisors (India) Pvt Ltd -vs.- DCIT [2015-TII-13-DEL-TP] emphasizing the significance of single year data. As far as aggregation of the transactions is concerned, each transaction should be individually 'benchmarked unless it is proved that all the transactions are interdependent and interlinked in such a way that they cannot be segregated. Hence, benchmarking of transactions separately is upheld. International transactions identified by the TPO are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 3 comparable companies (out of the existing 8 comparable companies) of the assessee on mere surmises and without any rational basis; 5.3. The TPO disregarded the principle of "Aggregation of Transactions" as enunciated in the TP Documentation Report and arbitrarily bench-marked the transactions of Export of Capital Assets with-out appreciating the fact that the said transactions are not alien to the manufacturing function of the assessee but are intrinsically linked to the other international transactions complimenting each other and contributing together as one. DRP Directions:- The assessee submitted that the import/export of capital assets transaction should be considered in aggregation and not in isolation. TPO arbitrarily rejected the approach of "aggregation of transactions" as also the application of TNMM and instead proposed application of ROCE. TPO accordingly determined the average ROCE at 15.77% and correspondingly held Linde India's ROCE of 7.86% as non-compliant to the arm's length requirement of the Indian TP regulations thereby proposing for an upward adjustment of INR 6.86 Crores. DRP has considered the submissions of the assessee. Transaction of import ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
