Search Results For: Transfer Pricing


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DATE: October 24, 2019 (Date of pronouncement)
DATE: November 28, 2019 (Date of publication)
AY: 2006-07, 2007-08, 2008-09
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CITATION:
S. 92 Transfer Pricing: Even if an assessee is eligible for tax exemption at the rate of hundred percent under section 10A/10B of the Act, then also the arm’s length price on international transactions deserve to be determined under section 92C of the Act (all imp judgements referred)

The provisions of chapter X are not impeding with the manner of the computation of exemption under section 10A of the Act, but it is to work out the true ALP qua the sale price of the impugned international transaction. Therefore we disregard the contentions of the ld. AR for the assessee that no reference to the TPO can be made for determining the ALP

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DATE: August 29, 2019 (Date of pronouncement)
DATE: September 7, 2019 (Date of publication)
AY: 2008-09, 2009-10
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CITATION:
S. 144C/ 254: (i) Condonation of delay of 1018 days: None should be deprived of an adjudication on merits unless it is found that the litigant deliberately delayed the filing of appeal. Delay due to improper legal advice should be condoned. A technical view of dismissing the appeal on the ground of delay should not be taken if the legal issue has to be decided for other years (ii) A draft assessment order u/s 144C issued with a notice of demand u/s 156 and a s/ 271(1)(c) penalty notice is null and void (Eaton Fluid Power 96 TM.com 512 followed, BS Ltd 94 TM.com 346 (Hyd) distinguished)

It is relevant to note the judgment of the Hon’ble Bombay High Court in Vijay Vishin Meghani Vs. DCIT & Anr (2017) 398 ITR 250 (Bom) holding that none should be deprived of an adjudication on merits unless it is found that the litigant deliberately delayed the filing of appeal. Similar to the cases under consideration, in that case too, delay of 2984 days crept in due to improper legal advice. Relying on Concord of India Ins. Co. Limited VS Nirmala Devi (1979) 118 ITR 507 (SC), the Hon’ble jurisdictional High Court condoned the delay. In yet another case in Anil Kumar Nehru and Another vs. ACIT (2017) 98 CCH 0469 BomHC, there was a delay of 1662 days in filing the appeal. Such a delay was not condoned by the Hon’ble High Court. In further appeal, condoning the delay, the Hon’ble Supreme Court in Anil Kumar Nehru vs. ACIT (2018) 103 CCH 0231 ISCC, held that : `It is a matter of record that on the identical issue raised by the appellant in respect of earlier assessment, the appeal is pending before the High Court. In these circumstances, the High Court should not have taken such a technical view of dismissing the appeal in the instant case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year.

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DATE: August 13, 2019 (Date of pronouncement)
DATE: August 14, 2019 (Date of publication)
AY: -
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CITATION:
S. 92CA(1) Transfer Pricing: CBDT's Instruction No.3/2003 dated 20.05.2003 makes it mandatory for the AO to make a reference to the TPO. The failure to make reference to the TPO renders the Transfer Pricing Adjustments made therein are bad in law though the assessment order is good. The matter should be restored to the file of the AO so that appropriate reference could be made to the TPO

In view of the guidelines issued by the CBDT in Instruction No.3/2003 the Tribunal was right in observing that by not making reference to the TPO, the Assessing Officer had breached the mandatory instructions issued by the CBDT

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DATE: April 25, 2019 (Date of pronouncement)
DATE: June 27, 2019 (Date of publication)
AY: 2003-04
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CITATION:
S. 92C/ Rule 10B: If the TPO is not satisfied with the assessee's method of benchmarking royalty payments, he should independently benchmark the ALP by adopting any one of the prescribed methods. He cannot determine The ALP at nil on an ad-hoc basis. TNMM is the most appropriate method for determining the ALP of royalty and not the CUP method. If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP

The Transfer Pricing Officer has not proceeded to benchmark the payment of royalty by applying any of the prescribed methods provided under the statute. Without assigning any reason, the Transfer Pricing Officer has determined the arm’s length price of the royalty payment at nil. Prima-facie, it appears, the determination of arm’s length price of royalty payment at nil by the Transfer Pricing Officer is completely on ad-hoc basis without following the due process of law as provided under the statute

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DATE: March 15, 2019 (Date of pronouncement)
DATE: March 29, 2019 (Date of publication)
AY: 2015-16
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CITATION:
S. 92C(1) Transfer Pricing: Even if the assessee does not report the specified transaction & the AO has no occasion to notice it, the TPO has no jurisdiction to suo moto determine the ALP. He has to call for a reference from the AO. Alternate remedy is not a bar if the action is without jurisdiction & can be severed from the rest

Learned counsel for the Revenue is correct in pointing out that in the present case, the assessee did not report such transaction at all and therefore, the Assessing Officer had no occasion to notice such transaction as specified domestic transaction. His reference, therefore, was necessarily confined to the reported transactions. The TPO noticed this anomaly, he proceeded to determine the arm’s length price after full opportunity of hearing to the petitioner. Even in such a situation, the statute does not permit the TPO to assume the jurisdiction to determine the arm’s length price of a specified domestic transaction not reported to him

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DATE: January 16, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 92C Transfer Pricing: It is mandatory for the AO to determine the arm's length price (ALP) of the international transactions by following one of the prescribed methods. He is not entitled to follow any other method or to resort to estimation. The failure to follow one of the prescribed methods makes the entire transfer pricing adjustment unsustainable in law. The legal infirmity cannot be cured by restoring the issue to the TPO. The TPO cannot be allowed another innings to rectify the mistake

Section 92C(1) of the Act, contemplates that the arms length price in relation to an international transaction shall be determined by comparable uncontrolled price method; resale price method; cost plus method; profit split method; transactional net margin method or such other method as may be prescribed by the Board. Hence, the TPO is bound to determine the ALP by following one of the prescribed methods, however, we notice that in the present case the Ld. TPO has not followed any prescribed methods and made the transfer pricing adjustment by estimating the man hours and the cost of service per hour. We therefore, find merit in the contention of the Ld. counsel that any ad-hoc determination of arms length price by the Ld TPO u/s section 92 de-hors section 92C(1) of the Act cannot be sustained

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DATE: February 28, 2019 (Date of pronouncement)
DATE: February 26, 2019 (Date of publication)
AY: -
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CITATION:
S. 92C Transfer Pricing: The TPO cannot re-characterize a transaction of subscription to redeemable preferential shares as being equivalent to interest free loans advanced by the assessee to the AE & charge notional interest thereon. The TPO cannot disregard the apparent transaction and substitute the same without any material or exceptional circumstances pointing out that the assessee had tried to conceal the real transaction or that the transaction in question was sham. The TPO cannot question the commercial expediency of the assessee entered into such transaction

The facts on record would suggest that the assessee had entered into a transaction of purchase and sale of shares of an AE. Nothing is brought on record by the Revenue to suggest that the transaction was sham. In absence of any material on record, the TPO could not have treated such transaction as a loan and charged interest thereon on notional basis

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DATE: February 20, 2019 (Date of pronouncement)
DATE: February 26, 2019 (Date of publication)
AY: 2010-11
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CITATION:
S. 92C: Taxability under Transfer Pricing provisions of shares purchased at value in excess of FMV: As the transaction of purchase of equity shares is a capital transaction and does not give rise to any income, the transfer pricing provisions do not apply. Chapter X is a machinery provision. It can only be invoked to bring to tax any income arising from an international transaction. It is necessary for the revenue to show that income does arise from the international transaction. S. 2(24)(xvi) & 56(2)(viib) are prospective

There is no dispute before us that the transaction of purchase of shares by the respondent of its subsidiary company i.e. A.E. at a price much higher than its fair market value would be international transaction as defined in Section 92(B) of the Act. The only issue before us as considered by the impugned order of the Tribunal is whether Chapter X of the Act would at all be applicable in case of any investment made on capital account. This on the premise that the transaction of purchase of equity share capital would not give rise to any income. We note that similar issue was before this Court in Vodafone 268 ITR 1 and this court inter alia observed that Chapter X of the Act is machinery provision to arrive at the arm’s length price of transaction between associated enterprises

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DATE: December 20, 2018 (Date of pronouncement)
DATE: December 22, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 92BA(i)/ 40A(2)(b) Domestic Transfer Pricing: Entire law on what constitutes "Specified Domestic Transactions” explained. The Dept's contention that a shareholder has beneficial interest in the assets of the company is contrary to all canons of Company law

We cannot, and the law does not permit us, to hold that HDFC Ltd. is the beneficial owner of 22.64% of the shares in the Petitioner by clubbing the share holding of HDFC Investments Ltd. with the shareholding of HDFC Ltd. If we were to do this, we would be effectively holding that HDFC Ltd., being a shareholder of HDFC Investments Ltd., is the beneficial owner of the shares which HDFC Investments Ltd. holds in the Petitioner. This, in law, is clearly impermissible because a shareholder of a company can never have any beneficial interest in the assets (movable or immovable) of that company. In the present case, if we were to accept the contention of the Revenue, it would mean that HDFC Ltd. is the beneficial owner of the shares which HDFC Investments Ltd. holds in the Petitioner. This would be contrary to all canons of Company Law. It is well settled that a shareholder of a company can never be construed either the legal or beneficial owner of the properties and assets of the company in which it holds the shares. This being the position in law, we find that the Revenue is incorrect in trying to club the shareholding of HDFC Investments Ltd. in the Petitioner along with the shareholding of HDFC Ltd. in the Petitioner, to cross the threshold of 20% as required in explanation (a) to section 40A(2)(b). We are supported in the view that we take by a decision of the Supreme Court in the case of Bacha F. Guzdar Vs. Commissioner of Income Tax [(1955) 27 ITR 1].

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DATE: September 18, 2018 (Date of pronouncement)
DATE: October 23, 2018 (Date of publication)
AY: -
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CITATION:
Transfer Pricing: The categorical finding of fact by the ITAT that a comparable (Motilal Oswal) is engaged in a qualitatively different and diversified business than that of the assessee cannot be challenged as a substantial question of law as the finding is not perverse or vitiated by any error apparent on the face of the record

We are in full agreement with the findings given by the ITAT. In fact, looking to the facts as narrated by the ITAT in the impugned order, we would have no hesitation in holding that by comparing Motilal Oswal Investments Advisory Pvt. Ltd. to the assessee company (for the purposes of determining the ALP) would be like comparing apples and oranges. This being the case, we do not find any infirmity in the order of the ITAT excluding Motilal Oswal Investments Advisory Pvt. Ltd. from the final list of comparables which would give rise to any substantial question of law