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Income Tax Appellate Tribunal, DELHI BENCH “I-1” NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI CHALLA NAGENDRA PRASAD
सुनवाईक�तारीख/ Date of hearing: 09.05.2022 26.05.2022 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the Revenue against the order of the Ld.
Commissioner of Income Tax (Appeals)-44, New Delhi dated 29.06.2018 for the AY 2012-13. The Revenue has raised the following grounds of appeal:
1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing the AO/TPO to benchmark the international transaction of the assessee by using customs data, ignoring the widely accepted principle that the customs valuation cannot be indiscriminately used for the purpose of determining the Arm’s Length Price under the Income Tax Act as the purpose 1
I.T.A.No.5695/Del/2018 and criteria governing the customs valuation are different and, therefore, it does not relieve the taxpayer’s burden of establishing that the price is at Arm’s Length for the purpose of Transfer Pricing requirements under the Income Tax Act (‘the Act’). a. Ld. CIT(A) has filed to appreciate that the customs rates are minimum presumptive rates prescribed for a class of goods to check evasion of duty, without going into the exact specifications of a particular input, within that class of goods.
2. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has erred in directing the AO/TPO to allow adjustment in respect of credit period on the ground that the TPO has accepted the assessee’s claim for such adjustment in the succeeding year (i.e. 2013-14), not appreciating the fact that no such claim was accepted by the TPO in the said year and adjustment was not made in the said year as the variation was within the prescribed tolerance limit.
3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in directing the AO/TPO to consider the entire set of transactions, ignoring the provisions of section 92(3) of the Act and the facts recorded by the TPO in the rectification order dated 30.03.2016.
4. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.”
None appeared on behalf of the assessee nor any adjournment was sought. Ld. DR submitted that on the directions of the Tribunal
I.T.A.No.5695/Del/2018 the notice was served on the assessee by way of affixture at the last known address. Copy of service report furnished by the notice server and the Inspector, Circle 16(1), New Delhi was placed on record by the Ld. DR. In spite of service of notice as the assessee is not coming forward to appear before the Tribunal in the case filed by the Revenue we proceed to dispose off this appeal on hearing the Ld. DR.
The Ld. DR submits that draft assessment order in this case was passed on 21.03.2016 proposing Transfer Pricing adjustment amounting to Rs.6,90,08,437/- but later on the TPO vide his order dated 30.03.2016 passed u/s 154 reduced the amount of TP adjustment to Rs.3,94,33,122/- as there were some arithmetical mistakes in the earlier order passed by the TPO. Ld. DR submitted that the assessee before the Transfer Pricing Officer (in short ‘TPO’) submitted that MOPAG prices used as comparables are spot prices i.e. payment on delivery, whereas assessee had availed credit from its AE. Therefore, it is submitted that the assessee had increased MOPAG prices with the financial cost for the credit period enjoyed by the assessee and the financial cost was computed on the basis of actual credit period availed by the assessee as multiplied by interest factor of 7% p.a. which was certified as cost of funds in the I.T.A.No.5695/Del/2018 hands of AE. Ld. DR submits that the second proviso to section 92C(2) provides if the price computed is within +/- 5% of the price charged by the AE no adjustment is required to be made. Ld. DR submits that considering the submissions of the assessee and also taking the TPO order into consideration the Assessing Officer made adjustment of Rs.3,94,33,122/-. Ld. DR submits that on appeal the Ld. CIT(Appeals) placing reliance on the submissions of the assessee that the TPO in the succeeding assessment year i.e. 2013-14 has accepted the claim of the assessee for credit period adjustment and benefit of second proviso to section 92C(2) of the Act the benefit of second proviso to section 92C(2) was granted to the assessee. The Ld. DR submits that the benefit of second proviso to section 92C(2) which was granted to the assessee for the year under consideration is wrong as the provisions are applicable from 01.04.2013 relevant to the AY 2013-14.
Heard the Ld. DR perused the orders of the authorities below.
In so far as ground no. 1 is concerned we observe that the Revenue challenged the order of the Ld.CIT(A) in directing the AO/TPO to benchmark the international transaction of the assessee by using customs data.
I.T.A.No.5695/Del/2018 4.1 On perusal of the order of the Ld.CIT(Appeals), we observe that the assessee contended that the international transaction should be benchmarked using custom valuation data and relied on the decision of the Chennai Bench of Tribunal in the case of Coastal Energy Pvt. Ltd. Vs. ACIT (2011) 12 taxmann.com 355. The Ld. CIT(A) following this decision directed the TPO to benchmark the international transaction for the purchase of fuel oil/HSD by the assessee by using customs data.
In ground no. 2 of grounds of appeal the Revenue challenged the order of the Ld. CIT(A) in directing the AO/TPO to allow adjustment in respect of credit period. In view of the submissions of the assessee that TPO has accepted the assessee’s claim for such adjustment in succeeding year i.e. 2013-14 the Ld. CIT(A) directed the AO/TPO to allow adjustment for credit period. It is the case of the Revenue that no such claim was accepted by the TPO in the assessment year 2013-14 and adjustment was not made in the said year as the variation was within the prescribed tolerance limit of +/- 5%.
6. In ground no. 3 the Revenue challenged the order of the Ld. CIT(A) in directing the AO/TPO to consider entire set of transactions
I.T.A.No.5695/Del/2018 as against the transactions considered by the TPO in the order passed u/s 154 on 30.03.2016.
6.1 On perusal of the Ld. CIT(A) order, we observe that assessee contended that TPO has not considered the transaction where difference between the comparable transaction price and international transaction price is negative. It was contended that this is not in consonance with the provisions contained in the Income Tax Act.
6.2 It was further contended that such aggregation was allowed by the TPO in the original order passed but has been taken back in the rectification order passed u/s 154 on 30.03.2016. Assessee contended that TPO cannot disallow the aggregation of negative values when the same was allowed in the original transfer pricing order passed by him as the scope of rectification u/s 154 is limited and not extend to the issues involving interpretation of law.
6.3 Considering the submissions of the assessee, we observe that the Ld. CIT(A) directed the TPO/AO to consider the entire set of transactions as has been done in the impugned order of the TPO dated 30.03.2016.
I.T.A.No.5695/Del/2018
In so far as bench marking the international transactions using customs data is concerned we sustain the order of the Ld. CIT(Appeals) as the Ld. CIT(A) observed that the Chennai Bench of the Tribunal in the case of Coastal Energy Pvt. Ltd. Vs. ACIT (supra) held that the valuation was made by custom authorities by assigning values to import goods on the basis of scientifically formulated methods as they were responsible for making fair assessment value of the imported goods according to internationally accepted protocols. Therefore, we see no infirmity in the order of the Ld. CIT(A) on this issue. Ground no. 1 of the Revenue is rejected.
We also sustain the order of the Ld. CIT(Appeals) in directing to consider entire set of transactions as has been done in the impugned order of the TPO dated 30.01.2016 since the scope of rectification u/s 154 by the TPO is very limited and the TPO cannot disallow the aggregation of negative values which was allowed in the original order by the TPO since the issue involves interpretation of law and is a debatable issue. Therefore, the same is beyond the scope of section 154. The ground no. 3 of grounds of appeal of the Revenue is rejected.
9. Lastly, coming to the direction of the Ld. CIT(A) to the AO/TPO to allow adjustment in respect of credit period we observe 7
I.T.A.No.5695/Del/2018 that the Revenue contended that no such adjustment in subsequent assessment year i.e. in 2013-14 was made and no such claim was accepted by the TPO for the reason that the variation was within the prescribed tolerance limit and, therefore, no adjustment was made in the said year in 2013-14. We observe that the above contentions of Revenue and Assessee have not been thoroughly examined by the Ld. CIT(A) in proper perspective. We also observe that no remand report was called for by the Ld. CIT(A) to appreciate the contentions of Revenue as well as the Assessee.
Therefore, in the interest of justice we restore this ground to the file of the Ld. AO/TPO for denovo adjudication in accordance with law after providing adequate opportunity of being heard to the assessee. Ground no. 2 of grounds of appeal of the Revenue is allowed for statistical purpose.
In the result, the appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 26/05/2022