Loading judgment…
Facts
The assessee, a Malaysian company, was awarded a contract by Punjab Rural Development Board for consultancy services related to roads and highways in Punjab. The assessee rendered these services through its Indian project office. The Transfer Pricing Officer made an adjustment to the arm's length price. The CIT(A) partly allowed the assessee's appeal.
Held
The Tribunal noted that the assessee did not appear for the hearing. However, considering it an old appeal, it was decided to dispose of the matter based on available records. The Tribunal found that the matter required fresh consideration by the TPO.
Key Issues
Whether the comparables chosen were appropriate and whether the reference to TPO was in accordance with CBDT instructions.
Sections Cited
92CA, 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘H’: NEW DELHI
Before: SHRI PRAKASH CHAND YADAV & SHRI BRAJESH KUMAR SINGH
ORDER PER PRAKASH CHAND YADAV, JM
The present appeal of the assessee is arising out of the order of the Ld. Commissioner of Income Tax (Appeals)-44, New Delhi, dated 22.08.2016 and relates to Assessment year 2009-10.
Brief facts of the case as coming out of the orders of the authorities below are thatthe assessee i.e. Opus International (M) Berhad-company incorporated under the laws of Malaysia, was awarded the contract by Punjab Rural Development Board (hereinafter referred as "PRBDB") for providing the consultancy services related to roads and highways in state of Punjab. To render the services to PRBDB in India, Opus International (M)
Berhad India Project Office (hereinafter referred to as"Appellant") was incorporated on July 18, 2008. It has its registered office atC4/54, Safdurjung Development Area, New Delhi 110016 filed its return of income on 05.08.2010.The return of income filed by the assessee was picked up for scrutiny by Assistant Director of Income Tax, Circle 2(1), International Taxation, New Delhi (hereinafterreferred to as "AO").The learned AO also referred the international transactions with associatedenterprises (in short ‘AE’) for the said assessment year to the Deputy Director of Income Tax(TPО-II(5)) - New Delhi (hereinafter referred to as "TPO"), to determine the arm'slength price. Thereafter, the TPO passed the order u/s 92CA(3) on 21.01.2013, which order has been further revised u/s 154 of the Act on 05.03.2013 and an adjustment of Rs.22,83,726/- has been made by the TPO.
Aggrieved with the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) partly upheld the order of the TPO interalia observing that comparables chosen are not accordance with FAR test applicable to the TP case. The Ld. CIT(A) after considering the objections of the assessee, partly allowed the appeal of the assessee.
Aggrieved with the order of the Ld. CIT(A), the assessee has come up in appeal before us by raising the following grounds of appeal:-
Ground No.1:
The order passed by the learned Commissioner of Income Tax (Appeals) (hereinafter referred to as "CIT (A)" for short) is bad in law and on facts and hence liable to bequashed. Ground No. 2:
On the facts and in the circumstances of the case and in law, the learned Additional Director of Income Tax (International Taxation), Range 2, New Delhi (hereinafter referred to as "AO" for short) has grossly erred by making a reference to the learned Transfer Pricing Officer (hereinafter referred to as "TPO" for short) in contravention to the CBDT's Instruction No. 3 of 2003, dated May 20, 2003. Further, the learned CIT(A) has erred by confirming the reference made by the learned AO. Ground No.3:
On the facts and in the circumstances of the case and in law, both the learned AO/learned TPO and learned CIT(A) have erred: (i) by rejecting the comparables selected by the Appellant on the basis of additionalarbitrary filters; (ii) by comparingthe Appellant with companies which have an entirely differentfunctional and risk profile; (iii) by selecting the comparables which are not passing the filters adopted by thelearned TPO himself; (iv) by not rectifying the arithmetical and other errors in computation of Net profitmargin of comparables even though the same were brought to the notice of thelearned TPO by the Appellant; (v) by not appreciating the reworking of the Operating and Administrative Expenses inorder to remove the abnormality caused by the situation beyond the control of theAppellant and accordingly arriving at the net profit margin; (vi) by rejecting the Cost plus method without any concrete basis or rationale. Ground No. 4:
On the facts and in the circumstances of the case and in law, both the learned AO and learned CIT(A) have grossly erred by not appreciating the fact that there is no intention aswell as scope for shifting of profits outside India for the transactions which was completely consummated in India and being assessed as income and as well asexpenditure as per the provisions of the Income Tax Act, 1961.”
Today, when this matter has been called up for hearing, nobody appeared on behalf of the assessee, despite the service of notice of hearing.
Since, this is an old appeal, we are disposing of this appeal on the basis of materials available on record. The basic contention of the assessee is coming out from the grounds of appeal is regarding inclusion or exclusion of certain comparables from the list of final comparables.
The ld. Sr. DR relied upon the orders of the authorities below.
We have perused the material available on record and having seen the contentions of the assessee raised before the ld. CIT(A) as well as before the Ld. CIT(A), we are of the view that this matter requires fresh consideration at the end of the TPO. The Ld. TPO will apply filters in accordance with Principles of FAR test as upheld by the various Courts of this country. We direct accordingly. Therefore, the matter is restored to the file of the TPO for examining afresh in view of the observations made by us in this order.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 09th May, 2025.