Transfer pricing rectification under section 254(2) cannot reopen a merits-based tested party dispute.

Rectification under section 254(2) was held unavailable where the assessee sought to reopen a transfer pricing finding already decided on merits. The Tribunal applied sections 92, 92B and 92C read with rule 10B and reiterated that the Indian transfer pricing framework requires comparison of the assessee's international transaction with uncontrolled comparables, not substitution of the foreign associated enterprise's profit as the tested party benchmark. It also noted that the cited decisions did not displace that approach. The requested relief was treated as a review of the earlier order, which lies beyond the limited scope of section 254(2), and the rectification application was rejected.

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Issues: Whether the assessee was entitled to rectification of the Tribunal's earlier order under section 254(2) on the ground that the foreign associated enterprise could be treated as the tested party for determining arm's length price and that certain cited decisions were not considered.

Analysis: The Tribunal held that the earlier order had already examined the transfer pricing controversy on merits by applying sections 92, 92B and 92C of the Income-tax Act, 1961 read with rule 10B of the Income-tax Rules, 1962. It found that under the Indian transfer pricing framework the comparison must be of the assessee's international transaction with uncontrolled comparables, and the profit of the foreign associated enterprise could not be substituted as the benchmark profit for the tested party. The Tribunal also held that the cited decisions did not lay down any contrary rule on the scope of the Indian transfer pricing provisions, and that an application under section 254(2) cannot be used to revisit or reappreciate an issue already decided on merits.

Conclusion: The application for rectification was not maintainable, as the relief sought would amount to a review beyond the limited scope of section 254(2); the request was rejected.

Ratio Decidendi: Rectification under section 254(2) is confined to patent mistakes apparent from the record and cannot be invoked to reopen a matter already decided on merits or to substitute a review for final adjudication.

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