2019 (3) TMI 738 - HC - Income Tax

Transfer Pricing Officer's Discretion Upheld in Fresh Assessment Process

The High Court allowed the Revenue's appeal, emphasizing that the Transfer Pricing Officer must independently assess the issues without being bound by the ... TP adjustment - Direction in remand proceeding - Customs Duty Adjustment, Air Freight Adjustment and Foreign Exchange Adjustment considered for determining the Arms Length Price (ALP) - remand for enquiry by TPO - HELD THAT:- though the issue relating to Customs Duty Adjustment, Air Freight Adjustment and Foreign Exchange Adjustment were directed to be reconsidered by the Transfer Pricing Officer for determining the Arms Length Price (ALP) in the case of the Assessee, the Tribunal has, in fact, fixed how such adjustments have to be made or not to be made. This hardly leaves any discretion to deal with these issues afresh with the Transfer Pricing Officer, since the Transfer Pricing Officer, being the lower Authority, would be bound by the observations and findings of the Tribunal. This, in our opinion, frustrates the very purpose of remand for enquiry by the Transfer Pricing Officer into these three issues by the Transfer Pricing Officer, as directed by the Tribunal itself. Therefore, we allow the present appeal of the Revenue and while upholding the remand order passed by the Tribunal, we observe that the Transfer Pricing Officer will pass such fresh order in pursuance of the remand directions, uninfluenced by the observations of the Tribunal, on the merits of the case. Issues:Appeal against the order of the Income Tax Appellate Tribunal remanding the case back to the Transfer Pricing Officer for the Assessment Year 2009-10.Analysis:The Revenue filed an appeal against the order of the Income Tax Appellate Tribunal, which remanded the case back to the Transfer Pricing Officer for the Assessment Year 2009-10. The grievance raised was that the Tribunal should not have made observations on the merits of the Transfer Pricing adjustment while remanding the case. The Assessee contended that the Tribunal's directions on how to make adjustments would restrict the Transfer Pricing Officer's discretion. The Tribunal had allowed additional grounds raised by the Assessee and remanded the case for fresh orders. However, the High Court noted that the Tribunal's directions could hinder the purpose of the remand, as they left little discretion for the Transfer Pricing Officer to deal with the issues afresh.The Tribunal had directed adjustments against custom duty component, air freight charges, and exchange rate variation while determining the Arms Length Price (ALP). The High Court observed that while these issues were to be reconsidered by the Transfer Pricing Officer, the Tribunal had essentially predetermined how the adjustments should be made, limiting the Officer's discretion. The High Court allowed the Revenue's appeal, upholding the remand order but emphasizing that the Transfer Pricing Officer should make fresh orders without being influenced by the Tribunal's observations on the case's merits. The Assessee was to be given a fair hearing before the Transfer Pricing Officer, ensuring due process.In conclusion, the High Court allowed the Revenue's appeal, emphasizing that the Transfer Pricing Officer must independently assess the issues without being bound by the Tribunal's predetermined directions. The Assessee was granted the opportunity for a fair hearing during the fresh assessment process. The judgment highlighted the importance of maintaining the Transfer Pricing Officer's discretion and ensuring a proper review of the issues raised during the remand process.