2022 (5) TMI 1408 - AT - Income Tax

Tribunal Upholds Benchmarking Decision, Revenue Appeal Partly Allowed

The Tribunal upheld the decision to benchmark international transactions using customs data and to consider the entire set of transactions. However, the ... TP Adjustment - benchmark the international transaction of the assessee by using customs data - HELD THAT:- On perusal of the order of the CIT(Appeals), we observe that the assessee contended that the international transaction should be benchmarked using custom valuation data and relied on the decision in the case of Coastal Energy Pvt. Ltd. [2011 (7) TMI 154 - ITAT, CHENNAI] - 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. 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%. CIT(A) in directing the AO/TPO to consider entire set of transactions as against the transactions considered by the TPO in the order passed u/s 154 - 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. [2011 (7) TMI 154 - ITAT, CHENNAI] 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. Adjustment in respect of credit period - We observe 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. 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. Grounds of appeal of the Revenue is allowed for statistical purpose. Issues:1. Benchmarking international transaction using customs data.2. Adjustment in respect of credit period.3. Consideration of entire set of transactions.Issue 1: Benchmarking international transaction using customs dataThe Revenue challenged the order directing the AO/TPO to benchmark the international transaction using customs data. The assessee argued for custom valuation data, citing a decision of the Chennai Bench of Tribunal. The Ld. CIT(A) upheld the assessee's contention, directing the TPO to use customs data for benchmarking the transaction. The Ld. CIT(A) reasoned that custom authorities assign values to imported goods based on internationally accepted protocols, ensuring fair assessment. The Tribunal upheld the Ld. CIT(A)'s decision, citing the Chennai Bench's precedent. Thus, the Tribunal rejected the Revenue's appeal on this issue.Issue 2: Adjustment in respect of credit periodThe Revenue contested the direction to allow adjustment for credit period, stating that no such adjustment was accepted in the succeeding year within the prescribed tolerance limit. The Ld. CIT(A) relied on the assessee's claim of acceptance in the next assessment year. The Tribunal found that the contentions of both parties were not thoroughly examined by the Ld. CIT(A) and no remand report was sought. To ensure justice, the Tribunal remanded this issue to the AO/TPO for fresh adjudication in accordance with the law, providing the assessee with a fair hearing. Therefore, the Tribunal allowed the Revenue's appeal on this issue for statistical purposes.Issue 3: Consideration of entire set of transactionsThe Revenue challenged the direction to consider the entire set of transactions, arguing that the TPO's rectification order limited the scope. The assessee contended that the TPO should not disallow aggregation of negative values, as allowed in the original order. The Ld. CIT(A) directed the TPO/AO to consider the entire set of transactions, emphasizing that rectification under section 154 does not extend to issues involving interpretation of law. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the TPO's rectification scope is limited and cannot disallow aggregation of negative values. Thus, the Tribunal rejected the Revenue's appeal on this issue.In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision on benchmarking international transactions using customs data and considering the entire set of transactions. However, the Tribunal remanded the issue of adjustment for credit period to the AO/TPO for fresh adjudication. The appeal of the Revenue was partly allowed for statistical purposes.