TaxTMI 
TaxTMI 
2011 (6) TMI 124
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.... security products marked by Policy Inc. It entered into international transaction with its associate enterprises for an aggregate sum of Rs. 14,33,33,713. Reference was made to Transfer Pricing Officer to determine the arm's length price of such transaction under section 92CA(1) of the Act. The TPO vide its order dated 8-10-2009 has computed the arm's length price OP/TC at Rs. 15,08,43,128 and a difference of Rs. 75,09,415 is arrived at which has been added to the income of the assessee on account of transfer pricing adjustment. The assessee for determining the arm's length price has adopted TNMM method. According to search and screening process based on a review of business description 101 companies were selected as reasonable functional comparables and average of OP/TC on comparable companies, mean margin was arrived at (-) 0.33 per cent. OP/TC of the assessee company was 10.06 per cent and, accordingly, in the TP study, the assessee disclosed the international transaction being at arm's length price. 4. The TPO in its order had applied various additional filters and has rejected all the comparables except three parties mentioned below and has arrived at OP/TC percentage of 1....
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....d. v. Asstt. CIT [2009] 122 TTJ 699/30 SOT 319 (Pune) (v) Electrobug Technologies Ltd. v. Asstt. CIT [2010] 37 SOT 270 (Delhi) (vi) SAP Labs India (P.) Ltd. v. Asstt. CIT [2011] 44 SOT 156 (Bang.) (vii) Adobe Systems India (P.) Ltd. v. Addl. CIT [2011] 44 SOT 49 (Delhi) (URO) 9. He further submitted that recently Delhi ITAT in the case of Haworth (India) (P.) Ltd. in Income-tax Appeal No. 5341/Delhi/2010 vide its order dated 29-4-2011 has held that the benefit of safe harbour of +/-5 per cent is available to the assessee in a case where the arm's length price has been worked out by the TPO on the basis of more than one comparables. He, therefore, contended that on the short ground, the aforementioned addition should be deleted. 10. On the other hand, the first and foremost contention raised by ld. DR was that the safe harbour of +/-5 per cent should be computed on the revenue shown to have been received by the assessee in respect of international transaction. He contended that if it is so done, then, the assessee's case will not fall under that safe harbour. Therefore, he contended that the benefit as claimed by the assessee is not....
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....liance upon the Special Bench decision of Delhi ITAT in the case of ITO v. Ekta Promoters (P.) Ltd. [2008] 113 ITD 719 and specifically to paras 56 to 58 thereof. He also relied upon the Special Bench decision in the case of Kuber Tobacco Products (P.) Ltd. v. Dy. CIT [2009] 117 ITD 273 (Delhi). 15. We have carefully considered the rival submissions in the light of the material placed before us. To resolve the controversy raised by both the parties in the present appeal, it will be necessary to first examine the pre and post amendment change in the proviso to sub-section (2) of section 92C. For that purpose, it will be necessary to reproduce the proviso pre-amended and post amended. The preamended proviso read as under :- "The most appropriate method referred in sub-section (1) shall be applied for the determination of arm's length price in the manner as may be prescribed. Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices or at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding 5 per cent of such arithmet....
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....eived the assent of the President and have just been notified. Therefore, where an assessee has failed to maintain the prescribed information or documents in respect of transactions entered into during the period 1-4-2001 to 31-8-2001 the provisions of section 92C(3) should not be invoked for such failure. Penalty proceedings under section 271AA or 271G should also not be initiated for such defaults. (iii) It should be made clear to the concerned Assessing Officers that where an international transaction has been put to a scrutiny, the Assessing Officer can have recourse to sub-section (3) of section 92C only under the circumstances enumerated in clauses (a) to (d) of that sub-section and in the event of material information or documents in his possession on the basis of which an opinion can be farmed that any such circumstance exists. In all other cases, the value of the international transaction should be accepted without further scrutiny." 18. Later on, the relaxation with regard to safe harbour of +/-5 per cent was brought into the statute by the Finance Act, 2002 with effect from 1-4-2002 which has been reproduced above and which is a proviso pre-amendment. 19. ....
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....en by ld. DR for the reason that if the amended proviso is taken into consideration, then, safe harbour of +/-5 per cent will be reckoned from the price received/paid by an assessee to/from its associate enterprise whereas if the case of the assessee will fall under the pre-amended proviso, then, safe harbour will be reckoned from the arm's length price determined by the TPO in a case where more than one price is determined by him by the most appropriate method. The case of the assessee fall within the marginal limit and, therefore, it is important to resolve this controversy first. 22. The statute (Finance (No. 2) Act, 2009) while bringing substituted proviso stated its applicability with effect from 1-10-2009 whereas when explanatory notes to the provisions of the Finance (No. 2) Act, 2009 was issued vide Circular No. 5/2010 dated 3-6-2010 it was incorrectly stated that the above amendment has been made applicable with effect from 1-4-2009 whereas the statute describe that it has been brought with effect from 1-10-2009, secondly, it explained that accordingly the amended proviso will be applicable in respect of 2009-10 and subsequent years, but, later on the Board has changed ....
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....ility or application and which imposes new duty in respect of transactions already completed, then, the said procedural provision also cannot be applied retrospectively. Similar is the position where the statute not only changes the procedure, but also creates new rights and liabilities, the same shall be construed to be prospective in operation unless otherwise provided for either expressly or by necessary implication. This has so been held by the Special Bench in the case of Kuber Tobacco Products (P.) Ltd. (supra). 25. In the case of ITO v. Ekta Promotors (P.) Ltd. (supra), it is held that in the fiscal legislation, if a provision is brought for imposing any liability, the normal presumption will be that it has no retrospective operation and it is a cardinal principle of tax law that law to be applied is the law which is in force in the assessment year unless otherwise provided expressly or by necessary implication. 26. If the unamended proviso is compared with the amended proviso, then, it is clearly noticed that there is a substantial change in the relief given to the assessee. By the unamended proviso, an option was given to the assessee to have its price of internation....