TaxTMI 
TaxTMI 
2014 (4) TMI 809
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....e matter to the TPOI( 3) for determination of arm's length price for these transactions. During the year assessee sold 10,700 equity shares in PT Essar Dhananjaya in Indonesia to M/s. Essar Global Ltd, Mauritius, a non-resident associate concern of assessee. TPO-I(3) after analyzing the issue and rejecting the net asset value adopted by assessee while supporting the sale price however, considered that the most appropriate method is the PE method and determined the arm's length price and the value of the share at USD7197.22 per share. Therefore, he arrived at the cost of total sale price at Rs.335.61 crores. As assessee has sold the shares at Rs..33.36 crores this resulted in enhancement of total income by Rs..302.24 crores. TPO order was dt. 22-11-07. AO following the provisions of the order have to adopt this value. However, in the meantime noticing that there was an error in computing the PE ratio of Essar Steel Ltd, TPO passed an order u/s 154 read with 92CA(5) dt.19-12-07 reducing the Arm Length price to Rs..44,99,23,887/- thereby the difference in shares worked out at Rs..11,62,46,042/-. As against the capital loss claimed at Rs..19.04 crores, the Long Term Capital loss was de....
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....orders passed by the TPO, it was submitted that the TPO originally determined a higher amount as arm's length price and having noticed an error in computation passed an order under section 154 which was forwarded to AO and AO in compliance to the provisions of subsection 4 of 92CA adopted the same value. Therefore, the order of AO which was subject matter of revision by the CIT does not suffer any mistake or error. 6. Another contention was that in Page 2 of the CIT's order reference was made to the revised order of TPO-I(3) on the basis of which the CIT directed AO to revise the computation, whereas there is no such order by the TPO-I(3). It was the submission that once a reference was made by AO during the assessment proceedings which culminated by the order of the TPO dated 22.11.2007 the TPO cannot revise his own order unless there was any other reference. There was no order passed by the TPO after conclusion of proceedings therefore, reference to the revised order of the TPO by the CIT while initiating proceedings u/s 263 itself is factually wrong. In support, he filed the order of the assessment passed by AO consequent to the proceedings under section 263 to submit that ev....
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....mended provisions of section 92CA(4) to submit that the words "having regard to" has been amended w.e.f. 1.6.2007 and mandated that AO has to proceed to compute in conformity with the arms length price as determined by TPO. Therefore, when AO has complied with the arms length price determined by the TPO, there cannot be any error in the order so as to revise under section 263. 11. We have considered the issue and examined the record. There is no dispute with reference to the fact that assessee has sold some shares it was holding in PT Essar Dhananjaya in Indonesia to M/s. Essar Global Ltd, Mauritius. It has claimed long term capital loss at Rs..19,04,35,383/-. It filed valuers report wherein the valuer adopted the average of net asset value and price earning value to support assessee sale price. The RBI also approved the sale based on the valuer's report. In assessment proceedings, AO referred the matter to the TPO-I(3) for determination of arms length price on these sale transactions. The TPO after analyzing the issue, in his order dt. 22- 11-07 running to 23 pages, rejected the net asset value adopted by the valuer and discussed the most appropriate method vide Para 7.6 and de....
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..... As seen from the provisions, the CIT has no jurisdiction over the TPO administratively and therefore, the CIT could not have revised the order under section 92C(3) passed by the TPO. Whether the DIT can revise the order which he himself has approved as per the Board Circular can only be examined when such issue arises but for deciding this issue, we can safely conclude that the order of the CIT revising the assessment order dated 1.1.2008 passed under section 143(3) is not erroneous or prejudicial to the interests of the Revenue, as it complied with the order of TPO u/s 92CA(4). 14. Whether the order passed by the TPO is correct on the method adopted is a subject matter of opinion as TPO has clearly stated in the order passed on 22.11.2007 that the net asset value adopted by assessee cannot be accepted and he went on to determine the price on price earning Method. Whether the TPO is right in stating that average price of net asset value and price earning method value (valuation arrived at in the proposal for revision under section 263) is a debatable issue on which two opinions can be formed. The Hon'ble Supreme Court in the case of CIT vs. Max India Limited, 295 ITR 282 h....
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.... available on record, AO has no other option than to follow the same which AO did in this case. Accordingly reliance on the above decision cannot be accepted in view of the change in the provisions. 17. The learned DR also relied on the decision of the Hon'ble Supreme Court in the case of T.N. Civil Supplies Corporation Ltd vs. CIT, 260 ITR 82 (SC) to submit that the CIT has power to revise the order passed by AO on the directions of the superior authority. Reliance on this case also is misplaced in the sense that the issue involved in that appeal was whether the order passed by the Income Tax Officer was prejudicial to the interests of the Revenue when the same was passed with the approval of the IAC under section 144B. In that case the CIT was the superior authority to the IAC. Therefore, on the set of facts the Hon'ble Supreme Court held that there is no scope for limiting the order passed by the Income Tax Officer under section 263 to exclude the orders passed by the Income Tax Officer on the directions of the superior authority either under section 144A or under section 144B. In this present case, no such issue arises as the CIT wrongly invoked the proceedings under....