TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1309
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.... and broadcasting. With effect from 1.4.2014, the petitioner demerged one of its business undertakings into BCCL. The scheme of demerger was approved by the High Court at Bombay by an order dated 16.1.2015. Consequently, the business pertaining to "Times Now" television channel of the petitioner got vested in BCCL. All assets and liabilities pertaining to demerged undertaking were also transferred to BCCL at the book value as on 31.3.2014. The difference between assets and liabilities was then adjusted against the brought forward profit and loss account balance as on 31.3.2014. However, no expenditure or income was charged to the profit and loss account for the financial year as per the scheme of demerger approved by the High Court. 2.2 For the assessment year 2015-16, the petitioner filed return of income on 28.11.2015 declaring total income of Rs. 5.90 crores (rounded off). In the said return, the petitioner had reported following two specified domestic transactions:- Sr. No. Nature of Transaction Related Party Amount (Rs. in Crs) Method adopted for benchmarking 1. Payment of subscription fees earned from distribution services BCCL ZENL 39.45 9.73 Transaction Net Mar....
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.... jurisdiction of the TPO to examine the said transaction in absence of a specific reference by the Assessing Officer. Be that as it may, the TPO passed the impugned order on 15.10.2018 in which he provided for a total adjustment of Rs. 84.09 crores. This comprised of the arm's length price adjustment of Rs. 26.55 crores made on the specified domestic transaction as reported in from 3CEB towards payment of subscription fees and arm's length price adjustment of Rs. 57.54 crores made on the specified domestic transaction not reported in form 3CEB towards what revenue contends was payment of creditors in demerger process. We may, however, record that the petitioner does not even accept that there was any such payment in the process of demerger. 2.6 With respect to the adjustment towards payment of subscription fees, the TPO carried out detailed analysis and examination, considered the petitioner's submissions and arrived at said figure of Rs. 26.55 crore in following manner:- Description Amount in Rs. Total Operating Revenue of the Distribution Segment 53,91,00,265 Total Operating Expenses of the Distribution Segment 80,49,04,800 Operating Profit (26,58,04,535) Op....
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....unting to Rs. 57,54,00,000/- as reconciled by assessee in the course of proceedings failed to report these transactions in the report filed in Form No. 3CEB and also failed to maintain and furnish proper details for determination of ALP for the transactions. The gross consideration paid being the value of asset transferred against these creditors is Rs. 62,31,00,000/- as reconciled by assessee in the course of proceedings. The assessee has however did not submit the fair market valuation and its cost of acquisition of the assets adjusted against the creditors despite repeated opportunities availed. Therefore, any excess payment over the book value of the creditors could not be taken into account in determination of the ALP of the creditors so paid or adjusted. 7.10 The assessee having squared off the creditors in its books through book entires, the provisions of Section 40A(3A) are triggered and thus, allowable expenditure representing these creditors paid will be Nil as it becomes deemed income of the assessee as per the said provisions of the Act. Accordingly, the Arms Length price of the transactions is determined at Nil by using this method considering the same to be "other me....
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...., therefore, correctly examined the same after putting the petitioner to notice. With respect to adjustment towards payment of subscription fees, the case of the department is that the TPO has undertaken a detail analysis, the same is subject to opposition by the petitioner before the Revenue Authorities. This Court should not entertain a challenge on this ground and the petitioner be relegated to appeal route. 3. Before deciding the rival contentions, we may record that learned counsel Mr. Chhotaray for the department had raised an objection to the very maintainability of this petition contending that the petition is filed at a premature stage. His argument was that whatever be the nature of the order passed by the TPO, the petitioner must be reletgated to the departmental proceedings and thereafter, appeal. At this stage, the Court should not examine the legality or otherwise of the report of the TPO. 4. We would first deal with this preliminary objection of the department. It is well settled through series of judgments of the High Courts and Supreme Court that writ jurisdiction of the High Courts in exercise of powers under Article 226 of Constitution of India is extremely wid....
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....rence made by the Assessing Officer. In this context, the question arises whether the TPO could have on his own, suo motu examined the transaction and made transfer pricing adjustment in his order. 6. Chapter X of the Act pertains to special provisions relating to avoidance of tax. Section 92 contained in the said chapter pertains to computation of income from international transaction having regard to arm's length price. As is well known, when these transfer pricing provisions were initially introduced in the Act, only international transactions were brought within fold of transfer pricing mechanism. Subsequently, several amendments were made in the provisions contained in Chapter X by Finance Act, 2012 bringing within the fold of transfer pricing mechanism certain domestic transactions. Sub-section (2A) inserted in Section 92 of the Act by Finance Act 2012 w.e.f. 1.4.2013 provides that any allowance for an expenditure or interest or allocation of any cost or expense or any income in relation to the specified domestic transaction shall be computed having regard to the arm's length price. Clause (ii) of Section 92F defines the term 'arm's length price'. The mea....
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....ass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year, proceedings for which have been completed before the 1st day of July, 2012.] (3) On the date specified in the notice under sub-section (2), or assoon thereafter as may be, after hearing such evidence as the assessee may produce, including any information or documents referred to in sub-section (3) of section 92D and after considering such evidence as the Transfer Pricing Officer may require on any specified points and after taking into account all relevant materials which he has gathered, the Transfer Pricing Officer shall, by order in writing, determine the arm's length price in relation to the international transaction [or specified domestic transaction] in accordance with sub-section (3) of section 92C and send a copy of his order to the Assessing Officer and to the assessee. [(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) i....
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....e also, the group of words "or specified domestic transaction" were inserted by Finance Act 2012 w.e.f. 1.4.2013. Sub-section (2A) provides that where any other international transaction other than an international transaction referred to in sub-section (1) comes to the notice of the TPO during the course of the proceedings before him, the provisions of the said chapter would apply as if such other international transaction was an international transaction referred to him under sub-section (1). 11. Sub-section (2A) was inserted by Finance Act 2011 w.e.f. 1.6.2011 and sub-section (2B) was inserted by Finance Act, 2012 with retrospective effect from 1.6.2002. These two sub-sections have been introduced by the legislature in order to overcome the limitation of the TPO to examine an international transaction which has either not been reported by the Assessing Officer under sub-section (1) or which the assessee has omitted to report as required under Section 92E. Sub-section (2B) of Section 92CA would cover a situation where the assessee does not report such transaction but it comes to the notice of the TPO during the court of the proceedings before him. In such a situation, he can exa....
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.... and (2B) of Section 92CA, the TPO would get jurisdiction to examine a transaction whether it is international or specified domestic transaction, only upon reference being made by the Assessing Officer under sub-section (1) of Section 92CA of the Act. Sub-section (2) of Section 92CA provides that where a reference is made under sub-section (1), the TPO would serve a notice to the assessee requiring him to furnish details in relation to international transaction or specified domestic transaction referred to in sub-section (1). Thus, the jurisdiction of the TPO to issue a notice to the assessee would be in relation to international transaction or specified domestic transaction for which reference is made by the Assessing Officer under sub-section (1). It is precisely for this reason that sub-sections (2A) and (2B) provide a deeming fiction where they provide that in case of an international transaction not referred to the TPO or an international transaction not reported by the assessee, which comes to his notice during the proceedings, the provision of the Chapter would apply as if such international transaction was one referred to in sub-section (1). In absence of this deeming ficti....
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....that the reference to the TPO is transaction and enterprise specific." In later Instruction No. 15/2015 dated 16.10.2015, it was clarified as under:- "4. Role of Transfer Pricing Officer 4.1 The role of the TPO begins after a reference is received from the AO. In terms of Section 92CA of the Act, this role is limited to the determination of the ALP in relation to international transaction(s) referred to him by the AO. However, if any other international transaction comes to the notice of the TPO during the course of the proceedings before him, then he is empowered to determine the ALP of such other international transactions also by virtue of sub-sections (2A) and (2B) of Section 92CA of the Act. The transfer price has to be determined by the TPO in terms of Section 92C of the Act." 17. Inescapable conclusion that we have reached is that in relation to a specified domestic transaction, the TPO can under take transfer pricing study only in relation to those transactions which are referred to him under sub-section (1) of Section 92C of the Act. Sub-section (2A) and (2B) of Section 92C are confined to international transactions and with the aid of any interpretive process, the sai....
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....ent to creditors in demerger process, the TPO had no jurisdiction to make any adjustments. Under these circumstances and even otherwise, we are not inclined to examine the adjustment on merits though it was argued before us by the learned counsel for the petitioner. 21. Coming to the adjustment made by the TPO towards payment of subscription fees, even though the petitioner may have certain arguable points, that by itself, would not enable us to bypass the entire statutory scheme of assessment, appeal and revision. Once the TPO makes his report, the provisions are made in the statute how such report would be acted upon. The petitioner would have full innings to oppose the contents of such report and take such challenge in the appeal in case the petitioner fails at the first stage. When a statute that too, fiscal statute makes detail provisions for assessment, appeals and revisions, ordinarily the Court would not examine the issues on merits bypassing such statutory remedies. Reference in this respect can be made to the decision of the Supreme Court in the case of CIT Vs. Chhabil Dass Agarwal [2013] 357 (SC). In the said judgment taking note of the larger number of decisions of the....