TaxTMI 
TaxTMI 
2020 (8) TMI 509
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....lding the action of ld. AO in referring the case of the Appellant to the Transfer Pricing Officer. The ld. CIT(A) ought to have considered that under the facts and circumstances of the case, there was no reasons to interfere with the pricing adopted by the Appellant as the same is falling within the parameters of transfer pricing laid down under the scheme of the Act. 3. The ld. CIT(A) has erred in law and on facts of the case in upholding the action of ld. AO in invoking the provisions of Chapter X without prima facie demonstrating that there was some tax avoidance. 4. The ld. CIT(A) has erred in law and on facts of the case in upholding the action of ld. AO in making a reference to the Transfer Pricing Officer u/s.92C(3) r.w.s. 92CA(1) of the Act without providing any opportunity of being heard to the Appellant. 5. The ld. CIT(A) ought to have considered that in any case the whole reference and the consequent orders were bad and illegal because the alleged approval granted by the Commissioner of Income Tax u/s.92CA(1) of the Act in law firstly on account of fact that the Appellant was not heard before any such approval and secondly because the same has been granted mechanic....
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....t it has charged the price from its AE after 4th February 2010 at the arm length price and therefore no adjustment is required to be made. 3.3. However, the TPO observed that price charged from its AE are varying significantly as evident from invoice wise details available on record. Therefore, TPO was of the view that each invoice should be compared separately. The TPO was also of the view that uncontrolled price of other non AE should also be included for calculating the ALP of the comparables. Accordingly, TPO worked out the revised ALP of the comparables i.e. average of price charged form Dyestar group pre 04th February 2010 and price charged from other non AE. The TPO Compared the same with each invoice of exports made to different units of Dyestar group after 04th February 2010. During the proceedings, the TPO found that in case of two invoices with respect to the product namely Reactive Blue 250, the assessee has not charged price at ALP as there was variance of more than 5%. Thus the TPO issued show caused notice vide letter no. DCIT (TPO-II)/AHD/Kri Dyes/92CA(1)/12-13 dated 18th October 2013 purposing addition of Rs. 2,20,704/-in the following manner: 3.4. The assesse....
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....Thereafter, the average price of the comparable should have been compared with each invoice raised by the assessee to its associated enterprises. Accordingly, the TPO worked out revised ALP of the comparables after considering price charged from Dyestar Group before acquisition i.e. 4-2-2010 along with price charged from other non AE. The revised ALP was compared with the actual price charged by the assessee for each invoices raised to its AE. It was found that some of the invoice issued for the product namely 'Reactive Red 195' and 'Reactive Black 5' were varying significantly. The relevant details are available on the pages 5 and 6 of the TPO order. 3.11. Accordingly, the TPO issued a show cause notice vide letter no. DCIT(TPO-II)/AHD/Kri Dyes/92CA(1)/12-13 dated 18th October 2013 purposing addition of Rs. 38,97,996/- for the upward adjustment on account of international transaction. 3.12. The assessee in response such show cause notice made reply vide letter dated 29th October 2013 by submitting that the AE (Well prospering Ltd) is located in the China whereas the Dyestar Group is mainly based in Europe and USA where the market conditions are different from the Asia . 3.13. T....
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....en pointed out by the appellant during the course of appellate proceedings. Further, the TPO has duly taken into account all the objections taken by the appellant at the stage before him. I am in complete agreement with his findings, and it is noted that the order of the TPO is well reasoned and detailed. The comparability analysis also has been properly done by him. The claim of the appellant that when the purpose of comparison of the same entity (post acquisition) was available comparison with other non-AE was not required is without any basis. The method which has been adopted by the TPO is CUP and the comparison would be better, if the broader base of comparable uncontrolled transactions is taken. Therefore, the action of the AO was justified. It is noted that the appellant is charging different rate to the same company, prior to acquisition and post acquisition, and therefore, this has led to the adjustment in Arms' length price. Regarding the objection taken by the appellant in respect of Dystar group, the appellant has pointed out that there is a geographical location, a difference with would affect the sale price of the product. It has rightly been pointed out by the TP....
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....er of this tribunal in the case of Gemstone Glass Pvt Ltd. 6.3. The learned AR also contended that the TPO has taken the average price of the comparables which was compared with the individual invoices raised by the assessee to the associated enterprises. As per the learned AR the TPO should have taken the same yard stick by taking the average price charged by the assessee instead of individual invoice. 7. On the other hand, the learned DR vehemently supported the order of the authorities below. 8. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case are not in dispute which have been elaborated in the preceding paragraph. Therefore we are not inclined to repeat the same for the sake of brevity and convenience. 8.1. In the present case, the issue relates to the determination of the ALP for the export of the finished goods made by the assessee with respect to two associated enterprises namely Dyestar and Well Prospering Ltd. To adjudicate the issue, we deal with the issue involved in the present appeal with the individual associated companies. Hence, we, first take up, the issue involved in the case of Dyest....
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....s the provisions of the rule permits to aggregate the comparable uncontrolled transactions for determining the ALP. However, the rule does not permit to aggregate the international transactions carried out by the assessee to work out the average price for the purpose of the comparison. In holding so we draw support and guidance from the order of the Delhi tribunal in the case of Tilda Riceland (P) Ltd vs. ACIT reported in 42 Taxmann.com 400 wherein it was held as under: "The first thing as noticed is that the assessee has determined arm's length price of its transactions with the AEs by comparing average export price charged by the assessee to its AEs with the average uncontrolled export price. This approach is patently incorrect inasmuch as while under rule 10B (1)(a)(i), it is indeed open to compute ALP on the basis of price charged in a comparable controlled transaction or 'a number of such transactions', but the arm's length price so computed is, under rule 10B(1)(a)(iii), taken as arm's length price in respect of property transferred in the international transaction. The expression 'the international transaction' referred to in rule 10B(1)((a)(i....
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.... be seen in connection with the actual price charged by the assessee. As such percentage works out at 4% in this example. 8.10. Before parting, it is also pertinent to note that even assuming for the sake of understanding, the contention of the assessee is correct then also the difference between the ALP and the price charged by the assessee exceeds 5% therefore there cannot be any benefit to the assessee on account of such variation. For the ready reference, we calculate the difference as detailed below: ALP of the comparable uncontrolled transactions Rs. 177.74 Less : benefit of 5% variation Rs. 8.89 8.11. The ALP after 5% variation comes to Rs. 168.85 whereas the price charged by the assessee stands at Rs.167.81 and Rs.165.59 for the invoices which are in dispute. 8.12. At this juncture, it is also important to understand that the assessee has taken same entity (Dyester Group) as one of the comparable for the transactions carried out by it before becoming such comparable company it's AE. The question arises whether such company can be considered for the purpose of determining the ALP. To resolve the controversy we find important to refer the provisions of section 92A (2) ....
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.... by the parties thereto. GSPL transfer agreement isdefined in the definition and interpretation clause 1 of the SPA as under" 8.15. In view of the above, and after considering the facts in totality, we do not find any infirmity in the order of the authorities below for making such upward adjustment of Rs. 2,20,704/- to the total income of the assessee. 8.16. Moving to the international transactions carried out by the assessee with Well Prospering Ltd, the 1st issue arises for our consideration whether the transactions carried out with the AE can be considered as one of the comparable for determining the ALP for the purpose of the comparison. Admittedly, the Dyestar Group of companies became the AE in the year under consideration dated 4th of February 2010. The provisions of section 92A(2) clearly states that a company shall become AE of another company at any time during the year under consideration if it meets the criteria provided under section 92A of the Act. Once the comparable company becomes the AE of the assessee in the year under consideration, then such company cannot be considered for the purpose of comparable. In holding so we place our reliance on the order of this t....
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....ote that it is the duty of the income tax authorities to implement the provisions of Income Tax Act while framing the assessment. In other words, if the assessee has made a mistake in the interpretation of the provisions of the Act then it is the duty of the authorities to rectify such mistake. Accordingly, it is inferred that assuming the assessee has paid the taxes on the items of income which were not chargeable to tax under the misconception of the provision of the Act. The income tax authorities are duty-bound to correct such mistake and extend the necessary relief to the assessee. Thus the income tax authorities cannot exercise their jurisdiction with respect to the matters which has not been authorized under the provisions of law despite the fact that the assessee has given his consent. 8.18. In holding so, we draw support and guidance from the order of Delhi tribunal in case of Tilda Riceland (P) Ltd. (Supra) where it was held as under: "As a quasijudicial authority, and while pursing the goal of justice, one cannot remain at the mercy of the wisdom of representatives of the parties appearing before such an authority; it is bounden duty of every quasijudicial authority ....