2021 (3) TMI 837

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....atural justice, ultra vires the provisions of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') and in breach of Articles 14, 19(1)(g) and 265 of the Constitution of India. 4. The Petitioner, a private limited company incorporated under the Companies Act, 1956, is a wholly-owned subsidiary of SABIC Global Limited, UK (51% shareholding) and SABIC Asia Pacific Pte Limited, Singapore (49% shareholding). It is engaged in providing marketing support services in India to the Saudi Basic Industries Corporation, Saudi Arabia, and SABIC Singapore [jointly referred to as "Associated Enterprises" or "AEs"] for the sale of the products owned by SABIC, Saudi Arabia. As the Petitioner was undertaking international transactions with its AEs, the international transactions entered into by it were referred to the Transfer Pricing Officer (hereinafter referred to as the 'TPO') for determining the Arm's Length Price (hereinafter referred to as 'ALP'), as per the provisions of Section 92CA of the Act. 5. For the relevant year (A.Y. 2016-17), vide order dated 29th October, 2019, the TPO rejected the transfer pricing methodology adopted by the Petitioner. These findings of the TPO cu....

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.... and also furnished evidence in support thereof. In spite of that, the same have been rejected without any application of mind, in a perfunctory manner. He submits that one significant objection filed by the Petitioner pertains to the 'rule of consistency' and the persuasive effect of the directions of the DRP dated 17th July, 2019 for AY 2015-16. In the said directions, Respondent No. 2 had held that the appropriate basis for the determination of the ALP was the comparable uncontrolled price (CUP) method. The comparable(s) sought to be relied upon by the TPO were held to be irrelevant or unacceptable for detailed reasons set out in the said directions. On a consideration of the facts and evidence, the DRP held that an independent arm's length transaction, entered into by the Petitioner's parent company with an independent entity in Algeria, was the acceptable comparable. Applying this acceptable comparable, the commission payable fell in the acceptable range of 0.5% to 1%, and was found proper and legal and did not require any adjustment. 10. Mr. Vohra submits that the agreement which was found acceptable by the DRP as the appropriate comparable for A.Y. 2015-16 was also in eff....

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....es where the Courts have entertained a writ petition, even at the stage where the directions of the DRP have yet not culminated into an assessment order. Indeed, the judgment relied upon by the petitioner in the case of P.D.R. Solutions FZC (supra) is one such case. As also noted in the said decision, it is only in exceptional circumstances, that a writ petition should be entertained. Therefore, we only have to see if the present case fits into the category of exceptions, recognized by the courts. The present petition is predominately premised on the ground of violation of principles of natural justice, which is contended to be apparent from non-consideration of the detailed written submission set out in the objections filed before the DRP. We have given our anxious consideration to this plea and to fully comprehend this contention, we have perused the impugned directions. We note that Petitioner's primary objection was founded on the rule of consistency i.e. DRP should follow its own directions issued for A.Y. 2015-16. On this issue, the DRP observes as under: "3.2. Grounds no 1.1 and 1.3 relate to non-following of this Panel's directions during AY 2015-16 even though the....

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....he TPO in para 9 of his order has given sufficient reasons justifying the application of other method using the database having comparables. The objection, therefore, is not acceptable and is rejected accordingly." 14. The aforesaid extract from the impugned directions discern that the DRP has taken into account the fact that the panel, during A.Y. 2015-16, rejected Assessee's objection to the CUP method adopted by the TPO/AO as well as its request to accept Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM). Following the same, the DRP had upheld the TPO's action of using the CUP approach and employing the "other method" and selecting the comparable(s) after considering the functional profile. It was further observed that no arguments were advanced regarding other methods employed by the TPO. In these circumstances, the DRP observed that each assessment year is an independent assessment year, and the decisions may vary in view of the facts of the case. We also notice that the DRP has also perused the reasons given by the TPO and found the same to be sufficient to justify the application of "other method" using the database having comparables. 15. At ....