TaxTMI 
TaxTMI 
2020 (1) TMI 1543
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....d grounds. Ground No. 2 is not pressed. Accordingly, the same is dismissed. Rest of grounds which requires the specific adjudication are extracted as under:- "3. Transfer Pricing Adjustment of INR 4,73,65,411/- on account of Specified Domestic Transaction of Directors Remuneration. 3.1. Erred in making a transfer pricing adjustment of INR 4,73,65,411/- on account of payment of directors remuneration by considering the same as excessive. 3.2. Erred in considering the said transaction as a separate transaction for benchmarking without considering the fact that the same is subsumed in the aggregated approach while applying TNMM for benchmarking of purchase and sale transactions which are held to be at arm's length. 3.3. Erred in benchmarking director's remuneration without adopting any of the prescribed methods. 3.4. Without prejudice to the aforesaid grounds, the learned TPO has erred in adopting the inappropriate comparable set of companies for benchmarking payment of directors remuneration. 4. Transfer Pricing Adjustment of INR 3,29,677/- on account of International Transaction of Corp....
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....ing the said SDT, the TPO benchmarked the international transactions of Corporate Guarantee which was unreferred by the Assessing Officer and accepted other international transactions. It is an admitted position that, with reference to the director's remuneration, the TPO relied heavily on his own finding on the similar transactions for the assessment year 2014-15. The contents of para 11 of the order of the TPO are relevant in this regard. On account of benchmarking of the director's remuneration, the Assessing Officer proposed the adjustments of Rs. 4,73,65,441/-. In the process, the TPO rejected the assessee's objection. 5. Before us, ld. Counsel for the assessee brought our attention to the said order of the Tribunal for assessment year 2014-15 on this issue of adjustments made by the TPO with reference to the specified domestic transactions of director's remuneration. According to him, this issue is a covered one. Further, on the other adjustments relating to the international transactions of corporate guarantee, the TPO proposed a sum of Rs. 3,29,677/-. The contents of para 8 of the order of the TPO are relevant in this regard. 6. Brief facts of these tr....
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....lving aggregated approach, an attempt of the TPO to isolate the specified domestic transactions of director's remuneration for separate benchmarking is improper as the same is against the principle of subsuming. No particulars method is applied by the TPO/Assessing Officer for benchmarking the same and no sustainable comparables were chosen for benchmarking the said transactions. 10. Further, it is the case of the AR for the assessee before us that similar benchmarking exercise were undertaken with specified domestic transaction of director's remuneration and the fate of the said adjustments decided in favour of the assessee by the Tribunal in assessee's own case for the assessment year 2014-15 vide ITA No. 1891/PUN/2018 order dated 04.09.2019. A copy of the same is placed at page 171 of the Paper Book - I. In this regard, ld. Counsel for the assessee brought our attention to the ground No. 9 and read out the relevant paras relate to the granting of relief to the assessee considering the another order of the Tribunal in the case of Hindustan Unilever Limited vs. Addl. CIT in ITA No. 7868/Mum/2010 for the assessment year 2006-07 dated 10.12.2012. 11. On hearing bot....
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....ustments made by Assessing Officer/TPO would get automatically subsumed including those adjustments also relating to royalty, etc. as done by the TPO. Applying the said principle, we hold that no separate adjustment is to be made on account of Directors remuneration in the hands of assessee. In view thereof, we allow grounds of appeal No. 7 and 9 raised by assessee and ground of appeal No. 8 becomes academic and the same is dismissed." 12. From the above, it is evident that the benchmarking of the specified domestic transactions of director's remuneration while accepting the aggregated results, is not sustainable. The decision of the Mumbai Bench of the Tribunal in the case of Hindustan Unilever Limited (supra) helps the assessee. Therefore, ground No. 3 should be allowed in favour of the assessee as a covered case. Accordingly, we order. Thus, the ground No. 3 is allowed. 13. Ground No. 4 relates to the transfer pricing adjustments of Rs. 3,29,677/- on account of international transaction of corporate guarantee. In this regard, the case of the assessee is that the benchmarking of such international transaction of corporate guarantee is not valid as the referral made by t....
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...., the TPO cannot increase the jurisdiction and proceed to benchmark the questionable international transactions of corporate guarantee transactions. 15. Referring many decisions, ld. Counsel mentioned that such jurisdiction of the TPO was not appreciated by the higher judicial. Referring to the Jurisdictional High Court's judgment in the case of Times Global Broadcasting Company Limited Vs. Union of India vide Writ Petition No. 3386 of 2018 dated 15.03.2019, ld. Counsel for the assessee mentioned that it is a case where, unlike case of the assessee, the Assessing Officer made a reference to the TPO for benchmarking an international transactions. During the proceedings, the TPO extended the scope of jurisdiction to specified domestic transactions also. Thus, before us, the question of validity of the jurisdiction of the TPO was raised. At the end of the proceedings, the Hon'ble High Court held in favour of the assessee and disapproved the jurisdiction of the TPO on such referred specified domestic transactions. The relevant paras are recited by the ld. Counsel for the assessee. 16. On hearing both the sides, we find it relevant to extract the contents of para 5, 14 and....
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....of the Principal Commissioner or Commissioner. Legislature, requires the Assessing Officer to obtain an approval from senior Revenue Authority before a reference is made. Such requirement cannot be jettisoned by the TPO exercising sue motu jurisdiction over the transaction not reported to him. ......... 17. Inescapable conclusion that we have reached is that in relation to a specified domestic transaction, the TPO can undertake 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 said provision cannot be applied to empower the TPO to examine any specified domestic transaction not referred to him by the Assessing Officer under sub-section (1). Any other view would be doing violence to the plain language of the statute." 17. From the above extracted portions of the judgment, it is evident that the Hon'ble High Court dealt with the sub-sections 92A and 92B of the Act incorporated by the Statute by the Finance Act, 2011 and held that t....
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....bmitted that this ground relates to the allowability of deduction in respect of the educational cess paid by the assessee. The Ld. Counsel further submitted that this issue is covered in nature by virtue of the decision of the Hon'ble High Court of Judicature for Rajasthan Bench at Jaipur in the case of Chambal Fertilisers and Chemicals Ltd. Vs. JCIT, Range 2, Kota. 13. On hearing both the parties on this issue, we find that this issue is covered one by the decision of the Hon'ble High Court of Judicature for Rajasthan Bench at Jaipur in the case of Chambal Fertilisers and Chemicals Ltd. Vs. JCIT, Range 2, Kota wherein substantial question of law No. 3 is relevant in this regard (Para 3) and the same was adjudicated by the Hon'ble High Court at Para 12 of the judgment. The Hon'ble High Court on this issue held the said question No. 3 is answered in favour of the assessee. For the sake of completeness, the said Paragraph is extracted as under: "12. We have heard counsel for the parties. On the third issue in appeal No. 52/2018, in view of the circular of CBDT where word "Cess" is deleted, in our considered opinion, the tri....