TaxTMI 
TaxTMI 
2022 (12) TMI 414
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....Armada Offshore Pvt Ltd Vs ACIT, which was heard just before this appeal came up for hearing. Learned representatives fairly agreed that whatever is decided in the said appeal will follow mutatis mutandis in this appeal as well. 3. Vide our order of even date, we have partly allowed the appeal filed by the Sapoorji Pallonji Bumi Armada Offshore Pvt Ltd (supra), and observed, inter alia, as follows: 2. The core issues requiring our adjudication in this case, as learned representatives agree, are (i) whether the Dispute Resolution Panel was justified in passing the impugned order dated 22nd April 2021, (ii) whether the Transfer Pricing Officer was justified in given effect, vide his order dated 31st May 2021, to the directions contained in the said order, and, (iii) whether, based on this rectification order passed by the Dispute Resolution Panel and based on the TPO's resultant order giving effect thereto, and, whether the Assessing Officer was justified in, based on these order, passing the impugned order dated 2nd June 2021 making an addition of Rs 6,68,10,000 as an arm‟s length price adjustment. 3. To adjudicate on these grievances, on....
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....action held as comparable by the learned DRP; (ii) significant differences between FPSO Armada Sterling and FPSO Karpan Armada Sterling III offered as comparable; (iii) ratio of annual lease charges pertaining to FPSO vessel to Charter Rate in the case of two incomparable vessels cannot be used to benchmark the transactions; (iv) in considering, in the case of Husky transaction, operating day rate pertaining to FPSO vessel as hire/lease day rate paid for the FPSO vessel; (v) erroneous assumption behind the present value (PV); (vi) no internal comparability involved as claimed by the DRP; (vii) documents filed by the assessee on 27.8.2020 treated by the learned DRP to be not in the nature of evidence, and yet relied upon to delete TP adjustment made by the TPO; (viii) no opportunity given by the TPO to offer comments on documents submitted by the assessee on 27.08.2020; (ix) no restriction on benchmarking ALP without comparable(s) under the Other Method, as claimed by the DRP; (x) restricting application of second criterion of Other Method to when comparables are not available; (xi) obverse interpretation of Rule 10B(2)(b); and (xii) other miscellaneous points. A copy of this petiti....
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....r in considering, in the case of Husky transaction, operating day rate pertaining to FPSO vessel as hire/lease day rate paid for the FPSO vessel as terms of the arrangements of the assessee vis-à-vis the comparable were similar, and specific detailed reasons, meeting all the points raised under this heading, were met by the assessee one by one; (v) as regards alleged erroneous assumption behind the present value adopted, it was pointed out that SBI PLR, which was adopted by the assessee, represents indicative rate for discounting on the facts of this case, and, even if LIBOR plus 3 percent or LIBOR plus 4 percent were to be adopted, the conclusion would not have been any difference, and that estimated life of 7 years for the FPSO vessel, with insignificant residual value, was a correct assumption on the peculiar facts of this case; (vi) as regards the point of internal comparability, it was pointed out that, firstly, wrong nomenclature, even if that be so, would not vitiate the conclusions, and, secondly, this transaction was between a group company and an independent party which was a valid comparable; (vii) as regards the point that documents filed by the assessee on 27.8.....
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....te that the TPO's MA dated 16.02.2021 is not maintainable because there is no provision under the Act or no rule under the DRP Rules, 2009 wherein a MA can be filed before the DRP. Therefore, the MA is rejected/ not accepted because of its being ultra vires in character. 3. We would like to state that the DRP has only power to 'rectify, mistakes/ errors apparent in direction' u/r 13 of the DRP Rules. Therefore, we decide to take the MA as application for rectification of apparent mistake/ error in the direction u/r 13 of the DRP Rules. Consequently, the assessee was given opportunity to present its say in this regard. The assessee filed its written submission on 24.02.2021. The TPO filed his written rejoinder dated 02.03.2021.Two virtual hearings were held on 25.02.2021 and 03.03.2021. In the virtual hearings the Addl. CIT (TP) 4(1). Mumbai, the TPO and the assessee presented their say with regard to the MA filed by the TPO. The matters/ issues were discussed in detail. The assessee vehemently pleaded for rejection of each point of the MA. 4. After careful perusal of the MA, the assessee's submission and the rejoinder of the TPO, we find tha....
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....ls for specific projects and do not as such command a terminal value at the end of the contract. (Refer para 3.5 of the MA) (viii) The TPO used contractual terms/ conditions relating to the hire charges to arbitrarily determine the revenue split ratio @ 46.80: 53.20. We benchmarked the revenue split ratio using the same contractual terms/ conditions comparing it to the revenue split ratio in a similar business based on their contractual terms/ conditions relating to hire charges. Taking average day rate was essential because the day rates were different in each of the seven-year duration in the assessee/ AE agreement as against the uniform day rate in each year in the comparable agreement. Resorting to comparison of the contractually agreed payments/ charges was a legitimate exercise to benchmark the revenue split ratio. (Refer to para 3.4.2(ii)/ 3.4.3 of the MA) (ix) The TPO has himself worked out a new ratio 18.57:81.43 for revenue split between the assessee and the AE in AY 2017-18, instead of 46.80:53.20 in the instant AY 2016-17 after referring our directions. (Refer para 4 of the MA) (x) "Jurisprudence‟ is "science of law‟.....
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....ween the assessee and the AE. (iii) In so far as the claimed inclusion of insurance/ statutory inspection charges/ survey fees/ overheads/ profits in the hire/ lease day rate paid to the AE is concerned, the assessee shall submit the relevant actual before the TPO for verification. (iv) In so far as the benefit of +/- 3 % variation is concerned, the TPO may decide the issue, as per law, after carrying out the above directions. (v) The TO is directed to afford to the assessee a proper opportunity of being heard and present its case and relevant documents with regard to the above directions, before passing the consequential order. 7. The assessing officer shall give effect to the above directions as per provisions of section 144C (13) of the Act read with rule 13 of the DRP Rules, 2009. 6. The assessee is aggrieved and is in appeal before us. 7. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 8. We find that under section 144C(14) of the Act, the Central Board of Direct Taxes "may make ru....
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....ications as the miscellaneous applications. In this view of the matter, while we do not approve the hyper pedantic approach in a rectification application filed before the Dispute Resolution Panel being dismissed as not maintainable in the absence of a specific provision for the filing of "miscellaneous applications‟, we nevertheless approve the dismissal of the said application on the short ground, as discussed in the foregoing paragraph, that the scheme of rule 13 does not visualize, or permit, a rectification application being entertained from a person other the assessee or the Assessing Officer. In any event, the rectification of mistakes, as permitted under rule 13, is only with respect to "mistake or error is apparent in such direction (issued by the DRP)". That is precisely what Section 154 of the Act also covers inasmuch as it covers "mistake apparent from the record", the connotations of a mistake "apparent in such direction‟ cannot be any broader than the connotations of a mistake "apparent from the record‟. As to what does the scope of a mistake "apparent from the record‟ covers, we can do no better than to reproduce the words of the landmark judg....
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....ond that". Quite clearly, therefore, the scope of mistakes apparent from the record is inherently limited, and, in the garb of rectification of error or mistake apparent in such directions issued by the DRP, the DRP can neither embark upon a review of its own order nor tinker with the areas beyond the mistake apparent on the record which is "an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions". Similarly, an error "to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment", in the light of the guidance of Hon‟ble jurisdictional High Court, is not something which can be treated as mistake apparent from record and rectified as such. In the light of this legal position, and when we take into account categorical and uncontroverted findings of the learned DRP to the effect "We can infer with certainty from the detailed MA, the detailed response by the assessee, the detailed rejoinder by the TO and para 4 of this order (supra), that no 'mistakes/errors apparent‟....
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.... for any specific adjudication. We may, however, add that this order is without prejudice to any such order as the DRP may, within the permissible framework of the law- including on the limitation aspect, pass under rule 13 on its own or on an application by such parties as are permitted to file such an application. We may further add that there may also be many other facets to the scope of law with respect to the rectification proceedings under rule 13 of the DRP Rules, but, given our findings above, it is not really necessary to deal with those nuances of law at this stage. 10. As we part with the matter, we may add that apart from the grievance against the impugned the arm‟s length price adjustment of Rs 6,68,10,000- including, of course, against the issuance of directions dated 22nd April 2021 by the Dispute Resolution Panel, the assessee has also raised a grievance against the depreciation allowance on Gas Turbine Generators (GTGs) of Rs 25,29,89,877 at 15% instead of 80%, but as this addition was made in the original assessment order dated 30th March 2021, and the order impugned in the present appeal is the rectification order dated 2nd June 2021, we are....