TaxTMI 
TaxTMI 
2023 (4) TMI 1100
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed and served on the assessee. One of the reasons for selection of the case for scrutiny was examination of TP parameters and huge amount of international transactions of Rs. 8.80Crores and specified domestic transactions (SDT) to the tune of Rs. 33.08 crores. Accordingly a reference was made to the AO/TPO. The TPO passed the order u/s 92CA(3) proposing the upper adjustment on account of transfer pricing adjustment of Rs. 84,76,769/- and accordingly the same was added to the income of the assesse in the assessment framed u/s 143(3) read with Section 144C(13) of the Act dated 25.01.2022 inter alia making other additions. 4. In the appellate proceedings also, the DRP dismissed the appeal of the assessee observing and holding as under: 3.1 In DRP proceedings, the assessee stated that TP provisions are inapplicable to the transaction under reference i.e. receipt of hire income from its AE which stood covered under Tonnage Tax Scheme as provided under Chapter Xll-G of the Act. The assessee submitted that Finance Act (No.2), 2004 introduced Tonnage Tax Scheme for taxation of income derived from shipping activities by an Indian Company vide Chapter Xll-G to provide for special provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... arising from an international transaction shall be computed having regard to the arm's length price under section 92 of the Act. Transfer pricing provisions contained in sections 92 to 92F fall within the ambit of Chapter X of the Act which contains special provisions relating to avoidance of tax. The Memorandum explaining the provisions of the Finance Bill, 2001 explains the intention underlying the provision is to prevent avoidance of tax by shifting taxable income to a jurisdiction outside India through abuse of transfer pricing. Thus, Chapter X of the Act governs the determination of arm's length price of every / any international transaction with a view to prevent profit shifting to a foreign jurisdiction 3.4 Chapter Xll-G of the Act provides relates to special provisions relating- to income of shipping companies in terms of computation of profits and gains from the business of operating qualifying ships. However, as the income from such business constitutes-business income, section 115VA provides for a non- obstante clause whereby notwithstanding anything contrary contained in business provision sections 28 to 43C of the Act, the computation of such income shall be c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....utset submitted that the assessee has been granted approval by the Addl. CIT, Range-1, Kolkata to offer its income on tonnage tax scheme vide letter dated 29.03.2017 on an application moved by the assessee exercising its option for the tonnage tax scheme under sub-section (1) of Section 115VP in form no. 65 for a period of 10 years effective from the date of application subject to the certain conditions. The Ld. Counsel also submitted that once the assessee has been returning his income from operating ships under Tonnage Tax Scheme, the transfer pricing provisions in respect of transactions entered into between domestic and foreign AE are not applicable as the tax is being paid on the notional/presumptive basis which cannot be subjected to any further adjustment/ variation. In defense of his arguments the Ld. Counsel for the assessee relied on the decision of Co-ordinate Bench of Mumbai in the case of Van Oord India Pvt. Ltd. vs. DCIT, Range-5(3), Mumbai in IT(TP) A No. 720/Mum/2015 dated 11.11.2019 wherein it was held that the TP provisions are not applicable where the assessee has opted for tonnage tax scheme and income is offered to tax under tonnage tax scheme. The ld. Counsel ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... principle, under Chapter X (sections 92 to 92F) of the Act are, a fortiori, not applicable to the TTS and ALP does not affect the computation and taxability of the tonnage income of the assessee. (d) Computation of income under the TTS is, thus, not impinged upon by the adjustment made by the TPO. (e) Income computed under the TTS is, by virtue of section 115VF, deemed to be the profits taxable as profits & gains of business or profession. (f) The amount of Rs. 17,24,50,468/-, which represents reimbursement of Head Office Expenses by the assessee to its holding company and AE, has wrongly been added, by altering the expenditure, under Chapter X, despite the inapplicability of the Chapter and inspite of the fact that Chapter X contains only machinery provisions and no charging provisions, sans which, it is trite, no tax can be levied. (g) Non-applicability of Chapter X does not get altered by the factum of the assessee having either filed audit report in Form 3CEB, or undertaken the benchmarking process and concluding its international transactions to be at arm's length. (h) The issue stands decided by the tribunal in favour of the assessee vide its orders in the ass....