TaxTMI 
TaxTMI 
2023 (2) TMI 1465
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.... TP adjustment by placing reliance on the judgment of Hon'ble High Court in the case of M/s Ranbaxy Lab Ltd. Vs. CIT 345 ITR 193 (Del.), even when the cases relied upon the decision have been rendered upturned in the decision of the Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. Vs. UOI 361 ITR 531 (Bom.)?" 3. In the instant case, the fact of determination of the ALP by the AO himself is not in dispute either by the parties. The short question before us is to adjudicate "whether the Assessing Officer himself/herself can determine arm's length price without referring the issue to the TPO". 4. On this issue we are guided by Instruction No. 3/2003 20.05.2003 and Instruction No. 15/2015 dated 16.10.2015 of CBDT and the judgment of Hon'ble Supreme Court dated 13.08.2019 in the case of PCIT-4, Mumbai Vs. M/s S.G. Asia Holdings (India) Pvt. Ltd. in Civil Appeal No. 6144 of 2019. For the sake of ready reference, the said references are reproduced in toto as under: Instruction No. 15/2015 F.No. 500/9/2015-APA-11 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Foreign Tax and Tax Research Divis....
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....with sub-section (3) of Section 92C, the computation of total income in conformity with the A LP so determined by the TPO is required to be done by the AO under sub-section (4) of Section 92C read with sub-section (4) of Section 92CA of the Act. 3.2 In order to make a reference to the TPO, the AO has to first satisfy himself that the taxpayer has entered into an international transaction with an associated enterprise. One of the sources from which the factual information regarding international transaction can be gathered is Form No. 3CEB filed by the taxpayer, which is in the nature of an accountant's report containing basic details of an international transaction entered into by the taxpayer during the year and the associated enterprise with which such transaction is entered into, the nature of documents maintained and the method followed. Thus, the primary details regarding such international transactions would normally be available in the accountant's report. The AO can arrive at a prima facie belief on the basis of these details whether a reference to the TPO is necessary. No detailed enquiries are needed at this stage and the AO should not embark upon scrutinizing th....
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....l Commissioner or Commissioner as provided in the Act. The provisions of Section 92CA of the Act, inter-alia, refer to the international transaction. Hence, all international transactions, in relation to which a reference to the TPO is considered necessary, have to be explicitly mentioned in the letter through which the reference is being made. 3.5 Since transfer pricing cases are now being selected for scrutiny on the basis of risk parameters, there is no requirement of selecting a transfer pricing case for scrutiny on the basis of the value of the international transaction. Consequently, there would be no requirement of referring an international transaction to the TPO for determination of its ALP merely because the value of the international transaction is above a particular limit. In particular, where a case has been selected for scrutiny only on non TP issues and the case also involves international transactions with AEs, the case shall not be referred to the TPO irrespective of the value of the international transaction or aggregate value of all international transactions. The only exception to this would be a case selected for scrutiny on non-TP parameters where the....
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....ictional Additional/ Joint CIT before passing the order. The jurisdictional CIT (TP) should assign a limited number of important and complex cases, not exceeding 50, to the Additional/ Joint CIT (TPOs) working in the same jurisdiction. For the selection of such important and complex cases by the CIT(TP), the concerned CCIT (International Taxation) shall frame appropriate guidelines. 4.2 The order passed by the TPO should contain details of the data used, reasons for arriving at a certain price and the applicability of methods. It may be emphasized that the application of method including the application of the most appropriate method, the data used, factors governing the applicability of respective methods, computation of price under a given method will all be subjected to judicial scrutiny. It is, therefore, necessary that the order of the TPO contains adequate reasons on all these counts. Copies of the documents or the relevant data used in arriving at the arm's length price should be made available to the AO for his records and use at subsequent stages of appellate or penal proceedings. 4.3 In addition to the above, the TPO is required to carry out the Complian....
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....r scrutiny on non-TP parameters and the case also involves specified domestic transact ions with AEs, the case shall not be referred to the TPO irrespective of the value of the specified domestic transaction or aggregate value of all specified domestic transactions. The only exception to this would be a case selected for scrutiny on non-TP parameters where the AO comes to know that the taxpayer has entered into specified domestic transaction or transact ions but the taxpayer has either not filed the Accountant's report under Section 92E of the Act or has not disclosed the said specified domestic transaction or transactions in the Accountant's report filed. In such exceptional situations, the AO may refer the matter to the TPO after providing an opportunity of being heard to the taxpayer. 8. This Instruction issues under Section 119 of the Act and supercedes Instruction No.3 of 2003 with immediate effect." (Sobhan Kar) Director (APA), Government of India 5. The Hon'ble Supreme Court has held in THE PRINCIPAL COMMISSIONER OF INCOME TAX-4, MUMBAI M/s. S.G. ASIA HOLDINGS (INDIA) PVT. LTD. that in view of the transfer pricing guidelines issued by the CBDT i....
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...."16.1 After considering the entire judicial discussion discussed hereinabove, in our considered opinion, the mandatory instructions issued by the Central Board of Direct Taxes cannot be brushed aside lightly. By not making reference to the Transfer Pricing Officer, the AO has breached the mandatory instructions issued by the CBDT thereby making the assessment order on this issue in violation of the provisions of the law. We, therefore, set aside the findings of the Ld. CIT(A) on this issue and hold that the Transfer Pricing Adjustments made by the AO in contradiction to the mandatory instructions of the CBDT is bad in law. Here, we would like to make it clear that the assessment order is good but the Transfer Pricing Adjustments made therein are bad in law. Ground No.11 is therefore partly allowed. 16.2 Before parting with this issue, the Ld. DR has emphasized that if the AO has not followed the mandatory directions, the case may be set aside to the file of the AO so that he may refer the matter to the TPO. We do not subscribe to this argument of the Ld. DR for the simple reason that the Tribunal is an Appellate Authority and therefore cannot interfere in the admi....
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.... Transfer Pricing Officer (TPO):- The Power to determine arm's length price in an international transaction is contained in sub-section (3) of section 92C. However, section 92CA provides that where the Assessing Officer considers it necessary or expedient so to do, he may refer the computation of arm's length price in relation to an international transaction to the TPO. Sub-section (3) of section 92CA provides that the TPO after taking into account the material available with him shall, by an order in writing, determine the arm's length price in accordance with sub-section (3) of section 92C. Sub-Section (4) of section 92CA provides that on receipt of the order of the TPO, the Assessing Officer shall proceed to compute the total income of the assessee having regard to the arm's length price, determined by the TPO. Thus, whereas the determination of the arm's length price, wherever reference is made to him, is required to be done by the TPO under sub-section (3) of section 92CA, read with sub-section (3) of section 92C, the computation of total income having regard to the arm's length price so determined by the TPO is required to be done by the Assessing Officer un....
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....edings but await the report of the TPO on the value of international transaction before making final assessment. The threshold limit of Rs.5 crores will be reviewed depending upon the workload of the TPOs. The work relating to selection of cases for scrutiny and reference to TPO on the above basis in respect of pending returns filed for the assessment year 2002-03 should be completed by June 30, 2003. (ii) Role of Transfer Pricing Officer:- The role of the TPO begins after a reference is received from the Assessing Officer. In terms of section 92CA this role is limited to the determination of arm's length price in relation to the international transaction(s) referred to him by the Assessing Officer. If during the course of proceedings before him it is found that there are certain other transactions; which have not been referred to him by the Assessing Officer, he will have to take up the matter with the Assessing Officer so that a fresh reference is received with regard to such transactions. It may be noted that the reference to the TPO is transaction and enterprise specific. The transfer price has to be determined by the TPO in terms of....
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....en by the Assessing Officer. (iv) Maintenance of database: It is to be ensured by the DIT (Transfer Pricing) that the reference received from the Assessing Officer is dealt with expeditiously so as to leave the Assessing Officer with sufficient time to offer an opportunity of being heard of the taxpayer before computing the income and completing the assessment. In order to ensure that all the references are attended to timely and effectively, a record of all such developments should be maintained in the format enclosed as Annexure I to these guidelines. This format will also serve as an important data base for future action and also help ensure uniformity in the determination of "arm's length price" in identical or substantially identical cases. These instructions are under Section 119 of the Income-tax Act. ANNEXURE I Register of record to be maintained by Transfer Pricing Officer Sl. No Date of Name of Name Nature and Name and Nature of Date of Transfer Arms Method Reference `Date of receipt the A.O. and quantum of address of association issue of price as length applied to any despatch of making address international the as per notice taken by ....