×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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This appeal filed by the assessee is directed against the order dated 06.10.2010 passed u/s. 143 (3) r.w.s. 144 C of the IT Act, 1961 for A.Y. 2006-07.
2. Facts of the case, in brief, are that the assessee is a company engaged in the business of import and export of precious metals, toys, stationery items etc. It filed its return of income on 30.11.2006 declaring total income of Rs. 5,46,75,382/-. Since the assessee has entered into certain international transactions with its AE, the AO referred the matter to the TPO for determination of the ALP of the international transaction. The TPO during the course TP assessment proceedings noted that the assessee has undertaken the following international transactions
1. Export of platinum of Rs.213.60 Crores.
2. Export of gold Rs. 17.95 Cores
He noted that the AE namely Prudential Precious Metals, FZE is a wholly owned subsidiary company and is located in Sharjah, UAE. The assessee during the impugned assessment year has entered into the international transaction related to sale of 2058.34 kilograms of platinum to its overseas subsidiary worth Rs.240.72 crores. The assessee has applied CUP method for benchmarking the international transaction. He noted that the company sources platinum from the third parties and sells them to its subsidiary. The sale price is fixed on the London Bullion Market Associates Rates (LBMA). The assessee has charged a premium of USD 2 per ounce over the rates fixed by LBMA. He noted that the assessee had purchased platinum by opening letter of credit. Assessee had sold
the goods purchased to its AE on the basis of spot rate. From the various details furnished by the assessee the TPO noted that for comparing the rate, the assessee had used date of fixing as the date for comparing the prices with London Bullion Market Association Rates. The TPO noted that the date of invoice and date of shipment are same whereas the date of fixing is different than these two dates. He observed that the date of invoice and date of shipment are verifiable piece of information whereas the date of fixing cannot be verified. According to the TPO although the assessee had used the date of fixing as the date on which the sale price was to be benchmarked, however, assessee had not furnished any credible evidences to suggest how the date of fixing was arrived. In view of the above the TPO rejected the TP analysis done by the assessee and used the date of invoice being the date on which the goods were soldto the AE and used the same for benchmarking the international transaction. Accordingly the TPO used the external CUP as available on date of sale invoice for comparability analysis and for benchmarking of the international transactions and rejected the T. P. analysis of the assessee pertaining to an imaginary date of fixing. Accordingly, the TPO made an upward adjustment of Rs.48,33,697/-. The assessee approached the DRP and the DRP upheld the action of the TPO. The AO in the order passed u/s. 143 (3) r.w.s144 C of the Act made addition of the same to the total income of the assessee.
3. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal :-
1. That the learned Deputy Commissioner of Income Tax, Circle-4(1), New Delhi has grossly erred both in law and on facts in determining the income of the appellant company at Rs. 5,96,09,634/- as against declared income of Rs. 5,46,75,382/- in an order of assessment under section 143(3)/144C of the Act dated 6.10.2010.
2. That the learned Deputy Commissioner of Income Tax has further erred both in law and on facts in making an addition of Rs. 48,33,697/- on account of alleged understatement of arm’s length price in respect of transactions between the assessee company and, its wholly owned subsidiary company M/s Prudential Precious Metals Pvt. Ltd. under section 92CA(3) of the Act
2.1 That in making the aforesaid addition, the learned Dy. Commissioner of Income Tax has erred in referring the matter to the Additional Commissioner of Income Tax (Transfer Pricing Officer-I (3), New Delhi (hereinafter referred to as ‘TPO’) u/s 92CA of the Act on the following grounds:
a) As none of the conditions precedent laid down under section 92C(3) of the Act were satisfied, there was no occasion for determination of arm’s length price by the AO and the value of the international transactions ought to have been accepted;
b) As the reference made by the learned AO to the learned TPO is not in accordance with the provisions of Section 92CA(1) of the Act;
c) As no opportunity of being heard was granted at any stage of the proceedings for this purpose, whether at the proposal or the approval stage;
d) As no initial opinion was formed u/s 92C(3) of the Act which is a jurisdictional precondition ;
e) By not furnishing the Letter of Reference (LOR) to appellant.
That since the reference by the learned AO was bad in law and void-ab-initio, consequentially the entire proceedings by the learned TPO, order of learned TPO dated October 23, 2009 order of Dispute Resolution Panel dated 08 09.2010 and, also the impugned addition of Rs.48,33,697/- were vitiated, invalid, illegal and hence, a nullify.
2.2 That the learned Deputy Commissioner of Income Tax has even other-wise failed to appreciate that provision of section 92CA of the Act were wholly inapplicable to the transactions of the appellant company with M/s Prudential Precious Metals Ltd. (hereinafter referred to as “PPML”)
2.3 That the learned Deputy Commissioner of Income Tax has further mechanically and on complete misconstruction of provisions contained in section 92CA(4) of the Act made the impugned addition without appreciating that arm’s length price determined by the learned Transfer Pricing Officer in an order under section 92CA(3) of the Act and, affirmed by Dispute Resolution Panel was based on complete disregard of the facts of the case of the appellant and the statutory provisions of law. Infact, the entire approach of