M/s Obulapuram Mining Company P. Ltd., Bellary V. DCIT, Bangalore

ITA 545/BANG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0158 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SIBICHEN K MATHEW CITIII
• Assessee Lawyers: MAYANK JAIN
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction
• Section: 92C; 92D; 92A; 10B; 263; 12; 92

Judgement Text

ITA NO.545(B)/2012 IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNANT MEMBER ITA NO.545(BANG) 2012 (ASSESSMENT YEAR : 2008-09 M/S OBULAPURAM MINING COMPANY PVT. LTD., ENNOBLE HOUSE, NO.6/4, RAGHAVACHARI ROAD, BELLARY DISTRICT -583 101 PAN NO.AAACO5753D APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BANGALORE RESPONDENT ASSESSEE BY : SHRI MAYANK JAIN, ADVOCATE REVENUE BY : DR. SIBICHEN K.MATHEW, CIT-III DATE OF HEARING : 31-05-2016 DATE OF PRONOUNCEMENT : 2 9-07-2016 O R D E R PER SHRI A.K.GARODIA, AM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE LD. CIT, CENTRAL, BANGALORE DATED 30-03-2012 PASSED BY HIM U/S 263 OF THE IT ACT, 1961. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER ; 1 . 1 THE IMPUGNED ORDER OF LEARNED COMMISSIONER OF INCOME TA X PASSED UNDER SECTION 263 IS AGAINST LAW AND WITHOUT JURISDICTION . 1 . 2 THE IMPUGNED ORDER PASSED IN HASTE , W ITHOUT PRO V IDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD I S I LL E GAL . 1 . 3 THE LEARNED COMMISS I O NER WA S N O T J US TI F I ED IN HOLDING THA T T HE ORDER OF ASSESSING OFFICER WAS ITA NO.545(B)/2012 ERRON E OUS AND PREJUDICIAL TO THE INTEREST OF R E VENUE . 1 . 4 E VE N ACCORDIN G TO T H E C O MMI S SION E R , T H E AO ' S OR D ER W AS O NL Y E R RONEO U S , T H ER E WAS NO T HIN G TO S H OW T H A T T HE SA M E WAS PR E JUDI C I A L T O TH E I N T E R E ST O F T H E RE V ENUE . 1 . 5 ON THE FAC T S AND IN THE CIRCUMSTANCES OF THE CASE IN LAW , THE LEARNED COMMISSIO N ER , W HILE RE V ISING THE ASSESSMENT , ERRED IN NOT APPRECIATING THE FACT AND TH E LA W THAT THE V IEW TAKEN B Y THE LEARNED AO WAS SUSTAINABLE IN LAW , THEREFO R E , THE ORDER PASSED W AS AFTER DUE APPLICATION OF MIND B Y TH E LEARNED AO AND K EE PING IN V IEW THE LA W OF THE LAND EXISTING AT THE TIM E OF FRAMING THE ASSESSMENT . 1 . 6 THE LEARNED COMMISSIONER ERRED IN REVISING THE ASSESSMENT UNDER S.263 ON THE GROUNDS THAT THE AO DID NOT REFER THE CASE TO THE TPO TO DETERMINE THE ALP , CUP DATA OF MAR 2008 IGNORED B Y THE AO AND T W O IN V OICES WERE ACCOUNTED BY THE ASSESSEE ONL Y IN THE SUBSEQUENT ASSESSMENT YEARS. EXPORT T O MIS GLA TRAD I NG INTERNATIONAL PTE L T D , DUBA I 2. 1 TH E LEARN E D C OM M ISSION E R ER R E D IN C OMIN G T O A CO N C LUSION T H AT THE R E IS S UPPR E SSIO N OF S A L E S AND U N D ER IN V O I CI N G OF SA L ES TO M/ S GL A T RA DIN G INT E RN A T I O NAL PTE LT D W H E N T H E R E I S N O EV IDENC E W H A TS OEVER OF AN Y S UPPRESSION OF S A L ES OR UNDER INV O IC IN G OF A N Y SUCH S A L E S . 2 . 2 THE L EA RN E D C OM M ISSIONER OUGHT TO HAVE ACCE PTED THAT THE SALES T O GL A TRADI N G WERE AT MARKET PRICES PREVAILING AT THAT TI M E . 2 . 3 TH E LE A RNED COMMISSION E R ERRED IN REJECTING COMP A RABL E PRIC E S , E V IDENCES AND S U BMISSIONS F U RNIS H ED DURING THE COURSE O F ASSESSMEN T PROCEED I NGS . 2 . 4 THE LEARNE D COMM IS S I O NER ERRE D IN T R EA TI N G M/ S G L A TRADING IN T ERNA T IONAL PTE L T D , DUBAI AS AN ASSO C IATED ENT E RPR I SES U / S . 92A OF THE ACT . 2. 5 THE LEARNE D COMM I SS I ON ER FAILED TO NOT I CE T HAT ITA NO.545(B)/2012 THE APP ELL AN T HAD ENTERED INTO LO N G TE RM S A LES C ONT R ACT WITH GL A TR A D ING AS AGAIN S T SP O T S A LES C O NT RA CT . 2 . 6 T H E LEARN E D COMM I SSION ER ERRE D I N BENCH MARKI N G THE T R ANSACT I ON AGAIN S T DAT A OF MARCH 2008 . 2 . 7 TH E L E ARN E D C OMM I SS I ON ER ER R E D M A D O P TI N G DOLL AR C O N V ERSION RAT E A T 40 . 1452 . 2 . 8 THE LEARNED COMMISSIONER WAS NOT JUSTIFIED IN HOLDING THAT THE UNDER ESTIMATION OF UNDER INVOICIN G B Y AO IS USD 34 , 73 , 562 . 2 . 9 THE LEARNED COMMISSIONER ERRED IN CONCLUDING THAT THE EXPORT SALES MADE TO GLA LTD WITH BILL OF LADING DATED 21 . 03 . 2008 AND 28 . 03.2008 OUGHT TO HA VE BEEN ACCOUN T ED I N THE FY 2007-08 RELE V ANT TO T HIS ASS E SSMENT YE AR ITSELF . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE C A SE AND IN LA W , T HE LEARNED C O MMISSIONER , ERRED IN NOT APPRECIAT I NG THE C ASE LAWS I N RIGH T P E RSPECT IV E. 4. THE APPELLAN T SEEKS Y OUR LEA V E TO ADD , ALTER , AMEND OR DELETE AN Y GROUNDS URGED AT THE T I M E OF HEAR I NG . 3. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE T HAT ON PAGE-1 TO 4 OF THE ADDITIONAL PAPER BOOK IS A COPY OF NOTI CE DATED 20-04-2012 ISSUED BY THE LD. CIT U/S 263 OF THE IT ACT, 1961. THEREAFTER, HE POINTED OUT THAT THE MAIN OBJECTION OF THE CIT IS THIS THAT AS PER THE BOARDS INSTRUCTION NO.3 DATED 25-05-2003, THE AO HAD NOT R EFERRED THE MATTER TO THE FILE OF THE TPO FOR DETERMINATION OF ARMS LE NGTH PRICE (ALP). THEREAFTER, HE SUBMITTED THAT AS PER THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF M/S VODAF ONE INDIA SERVICES PVT. LTD., VS UNION OF INDIA AS REPORTED I N 361 ITR 531 (BOM), ITA NO.545(B)/2012 IT WAS HELD THAT THE CBDT INSTRUCTION NO.3 DATED 25 -05-2003 IS NOT VALID BECAUSE THIS DEPARTS FROM THE PROVISIONS OF L AW. HE ALSO PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF DCIT VS CONSULTANCY SERVICES LTD., IN ITA NO.7513(MUM)/2010 DATED 04-11- 2015 AND POINTED OUT THAT IN PARA-31 OF THIS TRIBUN AL ORDER, THE TRIBUNAL HAS FOLLOWED THE SAME JUDGMENT OF THE HON BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF VODAFONE INDIA SERVIC ES PVT. LTD., VS UNION OF INDIA (SUPRA) AND HELD THAT THE CBDT INSTR UCTION NO.3 DATED 20-05-2003 IS CONTRARY TO THE DECISION BEING TAKEN AND REGARDING THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN TH E CASE OF M/S SONY INDIA PVT. LD., AS REPORTED IN 288 ITR 52 (DEL.), I T WAS HELD THAT THIS DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF M/S SONY INDIA PVT. LD.,(SUPRA) IS NOT APPLICABLE AFTER THE AMENDM ENT IN 2007. HE FURTHER SUBMITTED THAT IN THE PRESENT CASE, THE ASS ESSMENT YEAR INVOLVED IN 2008-09 I.E. AFTER THE AMENDMENT OF 200 7 AND THEREFORE, THIS BOARD INSTRUCTION NO.3 DATED 20-05-2003 IS NOT VALID IN THE PRESENT CASE. 4. THE LD. DR OF THE REVENUE SUPPORTED THE ORDER O F THE LD.CIT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IN PARA-9.3 OF THE IMPUGNED ORDER PASSED BY THE LD. CI T AS RE-PRODUCED BELOW, IT WAS HELD BY THE LD. CIT THAT THE ASSESSME NT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR THIS REASON ALONE THAT HE HAS NOT REFERRED THE INTERNATIONAL TRANSACTION BETW EEN THE ASSESSEE AND ITA NO.545(B)/2012 ITS ASSOCIATED COMPANY I.E. M/S GLA TRADING INTERNA TIONAL PTE LTD. FOR DETERMINATION OF ALP. 9.3 THUS, IT IS SEEN THE ABOVE THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE AO HAS NOT REFERRED THE INTERNATIONAL TRANSACTIONS BETWEEN THE ASSESSEE AND ITS ASSOCIATED COMPANY I.E. M/S GLA TRADING INTERNATIONAL PTE LTD., TO THE TRANSFER PRICING OFFICER FOR THE PURPOSE OF DETERMINING ARM S LENGTH PRICE (ALP). 6. ON PAGE-12 OF HIS ORDER, IT IS STATED BY LD. CI T THAT THE CBDT HAS ISSUED INSTRUCTION NO.3 IN EXERCISE OF ITS POWE R U/S 119 OF THE IT ACT, 1961 AND THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD., VS ACIT 294 ITR 321 HAS UPHELD THE VALIDITY OF THIS INSTRUCTION AND WHILE D OING SO, THE SPECIAL BENCH HAS RELIED UPON THE JUDGMENT OF THE HONBLE D ELHI HIGH COURT RENDERED IN THE CASE OF M/S SONY INDIA PVT. LTD., A S REPORTED IN 288 ITR 52(SUPRA) BUT IN A LATTER JUDGMENT OF THE HONBLE B OMBAY HIGH COURT RENDERED IN THE CASE OF M/S VODAFONE INDIA SERVICES PVT. LTD., (SUPRA), THIS ASPECT OF THE MATTER WAS EXAMINED IN GREAT DET AIL IN VIEW OF THE AMENDMENT IN THE ACT IN THE YEAR 2007. AS PER THIS LATER JUDGMENT OF HONBLE BOMBAY HIGH COURT, AFTER THIS AMENDMENT IN 2007, THE AO IS NOW REQUIRED TO PASS ASSESSMENT ORDER IN CONFORMITY WITH THE ALP AS DETERMINED BY THE TPO WHEREAS PRIOR TO 01-06-2007, THE ASSESSMENT ORDER WAS TO BE PASSED BY THE AO HAVING REGARD TO T HE ALP DETERMINED ITA NO.545(B)/2012 BY THE TPO. THE HONBLE BOMBAY HIGH COURT HAS NOTE D THAT AS PER THIS VITAL AMENDMENT, AFTER 01-06-2007, THE AO HAD NO OP TION BUT TO ADOPT THE ALP AS DETERMINED BY THE TPO WHERE AS PRIOR TO THIS DATE, THE AO WAS ONLY SUPPOSED TO PASS THE ASSESSMENT ORDER HAVI NG REGARD TO THE ALP DETERMINED BY THE TPO. REGARDING THESE TWO JUDG MENT I.E. M/S SONY INDIA PVT. LTD.(SUPRA) AND THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD.,(S UPRA), IT WAS HELD BY THE HONBLE BOMBAY HIGH COURT THAT THESE TWO JUD GMENTS WERE RENDERED IN THE CONTEXT OF SEC.92CA(4) AS EXISTING PRIOR TO 2007 AND SINCE AFTER THIS AMENDMENT, THE JURISDICTIONAL ISSU E CANNOT BE RAISED AFTER THIS AMENDMENT, THESE JUDGMENTS ARE NOT RELEV ANT AFTER AMENDMENT WITH EFFECT FROM 01-06-2007. HENCE, IT I S SEEN THAT RELIANCE PLACED BY THE LD. CIT IN THE IMPUGNED ORDE R ON THESE TWO JUDGMENTS I.E. JUDGMENT OF THE HONBLE DELHI HIGH C OURT RENDERED IN THE CASE OF M/S SONY INDIA PVT. LTD.,(SUPRA) AND TH E ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL RENDER IN THE CASE OF M/S AZTECH SOFTWARE & TECHNOLOGY SERVICES LTD.,(SUPRA) IS MISP LACED BECAUSE OF AMENDMENTS IN SEC.92CA(4) WITH EFFECT FROM 01-06-20 07. 7. NOW, WE EXAMINE THE APPLICABILITY OF THE TRIBUN AL ORDER RENDERED IN THE CASE OF DCIT VS TATA CONSULTING SER VICES LTD., (SUPRA). IN THIS CASE, THE DISPUTE BEFORE THE TRIBUNAL WAS W HETHER THE CIT(A) HAS ERRED IN DELETING THE ADDITIONS ON ACCOUNT OF T P ADJUSTMENT IN RELATION TO TRANSACTION WITH AE. PARA-25 TO 55 O F THIS TRIBUNAL ORDER ITA NO.545(B)/2012 ARE RELEVANT FOR THE DECISION ON THIS ISSUE AND THE REFORE, THESE PARAS ARE RE-PRODUCED HEREIN BELOW FOR THE SAKE OF READY REFERENCE. 25. AS PER GROUND NO.5 , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS ON ACCOUNT OF TP ADJUSTMENTS IN RELATION TO TRANSACTION WITH AE, M/S TATA AMERICA INTERNATIONAL CORPORATION INC. ( TALC) 26. APROPOS GROUND NO.5, INVOKING THE PROVISIONS O F RULE 27 OF I . T . A . T RULES, THE ASSESSEE HAS SOUGHT TO SUPPORT THE OR DER OF THE LD . CIT(A) BY RAISING A PLEA THAT UNDER SECTION 92C OR 92CA OF THE ACT, IT IS THE STATUTORY DUTY OF THE AO TO DECIDE I NDEPENDENTLY, WHETHER THE DETERMINATION OF ARM ' S LENGTH PRICE BY THE ASSES S EE SHOULD BE ACCEPTED, OR WHETHER OR NOT AFTER APPLYIN G THE PROVISIONS OF SECTION 92CA, THE TRANSFER PRICING ADJUSTMENT SHOULD BE MADE. THIS IS A STATUTORY SAFEGUARD FOR THE ASSESSEE. IT HAS BEEN CONTENDED THAT S IMILARLY , IT I S ONL Y AFTER PROPER APPLICATI O N OF MIND TO ALL THE FACT S AND HOLDING A PRIMA FACIE BELIEF THAT THE AO CAN MAKE REFERENCE TO THE TPO, OR THAT THE LD . CIT ( A ) CAN GRANT APPROV A L TO S UCH A REFERENCE. THIS, AGAIN, IS A STATUTORY SAFEGU ARD FOR THE TAXPAYER . IT I S S UBMITTED THAT CBDT INSTRUCTION NO.3 OF 2003 , DATED 20 . 05.2003 DETRACT S THE AO AND THE LD. CIT(A) FROM THE ABOVE OBLIGATION IN COMPLETE V IOLATION OF THE STATUTOR Y PRO V ISION S OF THE PRINCIPLE S O F N A TU RA L JU S TICE . IT HA S BEEN S UBMITTED THAT IN THE PRE SE NT C AS E , IN COMPLI A N C E OF TH E SA ID CBDT IN S TRUCT IO N N O.3 O F 2 00 3, THE AO DID N O T HIM S ELF E XA MIN E TH E I SS UE O F TR A N S F ER PR ICI N G A ND WI TH TH E A PPRO VA L O F TH E LD . CIT ( A ), M A DE A R E F EREN CE TO TH E TPO U/ S 92 C A( 1 ) OF THE ACT . TH E AO A ND THE LD. CIT DID N O T A PPL Y TH E IR MIND S T O TH E TRAN SFE R PRICING REPORT , OR TO AN Y OTHER MATERI A L O R INFORM A TION O R DOCUMENT . THE TPO M A DE AN ADJUSTMENT WHICH WA S INCORPORATED BY THE AO IN THE ASS ES S MENT ORDER . ON THEIR PART, THE AO AND THE LD . CIT(A ) DID NOT DI S CHARGE NECESS A R Y JUDICI A L FUNCT I ON S CONFERRED UPON THEM U/ S 92C O R 92C A OF THE 27. ON THE O THER H A ND , DUL Y S UPPORTIN G THE ACTION OF THE AO A ND THAT OF THE LD . CIT ( A ) IN THI S RE GA RD , THE LD . DR H AS S OUGHT T O PL ACE R E LI A N C E ON TH E FOLLOWIN G C ASE L AWS : I ) ' CO CA COLA INDI A IN C VS. ACIT ', 309 ITR 194 ( P&H ) II) 'SONY INDIA P. LTD. VS . CENTRAL BOARD OF DIRECT TAXES AND ANOTHER ', 288 ITR 52 (DELHI ) AND III ) ' AZTEC SOFTW A RE A ND T EC HNOLO G Y S E R V I CES LTD. VS. ACIT ' , 29 4 ITR ( AT ) 32 (B A NG A LORE ) [SB] 28 . WITH REGARD TO 'SONY INDIA PVT . LTD. ' ( SUPRA ) , THE LD. DR ITA NO.545(B)/2012 HAS CONTENDED THAT A S PER THI S DECI S ION , THE AO I S NOT REQUIRED TO F ORM A PRI O R CON S IDERED OPINION BEFORE MAKIN G A REFEREN C E TO THE TPO UNDER S ECTION 92CA ( L ) OF THE ACT A ND TH A T O NL Y A PRIM A FAC IE OPINION I S N ECES S A R Y. IT I S CONTENDED THAT THE AO I S NOT REQUIRED TO FOLLOW THE S T E P S E NLI S T E D IN SE CTION 92CA ( 1 ) OF THE ACT , BEFORE MAKIN G REFERENCE TO THE TPO. IN S TRUCTION NO . 3 / 2 00 3 I S N OT VIOL A TI VE OF AR TI C L E 14 OF TH E CO N S TITUTION OF INDI A . TH E INSTRU C TI O N I S NOT ULTRA V IRE S TH E IN CO M E- T AX A C T . TH E C L ASSIF IC A TI O N OF INTERN A TIONAL TRAN S ACTION S I S NOT INCON S I S T E NT W ITH , O R CONTR A R Y TO , THE OBJECTIV ES S OUGHT TO BE ACHI E V E D BY CH A PTER X OF TH E ACT . TH E IN S TRUCTION S UPPL E MENT S THE S TATUTOR Y PRO V I S ION TO A CHIE VE IT S OBJECTI V E AND DOE S N O T O VE RRID E IT . IT I S N E ITHER A RBITR A R Y , NOR UNR EAS ONABL E. IT W A S H E LD TO B E CON S TITUTIONALLY VALID. 29. SO F A R A S RE G ARD S ' AZTEC TAX SOFTWARE & TECHNOLOGY SERVI C E S LTD .' (S UPR A), IT HA S B EE N CONTEND E D THAT THE SP EC I A L BENCH OF THE TRIBUN A L , IN THE SAID C A S E , HA S HELD TH A T IN VIEW O F TH E PL A IN A ND A MBI G UOUS L A N G UA G E O F THE A C T , TAX AV OID A N CE I S N O T REQUIR E D TO BE PRO V ED BEFORE IN VO KIN G THE PROVISIONS OF CHAPTER X OF THE ACT . THE TP PROVISIONS ARE APPLICABLE EVEN IF INCOME IS EXEM PT U/S 1OA & 10B OF THE ACT . NO PRIOR HEARING IS TO BE GIVEN TO THE ASSESSEE BY THE AO, OR THE LD. CIT(A) BEFORE MAKING REFERENCE T O THE TPO. THE CONDITIONS IN SECTION 92CA(3) OF THE ACT ARE NOT RE QUIRED TO BE FULFILLED BEFORE MAKING REFERENCE TO THE TPO. CBDT INSTRUCTION NO.3/2003 IS BINDING ON THE AO AND HENCE , IT BECOMES NECESSARY OR EXPEDIENT FOR HIM TO REFER THE CASE TO THE TPO U/S 92CA(L) OF THE ACT, IF THE INTERNATIONAL TRANSACTIO N OR TRANSACTIONS EXCEEDS, OR EXCEED THE LIMIT MENTIONED THEREIN. THE INITIAL BURDEN IS ON THE ASSESSEE TO SELECT THE MOST APPROPRIATE M ETHOD. IT IS ALSO THE ASSESSEE'S ONUS TO SHOW THAT THE PRICE WAS AT A RM'S LENGTH. IN CASE THE TPO REDETERMINES THE ALP, THE BURDEN SHIFT S ON HIM. REFERENCE CAN BE MADE TO THE OECD GUIDELINES , US REGULATIONS , ETC. , SUBJECT TO THE DOMESTIC STATUTORY REGULATIONS. INDU STRY AVERAGE (NASSCOM) CANNOT BE TAKEN AS UP . THE TNMM REQUIRES COMPARABILITY AT A BROAD FUNCTIONAL LEVEL . THE SPECIAL BENCH OF THE TRIBUNAL UPHELD THE USE OF CURRENT YEAR DATA. WITH REFERENCE TO 'COCA COLA PVT . LTD.' (SUPRA), IT HAS BEEN CONTENDED THAT AS PER THIS DECISION, THERE IS NO NEED FOR HEARING TO BE G IVEN TO THE ASSESSEE BEFORE MAKING REFERENCE TO THE TPO. ONCE A N INTERNATIONAL TRANSACTION IS THERE, IN VIEW OF THE PLAIN AND UNAMBIGUOUS LANGUAGE , ALP HAS TO BE DETERMINED. THERE IS NO REQUIREMENT OF SHOWING SHIFTING OF PROFIT, EVASION OF TAX, ETC BEFORE INVOKING THE PROVISIONS OF CHAPTER X OF THE ACT . THE MERE FACT THAT THE ASSESSEE HAS CHOSEN ONE METHOD DOES NOT TAKE AW AY THE DISCRETION OF THE TPO TO SELECT ANY OTHER METHOD. RESTRICTION OF PAYMENT OR REMISSION IMPOSED BY THE RBI OR FERA CAN NOT CONTROL THE PROVISIONS OF CHAPTER X OF THE ACT; ALP HAS TO BE DETERMINED IN SUCH CASES ALSO. ITA NO.545(B)/2012 30 IN THIS REGARD, IT IS SEEN THAT IN 'SONY INDIA P VT . LIMITED' (SUPRA), THEIR LORDSHIPS OF THE HON'BLE DELHI HIGH COURT WERE CONSIDERING CBDT INSTRUCTION NO.3 DATED 20.05 . 2003, WHICH PROVIDES THAT A COMPULSORY REFERENCE HAS TO BE MADE TO THE TPO TO DETERMINE ARM'S LENGTH PRICE, WHERE THE AGGREGATE V ALUE OF THE INTERNATIONAL TRANSACTIONS EXCEEDS RS . 5 CRORES . THE ASSESSEE- COMPANY IN THAT CASE CHALLENGED THE CONSTITUTIONAL VALIDITY OF THE SAID CIRCULAR MAINLY ON THE GROUND THAT BY ISSUANCE OF THE CIRCULAR, THE AO'S ULTIMATE DECISION ON COMPUTATION OF ALP IS SOUGHT TO BE SUPPLANTED BY THE DECISION OF THE TPO FOR TRANSACTIONS OF VALUE OVER RS. 5 CRORES AND THE TPO IS NOT BOUND TO FOLLOW THE STEPS OUTLINED U/S 92C OF THE ACT, WH ICH ARE OTHERWISE MANDATORY FOR THE AO TO FOLLOW. THE QUESTION AROSE WHETHER THERE IS NOTHING IN SECTION 92CA ITSELF THAT REQUIRES THE AO TO FIRST FORM A CONSIDERED OPINION IN A MANNER INDICATED IN SECTI ON 92CA(3) OF THE ACT BEFORE HE CAN MAKE A REFERENCE TO THE TPO. IT WAS HELD THAT THIS IS INDEED SO. APROPOS THE QUESTION WHETHER IT IS NOT POSSIBLE TO READ SUCH REQUIREMENT U/S 92CA(L) OF THE ACT, THIS WAS ALSO H ELD IN THE AFFIRMATIVE. ITA NO.545(B)/2012 THEIR LORDSHIPS HELD THAT IT WOULD SUFFICE IF THE A O FORMS A PRIMA FACIE OPINION THAT IT IS NECESSARY AND EXPEDIENT TO MAKE SUCH A REFERENCE. IT WAS ALSO HELD THAT ONE POSSIBLE REASON FOR ABSENCE OF SUCH REQUIREMENT OF FORMATION OF A PRIOR CONSIDERED OPINION BY THE A O IS THAT THE TPO IS EXPECTED TO PERFORM THE SAME EXERCISE, AS ENVISAGED U/S(S) 92C(1) TO 92C(3) OF THE ACT, WHILE DETERMINING THE ALP U/S 92 CA(3). IT WAS FURTHER HELD THAT THE AO IS NOT BOUND TO ACCEPT THE ALP AS DETERMINED BY THE TPO AND ALWAYS PERSUADED BY THE ASSESSEE AT THAT ST AGE TO REJECT THE TPO'S REPORT AND STILL PROCEEDS TO DETERMINE THE AL P HIMSELF AND, THEREFORE, THE AO IS THE AUTHORITY TO FINALISE THE ASSESSMENT AND THE SAID POWER OF THE AO CANNOT BE USURPED. IT WAS ALSO HELD THAT THEREFORE, IT CANNOT BE SAID THAT THE AO'S DECISION IS SUPPLANTED BY THE DECISION OF THE TPO. STILL FURTHER, IT WAS HELD THAT THAT THE INSTR UCTION IN QUESTION , I.E., CBDT INSTRUCTION NO.3, DATED 20.05.2013, IS CONSIST ENT WITH THE STATUTORY OBJECTIVE UNDERLYING SECTION 92CA(L) OF T HE ACT AND ACTS AS GUIDANCE TO THE AO IN THE EXERCISE OF DISCRETION IN REFERRING AN INTERNATIONAL TRANSACTION TO THE TPO FOR DETERMINAT ION OF ITS ALP AND IT IS NEITHER ARBITRARY, NOR UNREASONABLE AND IS NOT U LTRAVIRES THE ACT . 31. IT HAS RIGHTLY BEEN CONTENDED ON BEHALF OF THE ASSESSEE WITH REGARD TO SONY INDIA PVT.LTD.,(SUPRA) THAT THE HONBLE BO MBAY HIGH COURT, IN THE CASE OF VODAFONE INDIA SERVICES PVT.LTD., VS UNION OF INDIA 361 ITR 531(BOM.) HAS HELD THAT CBDT INSTRUCTION NOI.3 DATED 20-05- 2003 IS CONTRARY TO THE DECISION BEING TAKEN THEREI N AND IT IS NOT BINDING ON THE AO. IT WAS HELD THAT THIS INSTRUCT ION DEPARTS FROM THE PROVISIONS OF LAW. IT WAS HELD THAT THE DECISION I N SONY INDIA LTD. (SUPRA) IS NOT APPLICABLE AFTER THE AMENDMENT OF 20 07 (PARAS 35 TO 37 OF THE JUDGMENT ARE RELEVANT IN THIS REGARD). 32. IN AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD., (SUPRA) THE BANGALORE SPECIAL BENCH) OF THE TRIBUNAL HELD THAT IT IS NOT A LEGAL REQUIREMENT UNDER THE PROVISIONS CONTAINED IN CHAPT ER X OF THE ACT, THAT THE AO SHOULD PRIMA FACIE DEMONSTRATE THAT THERE IS TAX AVOIDANCE, BEFORE INVOKING THE RELEVANT PROVISIONS. IT WAS HE LD THAT BEFORE THE CASE IS REFERRED TO THE TPO U/S 92CA(1) OF THE ACT FOR C OMPUTATION OF ARMS LENGTH PRICE, THE AO IS NOT REQUIRED TO PRIMA FACIE DEMONSTRATE THAT ANY ONE OR MORE OF THE CIRCUMSTANCES SET OUT IN SECTION S 92CA(3)(A)(B)(C) AND /OR () OF THE ACT, ARE NOT SATISFIED. IT WAS H ELD THAT THE AO IS NOT REQUIRED TO RECORD HIS OPINION/REASON BEFORE SEEKIN G THE PREVIOUS APPROVAL OF THE LD. CIT(A) U/S 92CA(1) OF THE ACT. IT WAS HELD THAT BEFORE MAKING A REFERENCE TO THE TPO U/S 92CA(1)RW S 92C(3) THEREOF, IT IS NOT A CONDITION PRECEDENT THAT THE AO SHALL PROV IDE THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. IT WAS HELD THAT CBDT INSTRUCTION NO.3 OF 2003, DATED 20-05-2003, ON TRANSFER PRICING MATTERS , IS NOT LEGAL AND THE SAME IS NOT BINDING ON THE DEPARTMENTAL AUTHORITIES . IT WAS ALSO HELD THAT PRIOR TO THE AMENDMENT BROUGHT IN W.E.F. 01-0 6-2007, THOUGH THE ORDER OF THE TPO ISSUED U/S 92CA(3) OF THE ACT, IS NOT BINDING ON THE AO, THE AO MAY TAKE THE ALP DETERMINED BY THE TPO W ITHOUT MAKING ANY CHANGE UNDER SECTION 92CA(3) OF THE ACT, FOR MA KING ASSESSMENT. THE ISSUE OF DETERMINATION OF QUANTUM OF ALP WAS RE MANDED. 33. IN VODAFONE INDIA SERVICES PVT.LTD (SUPRA), T HE HONBLE ITA NO.545(B)/2012 JURI S DICTIONAL HIGH COURT HA S HELD TH E D E CI S ION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN ' AZTEC SOFTWARE TECHNOLOGY & SERVICES ' (S UPRA) TO BE NOT APPLICABLE IN VIEW OF THE AMENDMENT BROUGHT IN 2007. IT W AS HELD THAT IT LAID DOWN THAT THERE WAS NO REQUIREMENT TO ESTABLI S H TAX AVOIDANCE BEFORE INITIATION OF PROCEEDING S. TAX AVOIDANCE , IN OTHER WORD S , I S REQUIRED TO BE ESTABLI S HED THEREAFTER AND BEFORE THE COMPLETION OF THE AS SESS MENT . IT WA S HELD THAT THE IN S TRUCTION DETRACT S FROM THE PROVISIONS OF LAW. 34. ' COC A COLA INDIA P V T . LTD. ' (S UPRA ), RENDERED BY THE HON ' BLE PUNJAB & HAR Y ANA HIGH COURT , W A S A PPEALED AGAIN S T BEFORE THE HON ' BLE SUPREME COURT . THE HON ' BLE SUPREME COURT , IN ITS JUDGMENT , REPORTED IN ' COCA COLA INDIA INC. VS. ADDL . CIT ' , 336 ITR 1 (SC) , DIRECTED THAT THE AUTHORITIES BELOW SHOULD DECIDE THE MATTER AFRESH , UNINFLUENCED BY ANY OF THE OBSERVATIONS MADE IN THE HIGH COURT JUDGMENT . 35 . THE POSITION OBTAINING WITH REGARD TO THESE THREE J UDGMENTS SOUGHT TO BE RELIED ON BY THE DEPARTMENT IS, THAT NONE OF THESE JUDGMENTS IS APPLICABLE. 'SONY INDIA LIMITED' HAS BEEN HELD TO B E NOT APPLICABLE BY ' VODAFONE INDIA ' (SUPRA), RENDERED BY THE JURISDICTIONAL HIGH COURT . ' AZTEC SOFTWARE & TECHNOLOGY SERVICES ' ( S UPRA), HA S ALSO NO APPLICATION IN VIEW OF ' VODAFONE INDIA SERVICES P . LTD. ' ( S UPRA) . ' COCA COLA INDIA INC .' (S UPRA ) IS ALSO INAPPLICABLE, THE HON ' BLE SUPREME COURT HAVING DIRECTED THE AUTHORITIES TO DECIDE THE MATTE R AFRESH UNINFLUENCED BY THE OB S ER V ATION S MADE BY THE HON ' BLE HIGH COURT . FURTHER , IN ' SONY ERICSSON MOBILE COMMUNICATIONS PVT . LIMITED', 374 ITR 116 (DELHI), THE SAME IS THE POSITION MAINTAINED. THIS APART , THE QUESTION RAISED BEFORE US WAS NOWHERE ARGUED OR ADJUDICATED IN ANY OF THE S E JUDGMENTS. THE ASSESSEE HAS CONTENDED THAT THE AO HA S ABROGATED HIS OBLIGATION UNDER A WRONG ASSUMPTION THAT CBDT CIRCULAR , I.E. , CBDT IN S TRUCTION NO . 3 OF 2003 DATED 20.05.2003 MANDATED HIM TO GO AHEAD WITHOUT MAKING ANY REFERENCE TO THE TPO. THE AO, THUS, IN T HE PRESENT CASE, DID NOT EXAMINE THE QUE S TION , WHETHER HE SHOULD HIMSELF ACCEPT THE TRANSFER PRICING REPORT OF THE ASSESSEE OR WHETHER HE SHOULD HIMSELF DETERM I NE TH E A RM S'S L E N G TH PRI CE. TH E RE F OR E A L SO, TH ESE JUD G M E NT S AR E N O T A PPLICABLE AND TH E Y D O N O T H E LP THE CA U SE OF TH E D E P A RTM E NT . 3 6. THE D E P A RTM E NT H AS F URTH E R SO U G HT T O PL ACE R E LI A N CE O N ' IN T E RR A INFORMATION T EC HNOLO GY ( I ) P V T . LIMIT E D VS. DCIT ', (2 012 ) 2 7T AX M A N . COM . L ( DEL ) ( TRIB. ) . IN TH A T CA SE, C O N S ID E RING AS S E SS MENT YEA R S 2 006- 07 & 2007 - 08 , IT WA S HELD THAT IT CANN O T B E L A ID D O WN A S A PR O P OS ITI O N THAT TR A N S F E R PRICIN G A DJU S TMENT CA NN O T EXCEE D T O T A L PR OF IT S EA RN E D B Y TH E G R O UP . I T WAS H E LD TH A T TH E ASSESSEE AS WE LL AS T H E R EVE NU E A UTH O RIT IES ARE B O UND T O DE T ER MIN E THE ALP B Y A PPL Y IN G TH E L AW A N D R UL ES L A ID D OW N A ND CA NN O T B E G UID E D B Y EXT R A N EO U S P A R A M E T E R S. IT WAS H E L D T H A T A N Y C L A IM FO R ADJ U ST M E N T O N T H E B AS I S OF R E A SO N O R A N Y O TH E R FAC T O R S H AS TO B E B ASE D O N PROPE R D A T A A ND SO UND C A L C UL A TI O N A ND A D-H O C A DJU S TM E NT S H O ULD N O T BE G R A NT E D . IT WAS HELD TH A T W H E RE M A T E RI A L I S AVA IL A BL E W ITH TH E TPO IN TH E CURR E NT YEA R , W HI C H I S V A S TLY DIFFERENT F ROM TH E M A TERI A L AVA ILABLE W ITH TH E TPO IN TH E E ARLIER YEA R , TH E PRIN C IPLE OF C ON S I S T E N CY D OES N O T HOLD WA T E R . IT W AS ITA NO.545(B)/2012 H E L D TH A T TH E ASSESSEE I S R E QUIR E D T O S UPPORT IT S C L A IM FO R A N Y A D J U S TM E NT WITH R O BU S T D A T A A ND F ULL D E TA I L S A ND E V IDEN CE A ND TH E BURD E N O F PR OOF I S O N THE A SSESSEE , W H E N EVE R IT M A K ES S U C H A C L A IM. H OWEVE R , T H IS D EC I S I O N , WE A R E A FR A I D, A L SO DOES N OT FURTH E R THE C A U SE O F TH E D E P A RTM E NT , AS IT D OES N O T A DDR ESS TH E I SS U E RA I SE D B Y TH E ASSESS EE BEF O RE U S IN TH E PRE SE NT CASE , AS DI SC U SSE D. 37 . IN THIS REGARD , THE HON'BLE SUPREME COURT, IN THE CASE OF ' GOOD YEAR INDIA LTD . VS . STATE OF HAR Y ANA ' , 188 ITR 40 2 ( SC ), HA S HELD THAT A DECISION ON A QUE S TION W HICH HA S NOT B EE N AR G U E D CA NNOT B E TR EA T E D A S A PR E CED E NT . FURTHER , WHEN A STATUTE VE S T S CERTAIN POWER S IN AN AUTHORITY TO BE E X ERCISED IN A CERTAIN MANNER THAT AUTHORITY HA S TO EXERCI S E THO S E POWER S ONLY IN A MANNER PRO V IDED IN THE S TATUT E IT S ELF . IT H AS B E EN S O H E LD B Y THE HON ' BLE SUPREME COURT IN ' CIT VS . A NJUM GHA SWA L A ', 2 5 2 ITR 1 ( SC ) . THE HON ' BLE JURI S DICTION A L HI G H COURT HA S AL S O T A K E N A S IMIL A R V I EW IN THE C AS E OF ' GHAN S HYAM K . KHARBANI ' , 346ITR 443 (BOMBAY ) . 38. THE DEPARTMENT HA S, TH E N , A L S O SO U G HT TO PL AC E RELI A N C E O N ' R A N A B AXY L A B O R A T O RI ES VS . ADDL . CIT ' , 1 1 0 ITD 4 2 8 ( D E L . ) . IN TH A T CAS E, I T WAS H EL D , WITH R EGA RD TO A SS E SS MENT Y EAR 2 004-05 , TH A T I T I S NOT R IG HT TO C O N TE ND TH A T IN NOT REF E RRING TH E QUE S TION OF D E TERMINATION O F ARM ' S LENGTH PRIC E TO THE TPO , AS R E QUIR E D BY CBDT IN S TRU C TION N O . 3 O F 2 00 3 (S UPRA ) , TH E AO MEREL Y CO MMITT E D A PR O CEDURAL ERR O R . ' V O DAF O NE INDIA S E R V ICE S P . LTD .', (S UPR A ) W AS R E ND E R E D B Y THE HON ' BL E JURI S DICTION HI G H COURT PO S T TH E D EC I S ION OF TH E . TRIBUNAL IN ' RAN A BAXY LABORATORIES ' (S UPRA ) AND THEREFORE , THE TRIBUNAL , C LE A RL Y DID NOT H AV E THE BENE F IT OF ' V O D A FONE INDI A ', ( S UPR A) . T O REITERATE , IN ' VOD A FONE INDIA ' , (S UPRA ). CBDT IN S TRU C T IO N NO. 3 1 2 00 3 HA S B EE N H E LD TO DETR A CT F ROM THE PR OV I S ION S O F L AW . IN ' V O D AFO N E INDI A' ( S UPR A) , IT HA S BEEN HELD THAT NECES S ARY HEARING IS REQUIRED TO BE G I V EN TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE B EFORE A REFERENCE IS MADE TO THE AO AFTER THE AMENDMENT IN THE YEAR 2007 . ITA NO.545(B)/2012 39. IN THE CASE OF ' JOHARI LAL VS . CIT ', 88 ITR 439 (SC), IT HAS BEEN HELD THAT THE PRIMA FACIE BELIEF OF THE AO THA T IT IS NECESSARY OR EXPEDIENT TO MAKE A REFERENCE TO THE TPO IS THE CON DITION PRECEDENT TO BE SATISFIED UPON APPLICATION OF MIND TO THE MATERI AL OR INFORMATION OR DOCUMENT IN HIS PO SS E SS ION. SUCH PRIMA FACIE BELIEF I S A CONDITION PRECEDENT AND I S MANDATORY AND IT IS THE S TATUTORY S AFE G U A RD FOR THE ASSE SS EE 'S S T A TUTOR Y RIGHT . THE AB S ENCE OF SUCH A BELIEF VITIATE S THE ENTIRE PROCEEDIN GS . 40. LIKE-WI S E , THE APPROVAL OF THE LD . CIT FOR THE R E FERENC E TO THE TPO ON A PROPER APPLICATION OF MIND TO THE RELE V ANT FACTS AND CIRCUM S TANCES IS A CONDITION PRECEDENT AND A NECE S SARY SAFEGUARD FOR THE STATUTORY RIGHT OF THE ASSESSEE AND THIS HAS TO BE PERFORMED NOT IN A MECHANICAL MANNER . THIS I S WHAT HAS BEEN HELD BY THE HON 'BLE SUPREME COURT IN THE CASE OF ' KRISHNA PVT . LTD . V S . ITO ' , 221 ITR 5 3 8 ( SC) AND BY THE HON ' BLE JURI S DICTION A L BOMBAY HIGH COURT IN THE CASE OF ' GERMAN REMEDIE S', 287 ITR 494 ( BORN . ) . 41. IN ' CIT V S. AMEDIU S' , 351 ITR 82 ( DEL . ) , IT HA S BEEN HELD THAT IT I S PRIMARILY THE DUTY OF THE AO TO COMPUTE THE ARM 'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION IN ACCORDANCE WITH THE MOST APPROPRIATE METHOD SPECIFIED IN SECTION 92C(1) OF T HE ACT; AND THAT HOWEVER, WHERE THE AO REQUIRES THE ARM'S LENGTH PRI CE TO BE COMPUTED BY SPECIALIST, A REFERENCE MAY BE MADE TO THE TPO. 42. IN CBDT CIRCULAR NO.14 OF 2001, IN PARA 55 . 11 THEREOF, IT HAS BEEN PROVIDED THAT 'UNDER THE NEW PROVISIONS THE PR IMARY ONUS IS ON THE TAXPAYER TO DETERMINE AN ARM ' S LENGTH PRICE IN ACCORDANCE WITH THE RULES AND TO SUBSTANTIATE THE SAME WITH THE PRESCRI BED DOCUMENTATION. WHERE SUCH ONUS IS DISCHARGED BY THE ASSESSEE AND T HE DATA USED FOR DETERMINING THE ARM'S LENGTH PRICE IS RELIABLE AND CORRECT, THERE CANNOT BE ANY INTERVENTION BY THE AO . THIS IS MADE CLEAR BY SUB SECTION (3) OF SECTION 92C, WHICH PROVIDES THAT THE AO MAY INTERVE NE ONLY IF HE IS, ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENT IN HIS POSSESSION, OF THE OPINION THAT THE PRICE CHARGED IN THE INTERNATI ONAL TRANSACTION HAS NOT BEEN DETERMINED IN ACCORDANCE WITH SUB-SECTIONS (1) & (2), OR INFORMATION AND DOCUMENTS RELATING TO THE INTERNATI ONAL TRANSACTION HAVE NOT BEEN KEPT AND MAINTAINED BY THE ASSESSEE I N ACCORDANCE WITH THE PROVISIONS CONTAINED IN SUB-SECTION (1) OF SECT ION 92D AND THE RULES MADE THERE UNDER ; OR THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARM'S LENGTH PRICE IS NOT RELIABLE OR CORRECT ; OR THE ASSESSEE HAS FAILED TO FURNISH, WITHIN THE SPECIFIED TIME, ANY I NFORMATION OR DOCUMENT WHICH HE WAS REQUIRED TO FURNISH BY A NOTICE ISSUED UNDER SUB- SECTION (3) OF SECTION 92D. IF ANYONE OF SUCH CIRCUMSTANCES EXISTS, THE AO MAY REJECT THE PRICE ADOPTED BY THE ASSESSEE AND DETERM INE THE ARM'S LENGTH PRICE IN ACCORDANCE WITH THE SAME RULES. HOWEVER, A N OPPORTUNITY HAS TO BE GIVEN TO THE ASSESSEE BEFORE DETERMINING SUCH PRICE . THEREAFTER, AS PROVIDED IN SUB SECTION (4) OF SEC. 92C, THE AO MAY COMPUTE THE TOTAL ITA NO.545(B)/2012 INCOME ON THE BASIS OF THE ARM'S LENGTH PRICE SO DE TERMINED BY HIM.' ITA NO.545(B)/2012 43. IN THE CASE OF 'SIRPUR PAPER MILLS', 237 ITR 41 (SC), IT HAS BEEN HELD THAT SECTION 119 OF THE ACT PERMITS THE C BDT TO SPECIFY CONDITIONS, BUT CONDITIONS CANNOT HAVE THE EFFECT O F CURTAILING THE SCOPE OF THE DEDUCTION GRANTED BY THE SECTION; THAT THE A MPLITUDE OF THE DEDUCTION PERMITTED BY THE SECTION CANNOT BE CUT DO WN UNDER THE GUISE OF IMPOSING A CONDITION; THAT IN FACT, THIS IS NOT A CONDITION , BUT AN IMPERMISSIBLE ATTEMPT TO RE-WRITE THE SECTION. IT W AS HELD THAT THE CBDT MAY CONTROL THE EXERCISE OF THE POWERS OF THE OFFIC ERS OF THE DEPARTMENT IN MATTERS ADMINISTRATIVE, BUT NOT QUASI- JUDICIAL . 44. IN THE FOLLOWING DECISIONS, AMONGST OTHER S, IT HAS BEEN HELD THAT THE TRIBUNAL CAN IGNORE ALONE INVALID CIRCULARS OF THE CBDT: (I) 'TATA & IRON STEEL', 69 ITD 292 (MUMBAI) (II) 'MAHINDRA & MAHINDRA', 8 ITD 427 (MUMBAI) AND ( III ) ' PARD EE P AGE N C I ES VS. ITO ', 18 SOT 1 2 ( D E LHI ) ( SB ) 45 . TH E ASSESSE E H AS F U R TH E R SO U G HT T O S UPP O R T TH E L D. C IT (A) ' S O RD ER O N TH E CO NT E NTI O N TH A T TR A N SFE R PRI C IN G A DJU S TM E NT CA NN O T B E MA D E I N A CASE WH E RE THE ASSESSEE E NJ OYS B E N EFI T U/ S LO A OR SEC TI O N 8 0HH E OF TH E AC T , O R WH E RE THE T A X R ATE IN TH E CO UNTR Y OF TH E A SSOC I ATE D E N TE R P RI SE I S H IG H E R TH A N TH E IND IA N RAT E A ND W H ERE, ACCO RDIN G L Y , ESTA BLI S HM E NT OF TAX AVO ID A N CE O R M A NIPUL A TI O N O F P RICES O R ES T AB LI S HM E NT OF S HI F TIN G OF PROFI T S IS N O T POSS IBL E. 46 . 'AZ T E C S OF T WARE & T EC HN O L OGY S E R VICES ' (S UP RA) , H OL D S TH AT TP PR OVIS I O N S A R E A PPL ICA BL E EVE N IF IN COME I S EXE MPT U/ S(S) 1 OA /1 O B OF TH E ACT . H OWEVE R , AS SEE N , ' AZTEC SOFTWA R E & T EC HN O L OGY SERVICES ', S TA ND S OVE RRIDD E N B Y T H E D ECISIO N OF TH E H O N ' BL E JU R I S D ICTIONA L H I G H CO U R T IN ' V O D AFO N E INDI A ' (S UPR A). 4 7. IN ' M O TI F INDI A IN FO T EC H P V T . LIMIT E D ' , T H E DEC I S I ON IN I TA N O . 3 04 3 /AHD/ 2 010 , R E ND ERE D O N 25. 0 3 . 2 01 3, IT H AS B EE N H E LD T H AT IN A CASE W H ERE TH E I N CO M E D ER I VE D FRO M A N INT E RN A TI O N A L T RA N SACT I O N I S EXE MPT F R O M T AX I N INDI A B ECA U SE OF T H E PR OV I S I O N S OF SEC TI O N LO A OF T H E AC T , IT CA NN O T B E H E LD TH A T B ECA U SE OF A N A RR A N GE M E NT B E T WEE N T H E ASSESSEE A ND T H E ASSOCIA T E D E NT E RPRI S E , A N Y IN CO ME TAXA BL E IN INDI A H A D B EE N UN DE R R E P O R TE D . 4 8. IT HA S B EE N HEL D T H A T I N S U C H CIRCUM S T A NC ES, W H ERE T H E IN CO M E DE R IVE D F R O M A N I NT E RN A T IO N A L T RA N SACT I O N I S EXE MPT FRO M TAX IN INDI A , IT CA NN O T B E ALLEG E D THAT THE ASS E SSE E HAD A R RA N GE D I T S AF F A IR S I N S UCH A MANN ER, S O AS TO S H OW LE SS ER T AXA BL E IN CO M E IN INDIA . 49 . IN ' C O TTON N A TUR A L S ( I ) P V T . L T D . VS. DCIT ', 22 ITR ( AT ) 43 0 ( D E L ) (TRIB .), IT W A S HELD TH A T THE ASSESS EE 'S S UB S TANTI A L PR OF IT S WE RE E XE MPT U/S 10 B OF THE ACT A ND T H E A SSOC I A T E D E NT ER PRI S E S WE RE N O T ITA NO.545(B)/2012 S ITU A T E D IN T A X H AV EN S, BUT IN TH E US , W H E R E TH E T AX R A T ES WE R E A T P A R WI TH INDI A, O R M AY B E MORE THAN TH A T ; TH A T TH E ASSESSEE'S PROF IT S WER E EXE MPT UL S1 L O B ; A ND TH A T H E NC E , TH E R E WAS N O CASE T H A T TH E ASSESSEE WO ULD BE N EF IT B Y S HI F TIN G PROF IT S O UT S ID E INDI A. 50 . IN TH E CASE OF ' IND O - A M ER I CA N J EWE L LE R Y ' , 41 S OT 1 ( MUM ), T H E MUMB A I BEN C H OF TH E TRI B UN A L FO U ND M ER I T IN T H E S UB M I S S I O N S O N BE H A L F OF TH E ASSESSE E THAT S IN CE TH E TAX RATES WERE HI G H ER IN TH E USA COM P ARE D W ITH TH OSE OF I NDI A, TH E R E WO UL D N O T B E A N Y IN CE NT IVE T O T RA N SFE R T H E P ROFITS TO A HI G H ER T AX C H A R GEA BL E REGIO N , ES P EC I A L LY W H E N TH E CO MP A N Y E N JOYE D D ED U C TI O N U /S 8 0HH E OF TH E AC T . 5L . IN ' D C IT VS . LUM AX INDU S T R I ES LTD .' , 36 T AXMA N .CO M. 380, I T WAS O B SE R VE D TH A T TH E TPO H A D N OW HER E M A D E O UT A CASE TH A T TH E PR O F I T WAS S HI F T E D F R O M A HI G H E R T AX J U R I SD I CTIO N T O A L OWE R T AX JURI S DICTI O N ; TH A T IN FAC T , TH ERE WAS N O M O TI VE FOR A N Y S U C H S H IFTI N G OF PR OFI T S A T TH E H A ND S OF TH E ASSES S EE-CO MP A N Y A ND T H ERE CO ULD H AVE B EE N A N Y R EASO N FO R TH E M A J O RIT Y STAKE HOLDER IN INDIA, I.E. , THE ASSESSEE , TO OVER PAY EVEN A SINGLE PAISE TO THE MINORITY STAKE HOLDER IN JAPA N; THAT THE TPO FELL IN ERROR IN IGNORING THE POSITION THAT IT WAS IF AND O NLY IF IT STOOD PROVED THAT THERE WAS MANIPULATION OF PRICES TO AVOID TAXE S IN INDIA, THAT THE TP PROVISIONS OF THE ACT COULD BE INVOKED; THAT THE TP REGULATIONS IN INDIA HAVE BEEN BROUGHT ON THE STATUTE BOOK WITH THE INTE NT OF PRESERVING THE TAX BASE IN INDIA AND PREVENTING TAX EVASION THROUG H MANIPULATION OF PRICING OF INTER-COMPANY TRANSACTIONS; THAT FURTHER , APPLICATION OF TAX JURISPRUDENCE PROVISIONS COULD HAVE BEEN JUSTIFIED , IF THE RATE OF TAX WAS LOWER IN JAPAN AS COMPARED TO THAT IN INDIA, WHICH WAS NOT SO; AND THAT IT WAS, THEREFORE , BEYOND COMPREHENSION AS TO WHY THE ASSESSEE WOULD HARBOUR ANY MOTIVE OF S HIFTING INCOME. 52. IN THE CASE OF ' PHILIP SOFTWARE ' , 119 TTJ 721 (BANG.) , IT WAS HELD THAT SINCE THE BASIC INTENTION BEHIND INTRODUC ING THE TP PROVISIONS IN THE ACT IS TO PREVENT SHIFTING OF PROFITS OUTSID E INDIA , AND THE ASSESSEE WAS CLAIMING BENEFIT U/S 1OA OF THE ACT, THE TP PRO VISIONS OUGHT NOT TO BE APPLIED TO THE ASSESSEE . 53. SIMILAR IS THE POSITION IN THE FOLLOWING CASES , AMONGST OTHERS: I)' ITO VS. ZYDUS ALTANA HEALTHCARE (P ) LIMITED ' , 44 SOT 132 (MUMBAI) II) 'ACIT VS. DUFON LABORATORIES ', 39 SOT 59 (MUMBAI) AND III) ' UM (INDIA) INFRASTRUCTURE ' , 28 ITR (TRIB) 176 (HYD) 54 . FOR THE ABOVE DISCU SS ION , THE AS S ESSEE ' S S UPPORT TO THE IMPUGNED ORDER ON BOTH COUNTS IS FOUND TO BE CORRECT. THE AO ERRED IN NOT HIMSELF EXAMINING THE ISSUE OF TP AND WITH THE A PPRO VA L OF THE LD. CIT , MADE A REFERENCE TO THE TPO U/S 9 2 CA(L) OF THE ACT ; THAT THE AO A S WELL A S THE LD . CIT(A) FAILED TO APPLY THEIR MIND TO THE TP REPORT FILED BY THE A SS ES S EE , OR TO ANY OTHER MATERIAL OR INFORMATION OR DOCUMENT FURNI S HED . THE TPO MADE AN ADJUSTMENT WHICH WAS ITA NO.545(B)/2012 INCORPORATED BY THE AO IN THE A SS E S SMENT ORDER . THEREBY, THE AO AS WELL A S THE LD . CIT ( A ) DID NOT DI S CH A RGE N E CES S ARY RE S P E CTIVE JUDICIAL F UNCTION S CONF E RR E D ON THEM UND E R SEC TI O N S 9 2 C A ND 92CA OF THE ACT . FURTHER , THE A S SE SS EE I S A L S O CORRECT IN CONTENDIN G THAT NO TP ADJUSTM E NT CAN B E MADE IN A CASE LIK E TH E PR ESE NT ONE , WH E R E TH E ASS E SSEE ENJOY S U/S 10 A OR 80HHE O F THE A C T , O R W HERE THE T A X RATE IN THE CO UNTR Y O F THE A S SOCIATED ENTERPRI S ES I S HIGHER THAN THE RATE OF TAX IN INDI A AND WHERE THE E S TABLI S HMENT OF TO AV OIDANCE OR MANIPULATION OF P R IC ES OR E S TABLISHMENT OF SHI F TIN G OF PROFIT S I S NOT PO SS IBLE . 55. ON THE BASI S OF THE ABOVE R EAS ONS , QUA GROUND NO . 5 , A CC E PTING THE PLEA S RAISED BY THE A SS E SS EE TO SUPPORT THE CIT ( A ),S ORDER , WITHOUT GOIN G INTO THE MERIT S OF THI S GROUND , TH E ORDER OF THE LD. CIT ( A ) I S CO N F IRMED. GROUND NO . 5 I S REJECTED. 8. FROM THE ABOVE PARAS OF THIS TRIBUNAL ORDER AND PARTICULARLY PARA- 31 OF THE TRIBUNAL ORDER, IT IS SEEN THAT AS PER TH IS TRIBUNAL ORDER, CBDT INSTRUCTION NO. 3 DATED 20.05.2003 IS NOT BINDING O N THE A.O. HENCE, THE ACTION OF THE A.O. OF HIMSELF DETERMINING THE TP AD JUSTMENT WITHOUT REFERRING THE MATTER TO THE TPO IN THE PRESENT CASE IS A POSSIBLE VIEW AS PER THIS TRIBUNAL ORDER. IN THIS VIEW OF THE MATTER, TH E ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS BECAUSE THE VIEW TAKEN BY T HE A.O. OF NOT REFERRING THE MATTER TO THE TPO IS A POSSIBLE VIEW AS PER THI S TRIBUNAL ORDER. LEARNED DR OF THE REVENUE COULD NOT POINT OUT ANY OTHER BAS IS INDICATED BY THE LEARNED CIT IN THE IMPUGNED ORDER TO SAY THAT THE A SSESSMENT ORDER IS ERRONEOUS. THIS IS A SETTLED POSITION OF LAW BY NOW THAT REVISIONARY POWERS OF CIT U/S 263 CAN BE INVOKED ONLY WHEN THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. SINCE, IN THE PRESENT CASE, THE ASSESSMENT ORDER COULD NOT BE ESTABLISHED TO BE ERRONEOUS, THE IMPUGNED ORDER OF LEARNED CIT U/S 263 IS NOT SUSTAI NABLE AND THEREFORE, WE QUASH THE SAME. ITA NO.545(B)/2012 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV ) ( A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 29.07.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE ITA NO.545(B)/2012 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDE R DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER