Calcutta H.C : Where Tribunal is of opinion that a particular company selected by assessee is not comparable, he should remand matter to TPO and not give his own opinion on matter

High Court Of Calcutta

CIT, Kolkata –II vs. Manaksia Ltd.

Section : 92C

Girish Chandra Gupta And Tapash Mookherjee, JJ.

G.A. No. 2587 Of 2013

ITAT No. 144 Of 2013

January 10, 2014

ORDER

1. The subject matter of challenge in this appeal is a judgement and order dated 14th March, 2013 by which the learned Tribunal has set aside the findings of the Disputes Resolution Panel [DRP, for brevity] and consequently, the additions made by the Assessing Officer taking into account the adjustment made by the Transfer Pricing Officer [TPO, for brevity] on the basis of the directions of DRP were deleted. The DRP had already granted substantial relief to the assessee holding as follows :

“4.1.2. We find that the TPO was justified in rejecting the rectification application. If the assessee has not given the segmental details of sales to AE by way of trading and by way of manufactured goods during TP proceedings the TPO definitely cannot decide the matter during the proceeding for rectification. However, we find that the TPO adjusted the entire sales Rs 731.80 Crores of the assessee. The adjustment is required to be made in respect to International Transactions. But we cannot make any difference in the given circumstances between the sales of finished goods and sales of manufactured goods to AE. Adjustment will have to be limited on total sales to AE only. Therefore, we direct the TPO to make proportionate adjustment on total sales to AE only. Adjustment should not be made on Non-AE sales.”

2. Aggrieved by the order of the DRP the assessee approached the learned Tribunal. The learned Tribunal was of the opinion that MALCO cannot be treated as a comparable unit to the assessee. It is on this basis that the aforesaid order of DRP was set aside and the additions deleted.

3. Aggrieved by the order of the learned Tribunal the present appeal was preferred.

4. Mr. Bhowmick, learned Advocate appearing for the appellant, submitted with some justification that the matter was referred to the TPO under Section 92CA of the Income Tax Act and based on the findings of TPO, a draft assessment was made which the assessee challenged before the DRP under Section 144C of the Act. The DRP reduced the additions proposed by the draft assessment. The TPO had taken MALCO as a comparable unit. DRP has also accepted that MALCO was a comparable unit for reasons indicated therein. It would also appear from the order of DRP that certain comparables, cited by the assessee, could not be tested because the assessee himself omitted to disclose the required particulars. In case the learned Tribunal was of the opinion that MALCO was not comparable to the assessee, the matter should have been remanded to the TPO. By omitting to do so, the entire exercise referring the matter to the TPO and the concerned Section of the Act have both been nullified.

5. Mr. Khaitan, learned Senior Advocate appearing for the respondent, submitted that the learned Tribunal did not possibly remand the matter because there was no other comparable company. He, in that regard, drew our attention to the following sentence from paragraph 5 of the judgement of the learned Tribunal :

“The search resulted in 2 companies as mentioned by the TPO one being the assessee itself and the other MALCO. Ltd.”

He contended that because there is no other comparable company, there was no necessity of remanding the matter.

6. We have considered the submissions advanced by the learned Counsel appearing for the parties and are of the opinion that the submissions made by Mr. Bhowmick must prevail. Whether there was any other comparable unit or any other method, might be a question to be considered by the TPO once the matter is remanded to him. It was not a proper exercise of discretion on the part of the learned Tribunal to have given a quietus to the matter after deleting the additions.

7. It was a clearly erroneous order in law passed by the learned Tribunal and is to that extent set aside. The matter is remanded to the TPO.

[Citation : 362 ITR 56]

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