TPO cannot take cognisance suo moto of any international transaction for adjustment in ALP

CIT Vs. Amadeus India Pvt Ltd (Delhi HC) – Role of Transfer Pricing Officer (TPO) is limited to determination of the Arm’s Length Price (ALP) in relation to the international transaction(s) referred to him by the Assessing Officer (AO). The TPO, on a suo moto basis, cannot take cognisance of any other international transaction not specifically referred to him by the AO.

It is primarily the duty of the AO to compute any income arising from an international transaction having regard to the ALP. The AO may determine the ALP of an international transaction himself or, as stated in Section 92CA of the Act, if he considers it necessary or expedient, he may, with the previous approval of the CIT, refer the computation of the ALP in relation to an international transaction under Section 92C of the Act to the TPO.CBDT Instruction dated 20 March 2003 is based on a correct interpretation of the relevant provisions of the Act. A harmonious reading of the Instruction and the provisions of the law makes it evident that the role of the TPO is restricted to determining the ALP in relation to the international transaction which has been referred to him by the AO. It is thus, not within the domain of the TPO to determine whether a particular transaction, which has come to his notice, but which has not been referred to him is an international transaction and to determine the ALP thereof. That is the exclusive jurisdiction of the AO. Sub-section (2A) of Section 92CA of the Act which deals with expansion of the jurisdiction of the TPO by empowering him to determine the ALP of any international transaction other than those referred to him by the AO, is not merely procedural in nature and therefore can only have a prospective effect from 1 June 2011 and does not have any application to the present appeal of the taxpayer which is in respect of FY 2005-06.

THE HIGH COURT OF DELHI AT NEW DELHI

Judgement delivered on- 28.11.2011

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