CA Suraj R. Agrawal
Facts of the case:
- The Respondent is in the business of execution of turnkey contracts involving design, manufacture, supply, erection and commissioning of sugar plants, cement plants, etc.
- During the subject Assessment Year, the Respondent Assessee had International Transaction with its Associated Enterprises (AE) in respect of import of spares and equipments, royalty and project engineering, manufacturing drawings, settlement for liquidated damages and interest on delayed payments.
- The TPO on selection of comparables arrived at the margin at 6.29% as against 5.19% arrived at by the Respondent Assesse in its Form 3CEB.
- However, the TPO proposed to make adjustment on account of enhancement of profit margin on all transactions of the RespondentAssessee.
- This in spite of the RespondentAssessee’s objection to the application of the margin applicable to arrive at ALP at 6.29% on transactions with third party i.e. non AE transactions.
- The Tribunal by the impugned order held that only transactions entered into by an assessee with its AE are subject to transfer pricing adjustment and not otherwise. Thus, allowing the Assessee’s appeal before it.
Issue put before Bombay High Court:
Whether on the facts and the circumstance of the case and law, the Tribunal was justified in law in restricting the Transfer Pricing (TP) adjustment only to the transaction between the Associated Enterprises (AEs.)?
Ruling of Honorable Bombay High Court:
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