Case Law Details
M/s. Carraro India Private Limited Vs DCIT (ITAT Pune)
In this case it is apparent that the AO deviated from the order passed by the TPO u/s. 92CA(3) of the Act. The primary question which requires adjudication is as to whether the action of the AO in this regard can be treated as valid? Section 92CA(4), prior to its substitution by the Finance Act 2007 w.e.f. 1.6.2007, provided that on receipt of the order passed by the TPO, the AO shall proceed to compute the total income of the assessee having regard to the ALP determined by the TPO. The Finance Act, 2007 substituted the hitherto sub-section (4) with a new sub-section w.e.f. 0 1-06-2007 providing that “on receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the arm’s length price as so determined by the Transfer Pricing Officer”. A conjoint reading of the earlier and existing sub-section (4) of section 92CA makes it explicitly manifest that whereas under the earlier provision, the report of the TPO was not binding on the AO and he could compute the total income of the assessee by just having regard to the ALP determined by the TPO. If the AO was not satisfied with the TPO’s opinion on any point determined by the latter, he could deviate from the TPO’s order and proceed in his own way. However, w.e.f. 01-06-2007, the legal position has undergone change. Now, the AO is bound by the order passed by the TPO as he is required to compute total income in conformity with the ALP determined by the TPO.
FULL TEXT OF THE ITAT JUDGEMENT
These are two cross appeals – one by the assessee and the other by the Revenue – arise out of a common order of CIT(A)-13, Pune passed on 27-04-2018, inter alia, for the assessment year 2009-10.
2. The first issue raised by the assessee in its appeal is against the confirmation of addition of Rs.75,41,558/- made by the Assessing Officer (AO) on account of transfer pricing adjustment recommended by the Transfer Pricing Officer (TPO). The Revenue in its appeal is aggrieved by the direction of the ld. CIT(A) to treat the entire amount of royalty as a revenue expense as against capital expenditure taken by the AO.
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