ACIT Vs Viney Corporation Limited (ITAT Delhi)
The Delhi ITAT considered Revenue’s appeal for Assessment Year 2016-17 against the CIT(A)’s order dated 10.08.2020, arising from the assessment order dated 31.12.2018 under Section 143(3) of the Income Tax Act, 1961. The assessee, engaged in manufacturing auto components, had filed its return on 28.11.2016 declaring income of Rs.25,10,98,150.
The principal dispute concerned specified domestic transactions. For the preceding Assessment Year 2015-16, the TPO had proposed an adjustment of Rs.1,38,52,861, representing 3.6% of specified domestic transactions of Rs.38,27,41,152. For AY 2016-17, the assessee reported specified domestic transactions of Rs.41,52,40,079. Instead of referring the transactions to the TPO under Section 92CA(1), the Assessing Officer adopted the preceding year’s 3.6% adjustment and made a transfer-pricing adjustment of Rs.1,49,48,643.
Before the CIT(A), the assessee contended that the AO could not determine the ALP without a TPO reference and that, because the adjustment was made without such reference, no draft assessment order under Section 144C(1) had been issued. The CIT(A) accepted the contention and quashed the assessment order. Reliance was placed on CBDT Instruction No. 3/2016 dated 10.03.2016 and Control Risk India Private Limited v. DCIT, among other decisions.
The ITAT observed that the AO ought to have referred the specified domestic transactions to the TPO for determination of ALP instead of computing the ALP himself by adopting the preceding year’s adjustment. It noted that clause 3.3 of the CBDT Instruction contained circumstances for TPO references, while clause 3.7 stated that ALP determination should not be carried out by the AO where no TPO reference was made. The Tribunal found the two provisions amenable to different interpretations.
