Case Law Details

Case Name : Price Waterhouse & Anr. Vs Commissioner of Income Tax (Calcutta High Court)
Appeal Number : Writ Petition No.16340 (W) of 2015
Date of Judgement/Order : 06/08/2015
Related Assessment Year :
Courts : All High Courts (3864) Calcutta High Court (153)

If an entity is not an “associated enterprise”, there cannot be any computation of income from “international transaction” having regard to ALP

Brief of the Case: In the case of Price Waterhouse & Anr. Vs CIT, Calcutta High Court through an interim order opined that if there was no relevant material in the hands of the Income Tax authorities with which it has come to an incontrovertible conclusion that the writ petitioner no.1 was an ‘associated enterprise’ of Pricewaterhouse Coopers Services BV, within the meaning of section 92A of the Income Tax Act, 1961, the question of issuance of notice, would not have arisen. The Writ Petition is kept pending for final disposal.

Facts of the Case: In the instant case, even after the Writ Petitioner no.1, by a letter dated 29th April, 2015, replied to the notice dated 24th March, 2015, issued by the JCIT (TPO), Kolkata, taking a specific point that the partnership firm had not entered into any “international transaction” within the meaning of section 92B of the Income Tax Act, during the assessment year 2012-13 nor in any earlier assessment years, the Income Tax authorities have remained conspicuously silent by not furnishing relevant materials based on which it came to a conclusion that there has been an “international transaction” within the meaning of section 92B of the Income Tax Act, 1961.

The issue falls for consideration before the HC was whether there has been any “international transaction” between the petitioner no.1 on one hand and PricewaterhouseCoopers Services BV on the other, as defined under section 92B of the Income Tax Act, 1961.

Contention of the revenue: Revenue relied on a Division Bench judgment of the Bombay High Court rendered on Hindalco Industries Ltd. vs. Additional Commissioner of Income Tax, reported in TAXMAN-2012 (211)-315 and submitted that it would inappropriate for this Court to exercise its writ jurisdiction under Article 226 of the Constitution of India to entertain a petition challenging the validity of the notice dated 24th March, 2015, as well as the reference made by the respondent no.3 to the Transfer Pricing Officer on 12th February, 2015.

Held by High Court: The Calcutta High Court noted that the judgment of the Bombay High Court, which is sought to be relied upon by the Revenue, has no manner of application at all in the facts and circumstances of the instant case. Further, sub-section (1) of section 92B of the Income Tax Act, 1961 reveals that “international transaction” means a transaction between two or more “associated enterprises”. Meaning of “associated enterprise” (emphasis supplied) has been statutorily elaborated under section 92A of the Income Tax Act, 1961. Clause (a) under sub-section (1) of section 92A of the Income Tax Act, 1961, spells out that one of the three statutory requirements, i.e. management or control or capital are necessary to be fulfilled for an enterprise to be associated with another enterprise. The kind of management or control or capital required has been further elaborated in sub-section (2) of section 92A of the Income Tax Act, 1961.

Further, If there is no relevant material in the hands of the Income Tax authorities with which it has come to an incontrovertible conclusion that the writ petitioner no.1 was an “associated enterprise” of PricewaterhouseCoopers Services BV, within the meaning of section 92A of the Income Tax Act, 1961, the question of issuance of notice dated 24th March, 2015, would not arise. When the writ petitioner no.1 replied to the said notice by its letter dated 29th April, 2015, the concerned respondent authority ought to have given a reply by supplying such relevant materials with which it come to a conclusion that the petitioner no.1 was an “associated enterprise” of PricewaterhouseCoopers Services BV. The reason why furnishing of such relevant materials were singularly important is that if the writ petitioner no.1 was not an “associated enterprise” of PricewaterhouseCoopers Services BV, there cannot be any computation of income from “international transaction” having regard to arm’s length price as envisaged under section 92 of the Income Tax Act, 1961.

After examining the facts and circumstances, prima facie case has been made out for an ad interim order in terms of prayer of the writ petition and held that such ad interim order should continue until final disposal of the writ petition.

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