Brief:-
1. Under the Proviso to s. 92C(2) (pre-amendment w.e.f. 1.10.09) the option to the assessee to choose a price which may vary from the arithmetical mean by an amount not exceeding five per cent is available only where more than one price is determined and not where there is only one comparable instance (Sony India vs. DCIT 114 ITD 448 (Del) & DCIT vs. BASF India not followed. Perot System TSI (India) Ltd 130 TTJ 685 followed);
2. The said Proviso as amended w.e.f 1.10.09 is a substantive provision and not clarificatory and applies only from AY 2009-10 and onwards. Even otherwise, the exception provided in both the provisos of s. 92C(2) with regard to the +/- 5% variation applies only when more than one price is determined. Even under the amended law, the benefit is not available to the assessee if only one price has been determined by applying CUP method.
3. Circular No. 12/2001 dated 23.8.2001 which states that the AO shall not make any adjustment to the ALP determined by the assessee if such price is upto +/- 5% the price determined by the AO is not applicable because the assessee has not “determined” a price but has relied upon the “Agriwatch” data base. Even the AO has relied on the same data base. So, “the price determined by the assessee and the AO is the same” and the Circular is not applicable. There is also no absurdity in this interpretation;
4. The argument that the position should be seen as a whole with respect to all the transactions and not only with respect to the disputed transactions is not acceptable because the assessee has not shown that various purchases were a part of pre-arranged scheme or agreement so as to constitute a part of the indivisible transactions of purchase.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘H’ DELHI
BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL
ITA No. 4405 (Del)/2009 Assessment year: 2003- 04
Assistant Commissioner of Income-tax, Circle 18(1) Vs. UE Trade Corporation (India)
ITA No. 4460(Del)/2009 Assessment year: 2003- 04
UE Trade Corporation (India) (P) Ltd., New Delhi Vs. Assistant Commissioner of Income tax
ORDER
PER K.G. BANSAL: AM
These cross appeals emanate from the order of CIT(Appeals)-XX, New Delhi, passed on 23.09.2009 in appeal no. 35/2007-08 pertaining to assessment year 2003-04. The assessee has taken following two substantive grounds in its appeal:-
(i) “That the ld. CIT(A) has erred in sustaining the adjustment of Rs. 6,40,581/- out of Rs. 9,76,369/- made by the AO on account of determination of Arm Length Price, disregarding the facts on record.
(ii) That the ld. CIT(A) has erred in holding that adjustment as made by the ld. AO, even after having made a reference to Transfer Pricing Officer, was permissible in terms of provisions of Income Tax Act, 1961.”
1.1 On the other hand, the revenue has taken following two grounds in its appeal:-
(i) “On the facts and in the circumstances of the case, ld. CIT(A) has erred in deleting the addition of Rs. 3,35,787/- out of the total addition of Rs. 9,76,369/- made by the AO on the basis of ALP worked out by TPO, on the ground that after allowing the benefit of +/- 5%, there is no difference in ALP in respect of four invoices.
(ii) On the facts and in the circumstances of the case, ld. CIT(A) has erred in deleting the addition of Rs. 7,79,812/- made by the AO on account of difference in closing stock.”
1.2 As the appeals were argued in a consolidated manner, we think it fit to pass a consolidated order.
2. The facts of the case are that the assessee filed its return on 2.12.2003 showing loss of ‘ 1,19,21,769/-. The return was processed on 21.3.2004. Thereafter, the return was selected for scrutiny by issuing notice u/s 143(2) on 15.10.2004. In the course of hearing, it was found that the assessee undertook international transactions with associated enterprises regarding export of pulses, payment of interest and reimbursement of expenses. The assessee relied on “Agriwatch” data base for justifying the contention that import of pulses was undertaken at arm’s length price. However, the AO noted that in six instances, the price paid by the assessee was in excess of the quotation in the “Agriwatch”. The details of the difference were tabulated, which show that the assessee paid an amount of ‘ 9,76,369/- in excess of arm’s length price. Therefore, this amount was deducted from the loss declared by the assessee. The details of the transactions are shown in a tabular form below:-
