Case Law Details
Megger India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
We find that the authorities below have erred in not appreciating the documents submitted by the assessee. While the TPO has not adopted any of the methods prescribed for benchmarking the international transaction, he has erred in applying the benefit test. On the other hand the assessing officer while purporting to invoke section 37(1) contradicted himself by stating that that he is not applying the benefit test, rather by raising issues of the documentation he has stepped into the shoes of the Transfer Pricing officer. The DRP has also erred in holding that the agreement should have been entered into by the parties in a particular manner by incorporating several other clauses. In our considered opinion here the dispute resolution panel exceeded its jurisdiction on this account. The format of agreement between the parties is not a subject matter of decision of DRP. The dispute resolution panel further erred in agreeing with the Transfer Pricing officer for application of benefit test for computing the arms length price of the international transaction. Accordingly in our considered opinion the Transfer Pricing adjustment is liable to be set aside as appropriate method of benchmarking the arms length price of international transaction as per the statute has not been adopted as held by the honourable jurisdictional High Court in the case of Johnson & Johnson (supra). Furthermore invoking of benefit test in transfer pricing adjustment is also against the ratio laid down by honourable Bombay High Court in the case of Lever India Exports Ltd. (supra).
ITAT has inter alia held that TPO has erred in applying the benefit test. That the AO has contradicted himself that he is not applying the benefit test. We find that the proposition of ITAT in the above order are applicable to the facts in the present case to the extent ITAT has inter alia set aside the order, DRP observation that the agreement should have been entered into by the parties in a particular manner by incorporating several other clauses. This observation is duly applicable to this year also. However, since the AO has noted that assessee has not supplied the relevant documentary evidence and Ld. Counsel of the assessee has agreed that documents may be examined by the AO, we remit the issue to the file of AO only to examine the documents in this regard. Thereafter, AO shall decide as per law keeping in mind ITAT order in assessee’s own case as above and our observations hereinabove.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the Assessee is directed against the order of learned CIT(A)-51 dated 29.10.2018 and pertains to Assessment Year 2015-16.
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