Case Law Details
Section 92(1) clearly provides that any income arising from an international transaction is required to be computed having regard to its arm’s length price. There is no provision exempting the computation of total income arising from an international transaction having regard to its ALP‘ in the case of an assessee entitled to deduction u/s 8oIC or any other such relevant provision. Section 92C dealing with computation of ALP clearly provides that the ALP in relation to an international transaction shall be determined by one of the methods given in this provision. This section also does not immune an international transaction from the computation of its ALP when income is otherwise eligible for deduction. On the contrary‘ we find that sub- section (j) of section 92C plainly stipulates that where an ALP is determined‘ the AO may compute the total income of the assessee having regard to the ALP so determined. This shows that the total income of an assessee entering into an international transaction‘ is required to be necessarily computed having regard to its ALP without any exception. Thus‘ the ld. AR’s argument that since its income is subject to deduction u/s 8oIC the provisions of the Chapter-X of the Act should not be applied‘ in our considered opinion, has no force in view of the clear statutory mandate contained in proviso to section 92C(4).
RELEVANT EXTRACT OF THE JUDGMENT
3. The learned Counsel for the assessee submitted that the assessee is a concern which is eligible for claiming exemption u/s 10A of the Act and therefore, all of its income is exempt from tax in India and hence there is no intention to shift its profit outside India and more so, when the tax rates in USA, where the AEs are located, is higher than in India. In support of the contention that the AO as well as the CIT(A), have to apply their mind to the TP study before making a reference to the TPO u/s 92CA of the Act, the learned Counsel for the assessee has placed reliance on the decision of the Coordinate Bench of the Tribunal at Mumbai in the case of Tata Consultancy Services Ltd in ITA 75 13/Mum/20 10. Further, he also placed reliance upon the article on principles of natural justice by Shri Brijesh Kumar, Hon’ble Judge of the Hon’ble Allahabad High Court wherein it has been stated that the principles of natural justice requires that no man should be condemned unheard and that both the sides must be heard before passing any orders. Therefore, the opportunity of hearing before making any decisions, was considered to be a basic requirement. It was observed that the application of principles of natural justice varies from case to case depending upon the facts and circumstances of the case.
4. The learned DR, on the other hand, supported the orders of the AO and the DRP, on merits and as regards the additional grounds, the assessee’s reliance on the decision in the case of Tata Consultancy Services (cited Supra), she submitted that the decision of the Tata Consultancy Services (cited Supra) has been considered by the Coordinate Bench of the Tribunal at Delhi in the case of Gruner India Pvt. Ltd vs. DCIT in ITA 6794/Del/2015 dated 29.04.2016 and it has been held that the said decision is not applicable.
5. She also placed reliance upon the decision of the Hon’ble Punjab & Haryana High Court in the case of Coco Cola Ltd vs. ACIT reported in (2009) 309 ITR 0194 wherein it was held that it is sufficient if opportunity is given by the TPO before making any ALP adjustment and it is not necessary that the AO should give an opportunity before making reference to the TPO. As regards the assessee’s contention that the tax rates are very high in USA as compared to the tax rates in India, the learned DR has placed before us a document stating that in USA the statutory and corporate income tax rate is ranging from 15 to 35%. Therefore, according to her, the tax rates in US are not higher than in India and therefore, the assessee’s contention that it cannot have any intention to shift profit from India to US cannot be accepted. The learned DR also submitted that the decision in the case of Aztech Software & Technology Services Ltd & Anr. Vs. ACIT covers the issue as the Special Bench of the Tribunal at Bangalore, has clearly held that before referring to the TPO, the AO need not give any hearing to the assessee. She submitted that the decision of the Special Bench still holds the ground and therefore, the decision of the Income Tax Appellate Tribunal, Mumbai Bench, in the case of Tata Consultancy Services Ltd (cited Supra) is against the principles laid down by the Special Bench and hence is not to be applied to the facts of the case before us.
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