Transfer Pricing – TPO can rely on ‘contemporaneous’ data even if not available at specified date – ITAT Bangalore

Kodiak Networks (India) Pvt. Ltd. Vs. ACIT (ITAT Bangalore)- As far as the data to be used by the TPO while determining the ALP was concerned, it is observed that it is covered by the provisions of rule 10D sub-rule 4 of the Income-tax Rules. Section 92 C provides that the arm’s length price in relation to an international transaction shall be determined by any of the methods being the most appropriate method having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors for computing the ALP and also any other method as may be prescribed by the Board. S. 92D provides that (i) every person who has entered into an international transaction shall maintain and keep such information and documents in respect thereof; (ii) the Board may also prescribe the period for which the information and documents shall be kept and maintained; and (iii) the AO or the CIT (A) may, in the course of any proceeding under the Act, require any person who has entered into an international transaction to furnish any information or document in respect thereof. Thus, it subscribes that the requirement is only to maintain and keep the information and documents relating to international transactions so that they are available as and when required during any proceeding under the Act. The section does not provide that the information and documents are to be kept and maintained for a period of eight years. Rule 10-D (1) specifies the documents and information which are to be kept and maintained by the assessee and sub-rule 2 thereof provides that nothing contained in sub-rule 1 shall apply in a case where the aggregate value as recorded in the books of accounts, the international transactions entered into by the assessee does not exceed Rs.1 crore. Sub-rule 3 provides the supporting authentic documents which are to be kept and maintained and sub-rule 4 thereof provides that the information and documents specified under sub-rule 1 & 2 should as far as possible be contemporaneous and should exists latest by the ‘specified date’ referred to in clause-4 of s.92F. Clause 4 of s. 92F gives the definition of ‘specified date’ to have the same meaning as assigned to ‘due date’ in Expln. 2 below sub- section 1 of s.139. Explanation 2 to s.139 defines ‘due date’ in a case of a company to be 30th of September of the relevant assessment year, the assessee is supposed to maintain information and documents. After going through the above provisions of law, it is clear that the Act has not provided for any cut off date up-to which only the information available in public domain has to be taken into consideration by the TPO, while making the transfer pricing adjustments and arriving at arm’s length price. The assessee as well as the Revenue is both bound by the Act and the rules there-under and, therefore, as provided under the Act and rules, they are supposed to be taking into consideration, the contemporaneous data relevant to the previous year in which the transaction has taken place. The assessee had strenuously argued that the provisions of s.92D and Rule 10D is defeated, if the TPO takes the data which is available in the public domain after the specified date and the ALP would be fluid and there would be no certainty for the same. We are, however, not in agreement with the arguments put-forth by the Ld. A.R. The ALP has to be determined by the TPO in accordance with law and the Act provides that the TPO shall take into consideration the contemporaneous data. The assessee was only required to maintain the information and documents as may be necessary relating to the international transactions so that it can be made available to the TPO or the AO or any other authority in any proceedings under the Act. By providing a specified date in the Act, the obligation is cast upon the assessee to keep and maintain the documents for that period. But, it does not restrict the TPO from making enquiries thereafter for determining the correct ALP.

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