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1 - 7 of 7 (0.22 seconds)Section 92CA in The Income Tax Act, 1961 [Entire Act]
Section 92 in The Income Tax Act, 1961 [Entire Act]
The Income Tax Act, 1961
Section 92B in The Income Tax Act, 1961 [Entire Act]
Cit vs Ekl Appliances Ltd on 29 March, 2012
The Tribunal also referred to the decision of the Hon'ble Delhi
High Court in the case of CIT v. EKL Appliances Ltd., ITA No.1068/2011
dated 29.03.2012. In the aforesaid decision, the assessee entered into an
agreement pursuant to which it paid brand fee/ royalty to an associated
enterprise. The TPO disallowed the payment on the ground that as the
assessee was regularly incurring huge losses, the know-how/ brand had
not benefited the assessee and so the payment was not justified. This was
reversed by the CIT (A) & Tribunal on the ground that as the payment was
genuine, the TPO could not question commercial expediency. On appeal
by the department, the Hon'ble Delhi High Court held that the "transfer
pricing guidelines" laid down by the OECD make it clear that barring
exceptional cases, the tax administration cannot disregard the actual
transaction or substitute other transactions for them and the examination of
IT(TP)A No.1315/Bang/2011
Page 36 of 39
a controlled transaction should ordinarily be based on the transaction as it
has been actually undertaken and structured by the associated enterprises.
The guidelines discourage re-structuring of legitimate business transactions
except where (i) the economic substance of a transaction differs from its
form and (ii) the form and substance of the transaction are the same but
arrangements made in relation to the transaction, viewed in their totality,
differ from those which would have been adopted by independent
enterprises behaving in a commercially rational manner. The OECD
guidelines should be taken as a valid input in judging the action of the TPO
because, in a different form, they have been recognized in India's tax
jurisprudence. The Hon'ble Court held that it is well settled that the revenue
cannot dictate to the assessee as to how he should conduct his business
and it is not for them to tell the assessee as to what expenditure the
assessee can incur (Eastern Investment Ltd 20 ITR 1 (SC), Walchand & Co
65 ITR 381 (SC) followed). Even Rule 10B(1)(a) does not authorise
disallowance of expenditure on the ground that it was not necessary or
prudent for the assessee to have incurred the same. In light of the
aforesaid decisions, we are of the view that the stand taken by the
assessee in this regard deserves to be accepted. It is clear from the
decisions referred to above that the TPO has to work out the ALP of the
international transaction by applying the methods recognized under the Act.
He is not competent to hold that the expenditure in question has not been
incurred by the assessee or that the assessee has not derived any benefits
for the payment made by the assessee and therefore he cannot consider
the ALP as NIL. We hold accordingly.
Industrial Cables (I) Ltd. vs Acit on 29 July, 2005
43. The above being the legal position, it becomes necessary to examine
the international transactions carried out by the assessee with its AE during
the previous year which have been categorized into 2 segments by the
TPO in his order and find out if they are interlinked or interconnected so
that the transactions need to be evaluated together rather than individually.
In this regard, we find that the submissions made by the Assessee before
IT(TP)A No.1315/Bang/2011
Page 32 of 39
TPO as well as before DRP have not been considered at all. The TPO
proceeded on the basis that ALP of each transaction has to be examined
independently/individually by placing reliance on the decisions of Tribunal
in the case of Star India Ltd. (supra) and UKB(I) (P) Ltd. (supra). We agree
with the submissions of the learned counsel for the assessee that these
decisions have in fact accepted in principle that aggregation of transactions
have to be done where they are interlinked but have on facts found that
transactions were not interlinked and therefore held that ALP of
transactions have to be determined individually. The following decisions
relied upon the learned counsel for the assessee also supports the plea of
the learned counsel for the assessee. :
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