Dy. CIT v. Hazira LNG (P.) Ltd.

INCOME TAX ACT, 1961

--Transfer pricing--Determination of ALPSection of comparables--Related party transaction--In case of public sector companies majority of or even all the shares may be held by the Union or State owned enterprises, however, for this reason alone these companies cannot be said to be related partner, accordingly rejection of PLL as a right comparable to assessee's case, on this count, was not justified.--Assessee imported liquefied natural gas (LNG) from its AEs, were abread and sold re-gasified LNG (R-LNG) to its customers in India. For benchmarking of international transactions, it suggested PLL company as a comparable. TPO, however, did not consider PLL as the right comparable to assessee's case on the ground that almost 99 per cent of its total sales had been effected by PLL to its related parties, i.e., IOC and ONGC, etc., holding majority shares therein and also, PLL had entered into certain long-term contracts for purchase of LNG, whereas assessee had solely purchased LNG in spot deals.Held: In case of public sector companies as PLL, even as all on majority of shareholding may be by the Union or State owned enterprises, however, these companies for this reason alone, cannot be said to related partner AEs for the purposes of section 92A. Further, it was PLL had purchased LNG under long-term arrangements as also by way of the spot deals. Even under long-term contracts, the price of LNG does not remain static as assumed by AO. Accordingly, PLL was the right comparable.