Addl. Director IT (International Taxation) v. Ballast Nedam Dredging

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The Tax Publishers2013 TaxPub(DT) 1357 (Mum-Trib) : (2013) 154 TTJ 0280 : (2013) 085 DTR 0307 Income Tax Act, 1961 --Transfer pricing--Computation of ALP Data of relevant financial year--Where fact that provisions relating to transfer pricing were not on statute when agreements were entered into, two quotation obtained by assessee in 2000 for calendar year 2001 and 2002 could be accepted as contumacious documents in order to examine ALP. Further, in this year the variation from the price quoted and the price paid is less than +/- 5 per cent as permitted. Therefore, under the provisions no adjustment need be made. TPO rejected two quotations as not of contemporaneous data ignoring the fact that the agreements were entered in an earlier year and assessee has paid the prices according to the originally agreed amounts. There is no dispute with reference to the fact that the contract was spread over three years and assessee having entered into agreement way back in January/December, 2000 continued to pay the amount as per the originally agreed amounts. The quotations obtained were contemporaneous to the date of the agreement and therefore, the TPO rejected the quotations without any basis. [Para 21] The rule 10B(4) permits data relating to the financial year in which international transaction has been entered into. In this case the international transaction continues to have effect for more than three years i.e. from assessment year 2000-01 onwards. It is admitted that during 2000-01 and 2001-02, Chapter X special provisions relating to transfer pricing were not on statute but that does not prevent assessee in contending that fresh documents need not be maintained/obtained separately in respect of each previous year when there is no change in the nature or terms of the international transaction. In view of this, the two quotations relied upon by assessee can be accepted as contemporaneous documents in order to examine the ALP. [Para 22] Tribunal is also not convinced with the arguments of the Commissioner-Departmental Representative that the quotations cannot be taken as authentic data. Even though the CUP method as prescribed in rule 10B(1)(a) used the words 'the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction', the TPO himself accepted the VG Bouw certificate while determining the ALP under the CUP method. Even in the case of VG Bouw certificate this is no 'price charged or paid' but only a certificate given about the authenticity of the prices quoted. [Para 23] There is no reason to differ from the findings of the Commissioner (Appeals) as far as the price for dredger Saga is concerned. First of all, as submitted by the learned counsel, the prices paid were the same as agreed upon way back on 5th Jan., 2000 and at that point of time there were quotations from third parties on the basis of which an amount of Rs. 32,17,492 was considered to be the difference between the rates offered and price paid in assessment year 2001-02. This issue was decided in ITA No. 1541/Mum/2005 dated 16-12- 2009 wherein the Tribunal considering the fact has upheld the additions. [Para 24] In this year the variation from the price quoted and the price paid is less than +/- 5 per cent as permitted. Therefore, under the provisions no adjustment need be made. [Para 25] Similarly, in the case of dredger Hector even though there is no dispute with reference to the examination of the international transactions in this year under the provisions of transfer pricing, while determining the ALP what is required to be considered is whether the price paid has any significant impact on the income. As submitted by assessee, the agreement was entered when the entities are independent and therefore, the price paid can be considered at arm's length. Moreover, assessee also justified the price paid is within the permitted range of +/- 5 per cent in both the cases, the fact of which was accepted by the Commissioner (Appeals). [Para 26] Since the price paid in both the cases is within the +/- 5 per cent range of the quotations available at the time of entering into the agreement, there is no need for making any addition on the basis of the data available on record and accordingly the Commissioner (Appeals)'s order is to be confirmed. [Para 27] Assessee is able to justify various adjustments so made to arrive at the ALP on the basis of the VG Bouw certificate also. If are examine the certificates as such before the authorities by assessee, we do not see any reason to reject the same. As already stated, there is no independent data available before the TPO to determine the ALP and the TPO has only to tweak the two certificates so as to arrive at the so-called difference on the ALP. If a proper analysis was made, there would not be any difference from the price paid to the price determined, as assessee demonstrated before the TPO both on the basis of the third party quotations which are considered as internal CUP and the VG Bouw certificates as external CUP. Under both workings assessee is able to justify the price paid and on that reason also, we have to accept assessee's contentions. Therefore, there is no reason to differ from the order of the Commissioner (Appeals) which is ultimately acceptable on the given facts of the case. [Para 28] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1357 (Mum-Trib) : (2013) 154 TTJ 0280 : (2013) 085 DTR 0307

Income Tax Act, 1961

--Transfer pricing--Computation of ALP Data of relevant financial year--Where fact that provisions relating to transfer pricing were not on statute when agreements were entered into, two quotation obtained by assessee in 2000 for calendar year 2001 and 2002 could be accepted as contumacious documents in order to examine ALP. Further, in this year the variation from the price quoted and the price paid is less than +/- 5 per cent as permitted. Therefore, under the provisions no adjustment need be made.

TPO rejected two quotations as not of contemporaneous data ignoring the fact that the agreements were entered in an earlier year and assessee has paid the prices according to the originally agreed amounts. There is no dispute with reference to the fact that the contract was spread over three years and assessee having entered into agreement way back in January/December, 2000 continued to pay the amount as per the originally agreed amounts. The quotations obtained were contemporaneous to the date of the agreement and therefore, the TPO rejected the quotations without any basis. [Para 21] The rule 10B(4) permits data relating to the financial year in which international transaction has been entered into. In this case the international transaction continues to have effect for more than three years i.e. from assessment year 2000-01 onwards. It is admitted that during 2000-01 and 2001-02, Chapter X special provisions relating to transfer pricing were not on statute but that does not prevent assessee in contending that fresh documents need not be maintained/obtained separately in respect of each previous year when there is no change in the nature or terms of the international transaction. In view of this, the two quotations relied upon by assessee can be accepted as contemporaneous documents in order to examine the ALP. [Para 22] Tribunal is also not convinced with the arguments of the Commissioner-Departmental Representative that the quotations cannot be taken as authentic data. Even though the CUP method as prescribed in rule 10B(1)(a) used the words 'the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction', the TPO himself accepted the VG Bouw certificate while determining the ALP under the CUP method. Even in the case of VG Bouw certificate this is no 'price charged or paid' but only a certificate given about the authenticity of the prices quoted. [Para 23] There is no reason to differ from the findings of the Commissioner (Appeals) as far as the price for dredger Saga is concerned. First of all, as submitted by the learned counsel, the prices paid were the same as agreed upon way back on 5th Jan., 2000 and at that point of time there were quotations from third parties on the basis of which an amount of Rs. 32,17,492 was considered to be the difference between the rates offered and price paid in assessment year 2001-02. This issue was decided in ITA No. 1541/Mum/2005 dated 16-12- 2009 wherein the Tribunal considering the fact has upheld the additions. [Para 24] In this year the variation from the price quoted and the price paid is less than +/- 5 per cent as permitted. Therefore, under the provisions no adjustment need be made. [Para 25] Similarly, in the case of dredger Hector even though there is no dispute with reference to the examination of the international transactions in this year under the provisions of transfer pricing, while determining the ALP what is required to be considered is whether the price paid has any significant impact on the income. As submitted by assessee, the agreement was entered when the entities are independent and therefore, the price paid can be considered at arm's length. Moreover, assessee also justified the price paid is within the permitted range of +/- 5 per cent in both the cases, the fact of which was accepted by the Commissioner (Appeals). [Para 26] Since the price paid in both the cases is within the +/- 5 per cent range of the quotations available at the time of entering into the agreement, there is no need for making any addition on the basis of the data available on record and accordingly the Commissioner (Appeals)'s order is to be confirmed. [Para 27] Assessee is able to justify various adjustments so made to arrive at the ALP on the basis of the VG Bouw certificate also. If are examine the certificates as such before the authorities by assessee, we do not see any reason to reject the same. As already stated, there is no independent data available before the TPO to determine the ALP and the TPO has only to tweak the two certificates so as to arrive at the so-called difference on the ALP. If a proper analysis was made, there would not be any difference from the price paid to the price determined, as assessee demonstrated before the TPO both on the basis of the third party quotations which are considered as internal CUP and the VG Bouw certificates as external CUP. Under both workings assessee is able to justify the price paid and on that reason also, we have to accept assessee's contentions. Therefore, there is no reason to differ from the order of the Commissioner (Appeals) which is ultimately acceptable on the given facts of the case. [Para 28]