INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Computation of ALP - -

This appeal of assessee was directed against the order passed by AO consequent to the direction of DRP. AO referred the matter to TPO for determination of ALP in respect of international transactions. However, TPO found that no adjustment was required for international transaction carried by assessee. AO subsequently passed a draft assessment order accepting the income returned by assessee. While accepting the returned income of assessee, AO found that assessee was not eligible for the benefit of the treaty. Assessee was eligible for benefit under the Indo-Cyprus Double Taxation Avoidance Agreement. AO found that assessee was not eligible for the benefit under the Indo-Cyrus DTAA. DRP found that since no variation was made under section 144, objection filed by assessee was beyond the scope of power of DRP. Held: When DRP found that objection did not relate to any variation by AO in income or loss returned by assessee and it was beyond the scope of its power, it could not proceed further to observe that assessee was not a beneficial owner of royalty. The question of benefits under the Indo Cyprus DTAA and whether assessee is beneficial owner or not for the royalty could be adjudicated when the DRP has power to adjudicate the objection of the assessee. When DRP was clear in their mind that objection of assessee could not be adjudicated, then there could not be any question of making further observation with regard to beneficial ownership of the royalty. Accordingly, finding/observation of DRP that assessee was not a beneficial owner of royalty and assessee was not eligible for benefit of Indo-Cyprus DTAA was set aside. Thus, appeal of assessee stands allowed.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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