INCOME TAX ACT, 1961

Section 92C(2)

Transfer pricing - Reference to TPO - Determination of ALP -

Assessee entered into international transaction with its AE during subject assessment year, i.e., 2005-06. The price invoiced by the assessee was Rs. 37,39,96,538. AO, referred it under section 92CA and TPO determined ALP at Rs. 38,05,97,081. The difference was Rs. 66,00,543. Assessee's case was that since variation between the invoiced price and ALP did not exceed 5%, therefore, price at which international transaction was undertaken was to be adopted in view of amendment by the Finance (No. 2) Act, 2009 which being clarificatory in nature was also applicable during the year under consideration. Held: Sub-section (2A) was brought into section 92C by Finance Act, 2012 stipulates that first proviso to sub-section (2) as it stood before its amendment by the Finance (No.2) Act, 2009 is applicable in respect of an international transaction for an assessment year and variation between arithmetical mean referred to in said proviso and price at which such transaction has actually been undertaken exceeds five per cent of the arithmetical mean, then, assessee would not be entitled to exercise the option as referred to in said proviso. This demolishes the contention of the assessee that amendments in 2009 are clarificatory in nature. Hence, statute, for the relevant year, did not at all provide an acceptance of the invoiced price on any count and not at all on the ground that difference between the invoiced price and ALP determined not exceeding 5%. There was absolutely no reference to invoiced price insofar as option made available to assessee by proviso as it existed from 1-4-2002, introduced by Finance Act, 2002 relevant to the subject assessment year. Mitigation provided by CBDT was on the proviso introduced by Finance Act, 2001. The same could not be applied to proviso introduced by way of substitution, by Finance Act, 2002. The substituted proviso, which applied from 1-4-2002 erased earlier proviso from the statute totally. It granted an option to assessee; but only insofar as adopting one of the prices from which the average price is determined; that too in cases of more than one price being determined under the most appropriate method. In such circumstances, question of law framed was answered in favour of revenue and against the assessee.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2005-06

SUBSCRIBE FOR FULL CONTENT