The Tax Publishers2021 TaxPub(DT) 0795 (Mad-HC)

INCOME TAX ACT, 1961

Section 92C

Tested party normally should be the least complex party to the controlled transaction and that there is no bar for selection of tested party either local or foreign party and neither the Act nor guidelines on transfer pricing provides so and selection of tested party is to further the object of comparability analysis by making it less complex and requiring fewer adjustment. Therefore, issue regarding assessee's plea to consider foreign AE as tested party to determine Arm's length nature of underlying international transaction was remanded to TPO for fresh decision on merits and in accordance with law.

Transfer pricing - Determination of ALP - Tested party vis-a-vis least complex theory -

Assessee entered into transactions with its AE abroad. Tribunal rejected assessee's approach of considering foreign associated enterprises as tested party. Assessee contended that available supporting material and evidences, clearly demonstrated least complex nature of assessee's overseas subsidiaries. Revenue's case was that based upon auditor's certification as filed in Form 3CED, assessee had to be taken as tested party for the purpose of determination of ALP. Held: Revenue sought to pin assessee based upon auditor's certification as filed in Form 3CED. As could be seen from the statutory form, it pertained only to the transactional claims and had got nothing to do with a tested party. The revenue could not compare case of assessee with that of assessee who failed to claim in his return of income a deduction or a benefit which he would be otherwise entitled to. Tested party normally should be the least complex party to the controlled transaction and that there is no bar for selection of tested party either local or foreign party and neither the Act nor guidelines on transfer pricing provides so and selection of tested party is to further the object of comparability analysis by making it less complex and requiring fewer adjustment. Therefore, issue regarding assessee's plea to consider foreign AE as tested party to determine Arm's length nature of underlying international transaction was remanded to TPO for fresh decision on merits and in accordance with law.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2011-12



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