MNCs & BPOs Transfer Pricing Issues settled

the Appellate Tribunal was right in holding that the second reassessment proceedings were not validly initiated and thereby quashing the reassessment proceedings-the proceedings initiated by the AO for the second time under Section 147 is barred by limitation-even the proviso to Section 147 does not come into play on the facts of the case-AIT-2010-373-HC Even if the goods belong to same entry, manufacture does take place if new identifiable/marketable goods known in market emerge due to operation conducted-the process of ironing applied to the stiched brassieres prior to their packing was a process incidental to the completion of the brassieres as a manufactured product-process of purification and filtration being incidental or ancillary to the manufacture of a marketable product, the Respondent was entitled to Modvat credit on the inputs involved-AIT-2010-370-HC Larger Bench of CESTAT rules the Tribunal has ample power to condone the delay in filing the appeal including the one filed under section 35 E (4)-AIT-2010-372-CESTAT Corruption in IRS takes its toll-Deputy Commissioner of Income Tax Dhananjay Kumar arrested by CBI in Mumbai-Joint Commissioner of Customs & Excise Hemant Kothikar also arrested by CBI FM directs expediting of Cadre Restructuring in CBDT & CBEC Tariff Value for import of Brass Scrap is 3924-Customs Non-Tariff Notification No. 78 Chief Justice of Gauhati High Court Justice Ranjan Gogoi to be Chief Justice of Punjab & Haryana High Court Anti-dumping duty on imports of Acrylic Fibre originating in, or exported from Japan and Belarus-Customs Tariff Notification No.85 Prescribing SION for new product “Propylene” under Chemical & Allied Products Group-DGFT PN 7 Inclusion of Finished Leather in the Focus Product Scheme of FTP-DGFT PN 6 Exchange Rate for imported goods is Rs 47.25 per US Dollar and Rs 60.35 per EURO-Exchange Rate for export goods is Rs 46.30 per US Dollar and Rs 58.70 per EURO-Customs Non-Tariff Notification No. 77-Click on Exchange Rate for details Anti Dumping Duty under the Notification No.15/2007 is not applicable to Spandex Yarn (Elastomeric yarn)-Customs Circular No.30 Import of goods under Notification No.13/2010 for Commonwealth Games, 2010-Customs Circular No.31 Larger Bench of CESTAT rules charges towards pre-delivery inspection and after-sale-service by dealers from buyers of the cars to be included in the assessable value of cars for payment of excise duty-AIT-2010-366-CESTAT merely because there was non accounting of goods, penalty was technical and inference of clandestine removal was not called for-AIT-2010-365-HC ITAT rules provision for doubtful debts and provision for standard debts are to be taken into consideration for computation of book profit u/s. 115JB of the IT Act-AIT-2010-361-ITAT HC rules slitting of aluminum foils into customized width, mounting the same on the printing machine and thereafter printing the necessary text thereon is covered for 80IB benefit as it falls within the ambit of the term “produce”-AIT-2010-363-HC Definitive Anti-dumping duty imposed on imports of Coumarin, originating in, or exported from China-Customs Tariff Notification No. 82 Special Bench of ITAT Ruling-where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract-AIT-2010-355-ITAT-SB

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MNCs & BPOs Transfer Pricing Issues settled

AIT News Network

MUMBAI. After Supreme Court’s ruling in case of Morgan Stanley AIT-2007- 246-SC modifying the ruling of the Authority for Advance Ruling; the heat has turned on MNC’s and BPOs Transfer Pricing and Arm’s Length Price methodology with Special Bench of ITAT passing landmark Ruling AIT-2007-250-ITAT on significant issues related to legal implications and requirement for invoking Transfer Pricing Provisions under the Income Tax Act. The Questions referred to the Special Bench and the issues settled are as under:

Question. Whether it is a legal requirement under the provisions contained in Chapter X of the Income tax Act, 1961 that the AO should prima facie demonstrate that there is tax avoidance before invoking the relevant provisions?

· Answer . Although Chapter-X has title "Special provision relating to avoidance of tax" and aim of various sections under Chapter-X is to check avoidance of taxes, diversion of income and funds by non residents from India, it is not necessary that AO must demonstrate such avoidance and diversion of tax before invoking provisions of section 92C and 92CA.

· Question . Whether it is a legal requirement under the provisions contained in Chapter X of the Income-tax Act, 1961 that the AO should prima facie demonstrate that any one or more of the circumstances set out in clauses (a), (b), (c ) and/or (d) of sub-section (3) of section 92C of the said Act are satisfied in the case of any assessee, before his case is referred to the Transfer Pricing Officer under sub-section (1) of Section 92CA for computation of the arm's length price?

· Answer : It would be sufficient for invoking provisions of section 92CA(1) if it is shown that there existed circumstances which prompted the AO to consider it necessary or expedient to refer the computation of ALP to the TPO.

Question . Whether the AO is required to record his opinion/reason before seeking the previous approval of the Commissioner u/s 92CA(1) of the Income-tax Act, 1961.?

Answer . No

· Question . Whether before making a reference to the Transfer Pricing Officer u/s 92CA(1) read with Section 92C(3) of the Income tax Act, 1961, is it is a condition precedent that the AO shall provide to the assessee an opportunity of being heard?

· Answer . No

· Question . What is the legal effect of Instruction No.3 of 2003 dated 20 th May, 2003 issued by the CBDT on Transfer Pricing matters?"

· Answer . There is no illegality in the directions issued by CBDT.

· Question . What is the role of the AO after receipt by him of the order passed by the Transfer Pricing Officer u/s 92CA(3) of the Income-tax Act, 1961? whether order of the Transfer Pricing Officer issued under sub-section (3) of section 92CA is binding on the AO, in the sense that he has to make assessment taking arms' length price determined by the TPO without making any change u/s 92CA(3).

Answer . TPO’s order under sub-section (3) of section 92C cannot be treated as final and binding on the AO. There may be cases in which the assessee after arms’ length price is determined by the TPO and before his order is made the basis of assessment, may get such authentic material to show that transfer pricing determined by the TPO is not correct or should not be blindly adopted without modifying it.

(Click here for Full Text of Judgment)

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