Income Tax Act, 1961: s.92 – Transfer Pricing Adjustment – Respondent received certain amount of brokerage from its parent company – During the assessment proceedings, respondent was directed to furnish details about the parent company and the rate of brokerage that was charged – According to the Assessing Officer, the brokerage charged by the respondent was only 0.05% which was found to be at a lower rate as compared to the prevalent rates in market – Assessing Officer, therefore, while computing the assessment made an addition of Rs.2,89,82,746/- under s.92 of the Act – Appellate Authority confirmed the addition made by the Assessing Officer – Tribunal set aside the findings rendered by the first two authorities and held that Transfer Pricing Adjustment made by the Assessing Officer was contrary to the mandatory instructions issued by CBDT in its Instruction No.3/2003 dated 20.05.2003 – The view so taken by the Tribunal was affirmed by the High Court – On appeal, held: In view of the guidelines issued by the CBDT in Instruction No.3/2003 the Tribunal was right in observing that by not making reference to the Transfer Pricing Officer (TPO), the Assessing Officer had breached the mandatory instructions issued by the CBDT – Matter remitted to the Assessing Officer for making appropriate reference to the TPO – CBDT’s Instruction No.3/2003.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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