Facts
The assessee, Mitsui O.S.K. Lines Maritime (India) Pvt. Ltd., is in the business of ship management and rendered recruitment and manning services to its Associated Enterprises („AEs‟). During the Assessment Year (AY) 2003-04, the assesse entered into number of international transactions with its AEs. Accordingly, the AO referred the transactions to the Transfer Pricing Officer (TPO).
During the course of Transfer Pricing assessment, the TPO made an adjustment of Rs. 1.41 crores to the assessee‟s transaction with its AEs relating to provision of recruiting and manning services by excluding continuously loss-making companies from the comparables‟ considered by the assessee. The said adjustment was confirmed by the AO. Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) [CIT (A)]. The CIT (A) ruled in favour of the assessee and deleted the entire Transfer Pricing adjustment.
The order of the CIT (A) was challenged by the revenue before the ITAT. In its order, the ITAT did not make any observations on the appropriateness of the assessee‟s comparables or the material furnished by the assessee and restored the matter back to the AO for fresh consideration, with a direction to give sufficient opportunity to the assessee to file fresh comparables of the financial year (FY) 2002-03 and make out assessee‟s case properly and place all relevant facts before the tax authorities so that proper arm‟s length price (ALP) can be determined in accordance with the law.
Against the order passed by the ITAT, the assessee proceeded for an appeal before the HC.
Question of law before the HC
Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in setting aside the order of the CIT (A) and remanding the matter back to the AO for fresh adjudication?
Observations and Ruling of the HC
Referring to the order of the ITAT, the HC observed that the ITAT did not state that the material, including the comparables, furnished by the assessee was inadequate and the department also did not contend that the comparable were inadequate. Further, the HC observed that the order of the ITAT fairly permits the assessee an opportunity of filing fresh comparable for FY 2002-03 in order to enable the assessee to make out its case properly. Further, that the assessee was willing to proceed before the ITAT on the basis of the existing material including the comparable already furnished. It states that assessee did not wish to furnish any further material. In that event no purpose would be served by remanding the matter to the AO or for that matter, even before the CIT (A) for a fresh decision on the existing material. Further, the HC observed that the ITAT had not held that it was not possible to arrive at the ALP based on the existing material.
Accordingly, the HC set aside the impugned ITAT order and directed the ITAT to decide the matter based on the existing material. While passing its order, the HC also clarified that the power of the ITAT, in all respects, is kept open and that the statement on behalf of the assessee does not affect the same.
Thus, the HC allowed the assessee‟s appeal and directed the ITAT to decide the matter based on existing material.
Conclusion
This ruling of the HC signifies that the ITAT should decide the case based on available material and on merits, before remanding the matter back to the AO.
Source: Mitsui O.S.K. Lines Maritime (India) Pvt. Ltd [TS-518-HC-2012(BOM)]
The assessee, Mitsui O.S.K. Lines Maritime (India) Pvt. Ltd., is in the business of ship management and rendered recruitment and manning services to its Associated Enterprises („AEs‟). During the Assessment Year (AY) 2003-04, the assesse entered into number of international transactions with its AEs. Accordingly, the AO referred the transactions to the Transfer Pricing Officer (TPO).
During the course of Transfer Pricing assessment, the TPO made an adjustment of Rs. 1.41 crores to the assessee‟s transaction with its AEs relating to provision of recruiting and manning services by excluding continuously loss-making companies from the comparables‟ considered by the assessee. The said adjustment was confirmed by the AO. Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) [CIT (A)]. The CIT (A) ruled in favour of the assessee and deleted the entire Transfer Pricing adjustment.
The order of the CIT (A) was challenged by the revenue before the ITAT. In its order, the ITAT did not make any observations on the appropriateness of the assessee‟s comparables or the material furnished by the assessee and restored the matter back to the AO for fresh consideration, with a direction to give sufficient opportunity to the assessee to file fresh comparables of the financial year (FY) 2002-03 and make out assessee‟s case properly and place all relevant facts before the tax authorities so that proper arm‟s length price (ALP) can be determined in accordance with the law.
Against the order passed by the ITAT, the assessee proceeded for an appeal before the HC.
Question of law before the HC
Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in setting aside the order of the CIT (A) and remanding the matter back to the AO for fresh adjudication?
Observations and Ruling of the HC
Referring to the order of the ITAT, the HC observed that the ITAT did not state that the material, including the comparables, furnished by the assessee was inadequate and the department also did not contend that the comparable were inadequate. Further, the HC observed that the order of the ITAT fairly permits the assessee an opportunity of filing fresh comparable for FY 2002-03 in order to enable the assessee to make out its case properly. Further, that the assessee was willing to proceed before the ITAT on the basis of the existing material including the comparable already furnished. It states that assessee did not wish to furnish any further material. In that event no purpose would be served by remanding the matter to the AO or for that matter, even before the CIT (A) for a fresh decision on the existing material. Further, the HC observed that the ITAT had not held that it was not possible to arrive at the ALP based on the existing material.
Accordingly, the HC set aside the impugned ITAT order and directed the ITAT to decide the matter based on the existing material. While passing its order, the HC also clarified that the power of the ITAT, in all respects, is kept open and that the statement on behalf of the assessee does not affect the same.
Thus, the HC allowed the assessee‟s appeal and directed the ITAT to decide the matter based on existing material.
Conclusion
This ruling of the HC signifies that the ITAT should decide the case based on available material and on merits, before remanding the matter back to the AO.
Source: Mitsui O.S.K. Lines Maritime (India) Pvt. Ltd [TS-518-HC-2012(BOM)]
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