Veer Gems v. ACIT (2013) 351 ITR 35(Guj.) (High Court)

S.92CA: Avoidance of tax-Transfer pricing-Arm's length price-Powers-Reference to Transfer Pricing Officer

valid-Assessing Officer need not consider objections of assessee-The Transfer Pricing Officeris not called

upon to and is not competent to decide the issue which is sole jurisdiction of the Assessing Officer. (S.144C)

The assessee is engaged in the business of purchasing rough diamonds, manufacturing of polished diamonds and

sale/export of such polished diamonds. During the assessment proceedings for the assessment year 2008-09, the

Assessing Officer issued a notice under section 142 stating that on a perusal of the assessment records for the

assessment year 2007-08, it was observed that the assessee had filed an audit report in the prescribed form as required under section 92E of the Act as there were international transactions with an associated concern, BG. The assessment proceedings for the assessment year 2007-08 were in progress. The audit report showed that during the previous year relevant to the assessment year 2008-09, the assessee had international transactions with the associated concern amounting to Rs. 78.63 crores. However, the record did not show that the assessee had filed the audit report under section 92E of the Act in the prescribed form. There was correspondence between the assessee and the Assessing Officer. The Assessing Officer referred the matter to the Transfer Pricing Officer. On a writ petition challenging the reference to the Transfer Pricing Officer and also the notice from the Transfer Pricing Officer,the Court dismissing the petition, held that,admittedly, between the assessee and the associated enterprise there was an international transaction in the preceding year and the assessee had admittedly filed a report under section 92E of the Act. In the current year also the assessee had entered into transactions worth Rs. 78.63 crores. In the affidavit-in-reply it was further stated that the assessee had made substantial purchases from the associated enterprise. The partners of the assessee were three brothers and their wives/sons together holding the entire partnership stake. The fourth brother along with his wife and his son controlled the entire shareholding of the associated enterprise, the fourth brother and his son being directors of the assessee. It was clear that both the entities were being controlled by the same family of four brothers and their close relatives. It was clear that the associated concern was closely related with the assessee and fell within the parameters of section 92A(2) (j), (k) and (m). Therefore, it was not necessary or appropriate to judge, in the present petition, whether there was any international transaction between the assessee and the associated enterprise during the previous year relevant to the assessment year 2008-09 and such issue must be left to be judged by the competent authority while framing the final assessment. (A.Y. 2008-2009)