In Bausch & Lomb India Pvt. Ltd v. ACIT, a division bench of the ITAT Delhi has ruled that the Dispute Resolution Panel ( DRP ) has the power to enhance the variations proposed in the draft order under the provisions of the Income Tax Act, 1961.
It also clarified that the DRP can also do all such things, which the authorities could have done but omitted to do.
In the instant case, the Transfer Pricing officer (TPO) did not propose any transfer pricing adjustment in his order in respect of intra group services. However, as required by the DRP, the TPO d the benchmarking analysis and propose transfer pricing adjustment w.r.t. intra group services in his order the TPO did not propose any transfer pricing adjustment in his order on account of intra group services. Later, the DRP, after due notice to the assessee and having entertained its objections, directed to make transfer pricing adjustment.
Aggrieved by the above action of the DRP, the assesse approached the appellate authorities by contending that the DRP has no such power to enhance the addition. Since the officer has overstepped his jurisdiction, the order may be held as invalid, they argued.
After analyzing section 144C (7) & (8) of the Income Tax Act, the bench noted that the DRP is empowered to exercise such power under the Act.
“The Explanation to this sub-section inserted retrospectively from 1.4.2000 clarifies that the power of the DRP to enhance the variation shall include the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was not raised by the assessee. When we consider the language of sub-section (8) in conjunction with the Explanation, it clearly emerges that the DRP has a power to enhance variations proposed in the draft order on an international transaction, even if it was not raised by the assessee. `Enhance the variations’ include not only increasing the amount of transfer pricing adjustment already proposed, but also making a new transfer pricing adjustment, which was omitted to be proposed/made by the AO/TPO. There is no doubt and cannot be that the power of the DRP is co-terminus with that of the AO/TPO.”
Read the Full Text of the Order Below
