The Gujarat High Court ruled that in absence of any income issue of applying a measure of Arm’s Length Price (ALP) to transactional value itself would not arise.
The writ applicant, Hitachi Hi Rel Power Electronics challenged the reference made by the respondent authority under Section 92CA (1) of the Income Tax Act, in relation to the computation of Arm’s Length Price on the ground of being erroneous, illegal, and contrary to law. The writ applicant further challenged the notice under Sections 92CA(2) and 92D(3) respectively on the ground of being erroneous, illegal, contrary to law, and without jurisdiction.
Mr. B. S. Soparkar, the counsel appearing for the writ applicant vehemently submitted that the applicant was not given an opportunity of hearing by the AO before disposing of the objections and making a reference to the T.P.O. for the determination of the ALP.
Mr. Soparkar submitted that the applicant has truly and fully furnished all the necessary details of payment of interest on the loan in column No.14, which has an impact on the income. He argued that as such, there is no clause in the entire Form 3CEB wherein his client is obliged to declare the transaction of loan and determine the Arm’s Length Price and therefore, the disclosure made by his client insofar as the transaction that has an impact on the income should be construed as full and true.
The division bench of Justice J.B. Pardiwala and Ilesh J. Vora allowed the present writ application and quashed the impugned reference and the notice. The proceedings are remitted to the A.O. for fresh consideration of the matter and the issues as discussed in the present order. The A.O. shall give an opportunity of hearing to the assessee and thereafter, proceed to pass a reasoned order or a speaking order dealing with the objections in accordance with law.
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