The High Court of Gujarat while refusing to interfere with the transfer pricing proceedings initiated against a Company, observed that there is prima facie material to show that the directors of the petitioner company held more than 20% of the shares in voting power in the Associate Enterprise and the aggregate of expenditure incurred by the petitioner to such company exceeded Rs. 5 crores. On this ground, there is nothing wrong in initiating transfer pricing proceedings against the assessee-company. The Court was considering a Special Leave Petion filed by the assessee company in the instant case.
The Petitioners in the instant case, M/s D.B. Corporation Ltd, is a company filed return and revised return for the relevant assessment year.During the course of scrutiny of assessment, the Assessing Officer referred the matter to the TPO. The assessee opposed to the same by alleging that there were no international transactions nor were there any specified domestic transaction within the meaning of Section 92BA of the Act during the relevant assessment year.
The Principal Commissioner has rejected the objections raised by the assessee by holding that “the assessee has entered into transactions which has exceed the limit of Rs. 5 crore and as such the assessee was required to obtain a report from an accountant as required u/s. 92E of the Act which the assessee failed to do. In view of the above and keeping in view the CBDT instruction No. 15/2015 dated 16/10/2015, the assessment referred to the TPO, Ahmedabad is inconformity with the provisions of Section 92BA of the Income Tax Act and 92E of the Income Tax Act and the objection raised by the assessee has no locus standi and the same is required to be rejected.”
The assessee approached the High Court against the notices and orders issue in connection with the above proceedings. While confirming the impugned notices and orders, the Court concluded that “As noted, in the present case, there is prima facie material suggesting that the directors of the petitioner company, in the aggregate, held more than 20% of the shares in voting power in Writers & Publishers Pvt. Ltd. The aggregate of expenditure incurred by the petitioner to such company exceeded Rs. 5 crores. Under the circumstances, we would allow the transfer pricing procedure to carry on further without interjecting at this intermediary stage. The legal contention of the petitioner that in the report of the Assessing Officer dated 08.03.2016, the basis of Section 40A(2)(b) was not taken and therefore, now cannot be raised versus the Revenue’s contention, that if on admitted facts on the strength of correct statutory provisions the exercise of powers can be saved the order should not be quashed, are kept open.”
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