The Delhi Bench of the Income-tax Appellate Tribunal in the case of: Nikon India Pvt. Ltd. v. DCIT (ITA No. 6314/Del/2015), held that Transfer Pricing Officers have the authority to determine the arm’s length price of any international transaction that comes to their attention whether or not such transactions are the subject of a referral from the Assessing Officer.
Instruction No 3/2016 (March 2016) contains guidance on the procedures that apply for transfer pricing adjustments, including rules that taxpayers must first be afforded an opportunity of being heard before an adjustment is made.
In that case, the Assessing Officer referred the taxpayer’s case to the Transfer Pricing Officer, but there was no reference made with regards to a specific arm’s length price. The Transfer Pricing Officer, however, determined the arm’s length price of an international transaction, and proposed a transfer pricing adjustment. The taxpayer challenged the authority of the Transfer Pricing Officer to act on an adjustment without first having a referral from the Assessing Officer.
Finally, the tribunal held that while the original authority of the Transfer Pricing Officer was limited to those international transactions as referred by the Assessing Officer, this authority may be extended to other international transactions that come to the attention or are noticed by the Transfer Pricing Officer during the course of review. The tribunal also replied that the guidance under Instruction No 3/2016 is applicable prospectively, and not retroactively.
