Facts of the Case

Amadeus India Pvt. Ltd., incorporated as a joint venture between Radha Bhatia & family (95% shares) and German Travel Services (5%), was engaged in providing data processing and software services to associated enterprises across India, Bangladesh, and Nepal. During the assessment year 2006-07, the assessee reported international transactions under Form 3CEB.

The Assessing Officer referred certain transactions to the Transfer Pricing Officer (TPO) under Section 92CA(1) after prior approval from the Commissioner. The TPO adjusted `32,92,83,589/- to account for differences in arm’s length price, including Advertisement, Marketing, and Promotion (AMP) expenses, which were initially not referred to him.

Issues Involved

  1. Whether the Transfer Pricing Officer (TPO) could suo moto determine the arm’s length price for international transactions not specifically referred by the Assessing Officer under Section 92CA(1).
  2. Scope of TPO jurisdiction pre-amendment of Section 92CA(2A) (Finance Act 2011).
  3. Legality of adjustment of AMP expenses as international transactions.

Petitioner’s Arguments (Commissioner of Income Tax)

  • A reference to the TPO includes the entire gamut of transactions with associated enterprises.
  • Section 92CA should not be read restrictively; the TPO can determine arm’s length price for all international transactions.
  • The TPO can consider AMP expenditure while computing arm’s length price once a reference is made.

Respondent’s Arguments (Amadeus India Pvt. Ltd.)

  • TPO’s role is limited to transactions specifically referred by the Assessing Officer.
  • AMP expenditure was a domestic transaction and not reported in Form 3CEB; TPO had no jurisdiction.
  • Section 92CA(2A) empowering TPO to consider other transactions is prospective (from 01.06.2011) and not applicable to assessment year 2006-07.
  • Reliance on CBDT Instruction No.3/2003 and previous case laws: Sony India Pvt. Ltd v. CBDT (2007) 288 ITR 52 (Delhi) and Veer Gems v. ACIT, Gujarat HC.

Court Order / Findings

  1. The TPO cannot suo moto take cognizance of international transactions not referred by the Assessing Officer.
  2. AMP expenditure not referred in Form 3CEB was beyond the jurisdiction of the TPO.
  3. Section 92CA(2A) introduced by Finance Act 2011 expands TPO jurisdiction but applies prospectively; it does not affect AY 2006-07.
  4. The Revenue’s appeal was dismissed; the Tribunal correctly held TPO’s limited role.

Conclusion: The Assessing Officer is primarily responsible for determining whether a transaction qualifies as international and may refer specific transactions to TPO. The TPO can only compute arm’s length price for transactions explicitly referred.

Important Clarification

  • TPO’s jurisdiction is transaction-specific and enterprise-specific per Section 92CA(1) and CBDT instructions.
  • Prospective application of Section 92CA(2A) confirmed by comparison to Supreme Court rulings (STO v. Oriental Coal Corporation (1988) SCC Suppl. 308, Bharat Singh v. Management of New Delhi Tuberculosis Centre (1986) 2 SCC 614).
  • Form 3CEB is the primary source for reporting international transactions to TPO.

Link to download the order:https://delhihighcourt.nic.in/app/case_number_pdf/2011:DHC:6027-DB/BDA28112011ITA9382011.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.