The relevance of authentic documents and the significance of price publications in determining the Arms Length Price.

AKIL KURESHI, J.

1. Revenue is in appeal against the judgment of the Incometax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’) dated June 21, 2013, raising the following questions for our consideration :

“A. Whether the Appellate Tribunal has substantially erred in restricting the disallowance u/s 14A of Rs.75,360/to Rs.7,536/overlooking the facts that the assessee had earned exempt income, had made investment of Rs.2.01 crores and had claimed administrative and other expenses of Rs.72.13 crores ?

B. Whether the Appellate Tribunal has substantially erred in deleting the addition of Rs.58,48,771/made u/s.92CA(3) of the Act ?

C. Whether the Appellate Tribunal is right in considering the quotation of Malaysian oil price from 'Oil World' which is an independent agency of Germany engaged in providing forecasting services for the purpose of deciding the Arms Length Price (ALP) of Malaysian palm oil ?

D. Whether the Appellate Tribunal is right in overlooking the fact that MPOB is a Govt. Nodal agency for Malaysia palm oil and hence the quotation obtained from this agency does not require further adjustment ?

2. Question A pertains to disallowance which was restricted by the Tribunal, however, looking to the smallness of the sum involved, we are not inclined to consider the same without entering into the legal aspects sought to be raised by the Revenue.

3. Questions B to D pertain to computation of Arms Length Price. The Transfer Pricing Officer (hereinafter referred to as ‘the TPO’) adopted Comparable Uncontrolled Prices (CUP) method. In the process, the assessee had presented two sets of prices claiming them to be comparable. One set of transactions relied on by the assessee was supplied by Malaysian Palm Oil Board (hereinafter referred to as 'the MPOB'). Simultaneously, the assessee also relied on the quotations by one Oil World, an organisation based in Germany. The assessee adopted the average of two sets of prices and claimed that the price variance between the assessee's transaction and the average of two sets of prices did not exceed 5% and, therefore, no additions were necessary. The TPO, however, took into account only the rates mentioned by the MPOB and totally discarded the rates quoted by the German organisation. He, therefore, rejected the arithmetic mean of two sets of the prices in order to determine the Arms Length Price. This was on the basis of mainly two objections of his. One was that the MPOB was a Government Nodal Agency for Palm Oil Industry in Malaysia, whereas the quotations of Oil World did not have any statutory authority. The second objection was that Oil World was an independent organisation registered in Germany and had nothing to do with the oil prices prevailing in Malaysia. He relied on Rule 10D)(3)(a) of the Incometax Rules (hereinafter referred to as 'the Rules'), to place heavy reliance on the price list of the MPOB.

4. The assessee carried the matter in appeal. The Commissioner of Incometax (CIT) (Appeals) discarded both the objections of the TPO. Referring to section 92C of the Incometax Act, 1961 (hereinafter referred to as 'the Act') and Rule 10(D)(3) of the Rules, he found that the quotations of the Oil World could not have been discarded. He observed as under :

“4.4 I have also gone through the few publications of Oil World which is independent organization established in 1958 in Germany. This provides the independent forecasting services for oil seeds, oils and means and providing primary information and professional analysis. The oil world compiles information of various countries in the oil sector. This publishes daily, monthly and yearly journals in oil sector. This compiles information of various countries and, therefore, is broad based data base. The quotation adopted by the appellant from Oil World is for Malaysia and not for Germany. Therefore, it is an authentic independent trade quotations and is duly covered under the various documents which has been listed in