M/S.hyundai Motor India Ltd Rep By Authorized Signatory T.saravanan P.no.h-1 Sipcot Industrial Park Irrungattukottai Sriperumbudur Taluk Kanchipuram - 602 117 v. The Secretary Income Tax Department Dispute Resolution Panel-2 7Th Floor Income Tax Office Bmtc Building 80 Feet Road Koramangala Bangalore

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.10.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE M.S.RAMESH W.A.No.1344 of 2017 against W.P.No.2088 of 2017 M/s.Hyundai Motor India Ltd Rep by Authorized Signatory T.Saravanan P.No.H-1 SIPCOT Industrial Park Irrungattukottai Sriperumbudur Taluk Kanchipuram - 602 117 ...Appellant Vs 1 The Secretary Income Tax Department Dispute Resolution Panel-2 7th Floor Income Tax Office BMTC Building 80 feet road Koramangala Bangalore 2 Joint Commissioner of Income-Tax Transfer Pricing officer 2(I/c) Room No.320 III Floor Main Building No. 121 M.G.Road Nungambakkam Chennai-600034 3 Deputy Commissioner of Income-Tax Large Taxpayer Unit-II 1775 Jawaharlal Nehru Inner Ring Road Anna Nagar Western Extn. Chennai-600101 ...respondents Appeal filed under Clause 15 of the Letters Patent againstthe order in WP No. 2088/2017 dated 20/10/2017 petition filedunder Article 226 of the Constitution of India to issue a writof Certiorari calling for the records comprised in the impugnedorder bearing file No.116/DRP-2/BLR/2016-19 dated 13, 2016 madeunder Section 144c(5) of the Income Tax Act, 1961 for theAssessment year 2012-13 on the file of the first respondent andquash the same. For Appellant :Mr.Sathish Parasaran, Senior counsel,for Mr.K.MageshFor respondents :Ms.Hema Muralikrishnan,Senior Standing Counsel JUDGMENT (Delivered by DR.VINEET KOTHARI, J.) This Writ Appeal is directed against the order of thelearned Single Judge dated 20.10.2017, dismissing the WritPetition of the Appellant herein M/s.Hyndai Motors India Ltd.,as premature, which was directed against the order of theDispute Resolution Panel (“DRP”, for short) dated 13 December2016, for the Assessment Year 2012-13. 2. The DRP had made certain directions for the guidance ofthe Transfer Pricing Officer (TPO) under section 144C(5) of theAct, which are binding on the TPO who makes the TP adjustmentsin the assessment relating to international transactions underthe Chapter X of the Income Tax Act, especially enacted forthese purposes. 3. The learned Single Judge has dismissed the Writ Petitionas premature finding that against the order of the learned TPOwhen passed in consequence of the directions given by the DRP,there is an appeal remedy available to the Assessee before thelearned Tribunal and therefore, the questions of facts coupledwith the questions of law sought to be raised before the DRP andbefore this court under the Writ Jurisdiction, can be firstagitated before the learned Tribunal as well. Thereafter, theAssessee has further remedy by way of appeal to this court onthe substantial questions of law arising from the order of theTribunal under section 260A of the Income Tax Act. The relevantobservations of the learned Single Judge in the impugned orderdated 20 October 2017 are quoted below for ready reference:-16. It is to be noted that though thepetitioner has challenged the directionsissued by the DRP in its entiretyMr.N.Venkatraman, confined his submissionsonly with regard to the enhancement made byDRP, and the assessee will challenge theother findings once the assessment iscomplete. Thus, it has to be seen whetherthe DRP has recorded any factual findingswhile disagreeing with the TPO with regardto computing quantum of adjustment. Thefinding recorded by the DRP in this regardis contained in paragraph 18.1, which is asfollows:- "The argument of the assesseecould have some force if the datain relation to profits earned byassessee in relation to costspertainingtointernational "The argument of the assesseecould have some force if the datain relation to profits earned byassessee in relation to costspertainingtointernational transactionswereavailable.However, this is not so. Theassessee is selling a product, forthe manufacture of which, partpurchases are from AEs andremaining from the non-AEs. Whenthe product is sold only overallprofit margin is recorded withoutany data as to what would be theprofit in relation to purchasesfrom AE. But it cannot bepresumedthattheprofitpercentage earned in relation tocosts related to internationaltransactions as well as non-internationaltransactionwassame. So it is always possiblethat the margin of profit on costsrelatedtointernationaltransaction is not the same asprofit margin on costs related tonon-international transactions butultimately overall profit marginis being shown." 17. After recording the above finding,the DRP has adopted a hypothesis with regardto an assessee having internationaltransactions and how the arms length priceneeds to be determined. The case of thehypothetical assessee is dismissed inparagraphs 18.2, 18.3 and 18.4 of theimpugned directions. After the abovediscussions, on facts the DRP has recordedas hereunder:- "18.5.........Any impact onthe basis of calculation of ALP byMAM (here TNMM) has to beconsidered as adjustment underSection 92CA and the same cannotbe proportionately reduced byconsidering that a part of thepurchases was from non-AE also.Whatever is the reduction in themargin of the assessee vis a viscomparables is on account ofinflated purchases from AE and thesame gets considered when ALP iscalculated by applying TNMM. Asregards assessee's reliance on Judicial decisions, the abovefactual matrix was not brought tothe knowledge of Hon'ble JudicialAuthorities and so those decisionscannot be applied to the case ofthe assessee. The AO/TPO is,therefore, directed to effectadjustment without restricting thesame to the proportion ofinternational transaction to thetotal operating cost."18. Therefore, it would be too farfetched plea on the part of the petitionerto state that sans facts, the decision inMobis, and other cases, (Firestone, Il JinElectronics etc) should be applied and thefinding with regard to the adjustment of theALP should be set aside, is a proposition,which cannot be acceded to. The DRP whileissuing directions has directed adjustmentby examining the facts. This direction isrequired to be implemented by the AssessingOfficer after which it ripens into anassessment order open to challenge in termsof the provision of the Act. This appears tobe precisely the reason for terming theimpugned order as a direction under Section144C (5) of the Act and it ripens into anorder on being given effect to by theAssessing Officer. Therefore, I am convincedthatthedecisionscitedbyMr.N.Venkatraman, cannot be applied, at thisjuncture, as the factual position requiresto be considered, which obviously cannot bedone in a Writ Petition and therefore, theimpugned direction issued by the DRP has tobe given effect to and the third respondenthas to pass an order of assessment, whichcan be questioned by the petitioner byfiling an appeal before the Tribunal. 19. For all the above reasons, the WritPetition is dismissed with direction to thethird respondent to give effect to thedirections issued by the DRP, dated13.12.2016, by passing an assessment order,after which, it is open to the petitioner tochallenge the same before the Tribunal. Allcontentions are left open. No costs.Consequently,connectedMiscellaneousPetition is closed. 4. The learned Senior Counsel Mr.Satish Parasaran was atpains to emphasize before us that the learned DRP in itsimpugned order dated 13.12.2016 has disregarded the judgments ofthe other High Courts on the question that TP adjustments can bemade only with regard to international transactions which hadtaken place with the Associated Enterprises and not the domestictransactions and therefore, the international transactions withthe Associated Enterprises cannot be allowed to bear the bruntof the profit adjustments in the domestic transactions and thus,this question of law has wrongly been decided by the learnedDRP, which order is however binding on the Assessing Officer asper the provisions of Section 144C(5) of the Act and thereforeon the said question of law alone, it was argued before thelearned Single Judge as well as before us, that this Court mayinterfere with the impugned order by exercising the power underthe Writ Jurisdiction. For other questions of fact, the Assesseemay be allowed to go to the fact finding bodies, including theTribunal and therefore, to that extent, the learned Single Judgehas erred in dismissing the Writ Petition as premature and thesame deserves to be interfered with by this court in the presentintra court appeal. 5. On the other hand, the learned Counsel for the Revenue,Ms.Hema Muralikrishnan supported the impugned order andsubmitted that the mixed questions of facts and law can beagitated by the Assessee even before the Tribunal even thoughthe order to be passed by the Assessing Officer is a mereconsequence, in pursuance of the binding directions of the DRP,which comprises of three higher level officers of theDepartment, and that mechanism has been created in the Act tocut short the process of assessment and for applying theguidance of higher committee in the form of DRP by the TPO, lestthe individual officers may take different individual views ofthe matter. He submitted that Writ Jurisdiction in such casesshould not be allowed to be invoked by the Assessees at thispremature stage and the learned Single Judge was right indismissing the Writ Petition as premature. 6. To allay the unfounded fears of the Assessee, she hasfurther drawn our attention to the Affidavit filed by the thirdRespondent viz., the Assistant Commissioner of Income Tax, LargeTax Payer Unit II, Chennai, Dr.S.R.Nedumaran. In paragraph 3 ofhis Affidavit, it is clearly stated that no adjustments inrespect of domestic or third party transaction shall be made bythe Transfer Pricing Officer or Dispute Resolution Panel.Paragraph 3 of the said Affidavit is quoted below for readyreference:- “3. In any event, notwithstanding theabove and without prejudice it is submittedthat there is no adjustment made in respectof domestic or third party transactions bythe Transfer Pricing Officer or DisputeResolution Panel. The adjustments maderelate to International transactions only.Hence, there is no basis to raise a questionof law. The chart filed by the appellant atpage 32 of the typed set of papers is hisunderstanding/ interpretation of the orderof the DRP. It is submitted that noadjustmentsweremadetodomestictransaction and hence the case laws quotedby the appellant have no relevance to thefacts of the case.” “3. In any event, notwithstanding theabove and without prejudice it is submittedthat there is no adjustment made in respectof domestic or third party transactions bythe Transfer Pricing Officer or DisputeResolution Panel. The adjustments maderelate to International transactions only.Hence, there is no basis to raise a questionof law. The chart filed by the appellant atpage 32 of the typed set of papers is hisunderstanding/ interpretation of the orderof the DRP. It is submitted that noadjustmentsweremadetodomestictransaction and hence the case laws quotedby the appellant have no relevance to thefacts of the case.” 7. Accordingly, the learned Counsel for the Revenue hassubmitted that the apprehension of the Appellant/Assessee in thepresent case that there will be a mix up of domestictransactions and TP Adjustments can be made only forinternational transaction is unfounded, as the Department isvery clear in its approach and TP Adjustments which can be madeonly to the international transactions covered by the definitiongiven in Section 92B in the Chapter X, by the RevenueAuthorities. Therefore she submitted that the Assessee mayapproach the learned Assessing Officer and if it is aggrieved bythe order passed by the Assessing Officer, they have a furtherremedy of appeal before the learned Tribunal and then furtherappeal on substantial questions of law before the High Courtunder Section 260A of the Act. 8. Having heard the learned Counsel for the parties, we areof the opinion that the present Writ Appeal deserves to bedismissed as there is no merit. We cannot appreciate thearguments of the learned Senior Counsel for the Assessee that onthe question of law, the DRP has disregarded the case laws ofother High Courts. A mere discussion of such case laws but notapplying to the facts cannot be said to be any disregard to thelaw laid down by the other High Courts in this respect. Wecannot accept the submission of the learned Counsel further onthe ground that merely because the order of the DRP may bebinding on the Assessing Officer, against whose order, theappeal can be filed only before the learned Tribunal, a shortcutcould be provided to the Assessee in such cases to invoke theWrit Jurisdiction, which itself has three tiers of remedies;before the High Court, two tiers, viz., the learned Single Judgedealing with the Writ Petition and the intra-Court Writ Appealbefore Division Bench and then if the matter is taken up to theHon'ble Supreme Court by way of Special Leave Petition under Article 136 of the Constitution of India. If the matter isdragged through in these three tiers, it would be impossible forthe orders of the DRP to be executed by the Assessing Officerand the Tribunal to apply its mind to the factual aspects of thematter for a long period. It is needless to say that even thequestions of law which are coupled or mixed with the findings offact can be raised and argued before the concerned authoritiesbelow, including the TPO and before the learned Tribunal. Such adigression from the normal channel of the remedies provided inthe Act in the said Chapter, need not be cut short by allowingthe Assessee to invoke the Writ Jurisdiction in such cases. 9. In our considered opinion, this digression is selfdefeating and defeats the very purpose of quicker assessmentssought to be achieved in the special law relating tointernational transactions envisaged in the Chapter X of theIncome Tax Act provided for assessment of internationaltransactions, so that an image of balanced approach by ITauthorities can be projected on the international horizons. Manyother developed countries provide for such quicker management oftax dispute resolution. 9. In our considered opinion, this digression is selfdefeating and defeats the very purpose of quicker assessmentssought to be achieved in the special law relating tointernational transactions envisaged in the Chapter X of theIncome Tax Act provided for assessment of internationaltransactions, so that an image of balanced approach by ITauthorities can be projected on the international horizons. Manyother developed countries provide for such quicker management oftax dispute resolution. 10. In view of the undertaking given by the Respondents inparagraph 3 of the Affidavit of the Assistant Commissioner thatthey are going to apply for TP Adjustments only to internationaltransactions, even the aforesaid unfounded apprehension of theAssessee is not justified. 11. The learned Counsel for the Assessee also wanted totake us through the charts of the factual scenario which willobtain, if the directions of the DRP are implemented by theAssessing Officer for which he is bound. We are not inclined togo into the exercise of facts and figures at this stage at all,lest it affects the lower authorities in any manner andprejudices the case of either the Assessee or the Revenue. Aregular appeal on substantial question of law, under Section260A of the Act is provided in the Income Tax Act, 1961 and onthose questions of law, if at all they would arise from theorder of the learned Tribunal, the Assessee has a remedy evenbefore this Court, and later before the Hon'ble Supreme Court onregular appeal. 12. This stream lined procedure, provided under the Actshould not normally be allowed to be breached in such caseswhere a deeper analysis of facts has to be done by theauthorities under the Act up to the Tribunal and a factualexercise has to be undertaken by them with regard tocomparables, TP Adjustments and methods for making TPadjustments as prescribed in Rule 10B and Section 92C of theAct. Prematurely pronouncing on these issues, definitely curtails the discretion of the Assessing Authorities in thisregard and as we have said above, it is a self defeatingexercise, which the High Court in its Writ Jurisdiction shouldbe reluctant to undertake. 13. Therefore we are not inclined to interfere with theorder of the learned Single Judge and leaving it free for theAssessee to raise all the objections before the learnedAssessing Officer and then before the learned Tribunal in themanner provided under law. 14. The present Writ Appeal is therefore liable to bedismissed and the same is accordingly dismissed. No costs.Consequently, CMP Nos.18592 and 20114 of 2017 are also closed. Sd/- Assistant Registrar //True Copy// To Sub Assistant Registrar 1 The Secretary Income Tax Department Dispute Resolution Panel-2 7th Floor Income Tax Office BMTC Building 80 feet road Koramangala Bangalore 2 Joint Commissioner of Income-Tax Transfer Pricing officer 2(I/c) Room No.320 III Floor Main Building No. 121 M.G.Road Nungambakkam Chennai-600034 3 Deputy Commissioner of Income-Tax Large Taxpayer Unit-II 1775 Jawaharlal Nehru Inner Ring Road Anna Nagar Western Extn. Chennai-600101 +1cc to M/s.Hema Muralikrishnan, Advocate in SR.NO..32869 MP(CO)RV(03/11/2020)