Exclusion inclusion of comparables to determine Arm’s Length Price (ALP) not necessarily give rise to purely legal or substantial questions of law – High Court
ABCAUS Case Law Citation:
ABCAUS 2556 (2018) (10) HC
Important Case Laws Cited/relied upon by the parties:
Principal Commissioner of Income Tax v/s Barclays Technology Centre India Private Limited
In the instant case, the Revenue had challenged the order of the Income Tax Appellate Tribunal (Tribunal / ITAT ).
The assessee company was providing support to a USA based establishment which is in the business of software development. The assessment was completed under Section 143 (3) read with Section 144 C(1) of the Income Tax Act, 1961 (the Act). It was stated that the transaction is covered by Section 92 CA(3) of the Act. The Transfer Pricing Officer (TPO) did not accept the benchmarking of international transactions done by the assessee with its associated enterprise and made an upward adjustment which was added to the total income after the receipt u/s 144C of the Act.
Upon receipt of the Transfer Pricing Officer’s draft order, the assessee approached the dispute resolution panel (DRP). The dispute resolution panel made an order based on which the impugned assessment was made.
The aggrieved Assessee approached the Tribunal and argued that in its own case similar questions have been dealt with and the facts are no different for the assessment year under consideration.
The Tribunal following its own order for the prior assessment year, reversed the view of the Assessing Officer. Thus, the Tribunal came to the conclusion that the activities on account of the Infrastructure Management Services and E-learning and Digital Consulting were IT enabled services. These were not akin to software design and development services being rendered by the Assessee and therefore benchmarking was improper. Thus, comparables relied upon by the Transfer Pricing Officer were thus not comparable at all.
The Hon’ble High Court opined that there no substantial question of law was resulting from such an exercise.
The Hon’ble High Court observed that a Division Bench of the Court had an occasion to consider somewhat similar questions and it found that the Tribunal’s view deserved to be upheld. In upholding that view, it found that these were essentially matters of fact.
The High Court expressed surprised as to why the Revenue brings such Appeals to this court and regularly.
The Hon’ble High Court opined that the Courts in India seem to be taking a view that the Revenue has routinely brought such matters before this Court knowing fully well that the Transfer Pricing particularly with regard to exclusion and inclusion of certain comparables to determine Arm’s Length Price (ALP) would not necessarily give rise to purely legal questions or substantial questions of law.
The appeal was dismissed as not raising any substantial questions of law.
