2016 (4) TMI 1136 - HC - Income Tax

High Court affirms Tribunal's decision on comparables for tax assessment.

The High Court upheld the Tribunal's decision to consider Capital Trust Limited as a comparable despite being a loss-making unit, based on the finding ... Transfer pricing adjustment - selection of comparable - Held that:- As only persistently loss making unit cannot be said as comparable. In this case, the impugned order holds on facts that Capital Trust Ltd. it is not a persistent loss making unit. Therefore, Capital Trust Ltd. is comparable only persistently loss making unit cannot be said as comparable. In this case, the impugned order holds on facts that Capital Trust Ltd. it is not a persistent loss making unit. Therefore, Capital Trust Ltd. is comparable Spanco was essentially involved in activities with regard to Telecom and providing call center services while the Respondent-Assessee was providing financial services. Thus, as the activities of Spanco and Respondent-Assessee are functionally different, they are not comparable Tribunal in the impugned order adopted the same comparable it had adopted in the case of M/s. Carlyle India (2013 (4) TMI 486 - BOMBAY HIGH COURT ) for the purpose of arriving at the ALP in respect of its International Transaction. No substantial question of law arises in this case. Issues:1. Whether the Tribunal was justified in considering partly irrelevant material and accepting Capital Trust Limited as a comparableRs.2. Whether the Tribunal was justified in rejecting Spanco Telesystems and Solutions Ltd. as a comparableRs.3. Whether the Tribunal was justified in relying upon the decision of the coordinate bench in the case of Carlyle India Advisors Pvt. Ltd.Rs.Issue 1 - Capital Trust Limited as a Comparable:The Respondent-Assessee argued that Capital Trust Limited should be considered as a comparable for determining the Arms Length Price (ALP) despite being a loss-making unit. The Tribunal found that Capital Trust Ltd. was not persistently loss-making and hence could be considered as comparable. The Tribunal's decision aligned with a previous order regarding persistently loss-making units not being automatically excluded as comparables. Consequently, the Tribunal's view was deemed reasonable, and the issue did not raise a substantial question of law.Issue 2 - Spanco Telesystems and Solutions Ltd. as a Comparable:The Respondent-Assessee contested the inclusion of Spanco Telesystems and Solutions Ltd. as a comparable for Business Support Services, citing functional differences between Spanco's telecom activities and the financial services provided by the Respondent. The Tribunal agreed with this argument and removed Spanco from the list of comparables. As the Tribunal's decision was based on factual dissimilarities in business activities, the issue did not give rise to a substantial question of law.Issue 3 - Relying on Carlyle India Advisors Pvt. Ltd.:During the Assessment Year, the Respondent provided various services, including Broking Services and Investment advisory services. The Tribunal adopted the same comparables as in the Carlyle India Advisors Pvt. Ltd. case for determining the ALP. This decision was supported by the Tribunal's previous ruling and a similar case involving General Atlantic Pvt. Ltd. The Court refused to interfere with the Tribunal's decision, as the comparables used were appropriate for the services provided by the Respondent. Consequently, this issue did not present a substantial question of law.In conclusion, the High Court dismissed the appeal, stating that no substantial questions of law were raised in the issues presented. No costs were awarded in the matter.