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Delhi High Court Dismisses Appeal on Transfer Pricing Exclusions and Foreign Exchange Treatment The High Court of Delhi dismissed the appeal as no substantial questions of law arose from excluding comparables M/s Infosys Ltd. and M/s. Persistent ...
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Delhi High Court Dismisses Appeal on Transfer Pricing Exclusions and Foreign Exchange Treatment
The High Court of Delhi dismissed the appeal as no substantial questions of law arose from excluding comparables M/s Infosys Ltd. and M/s. Persistent Systems Ltd., and from the treatment of foreign exchange gain or loss in transfer pricing determination of ALP. The court's decision was based on the significant differences in activities and intangibles ownership, as well as the inappropriate reliance on a Safe Harbour Notification.
Issues: 1. Exclusion of comparables M/s Infosys Ltd. and M/s. Persistent Systems Ltd. 2. Treatment of foreign exchange gain or loss in transfer price determination of ALP.
Analysis:
Exclusion of Comparables: The revenue in this appeal raised the issue of excluding two comparables, M/s Infosys Ltd. and M/s. Persistent Systems Ltd. The appellant argued that M/s Infosys Ltd. is engaged in activities not carried out by the assessee, such as substantial revenues from onsite software financial development and ownership of brand intangibles. It was highlighted that M/s Persistent Systems Ltd. data could not have been included based on previous orders and the similarity between the assessee and Cashedge India group. The court found that no substantial question of law arose regarding the exclusion of these comparables, as the differences in activities and ownership of intangibles were significant.
Treatment of Foreign Exchange Gain or Loss: Regarding the treatment of foreign exchange gain or loss in transfer pricing, the ITAT held that relying on the Safe Harbour Notification dated 18.09.2013 was not appropriate due to its prospective application, which did not cover the relevant assessment year (AY 2010-2011). The assessee cited a previous order for AY 2009-2010 where a similar question was settled in their favor. As a result, the court concluded that no substantial question of law arose concerning the treatment of foreign exchange gain or loss. Therefore, the appeal was dismissed based on the discussion and findings on both issues.
In summary, the High Court of Delhi dismissed the appeal as it found no substantial questions of law arising from the exclusion of comparables M/s Infosys Ltd. and M/s. Persistent Systems Ltd., as well as the treatment of foreign exchange gain or loss in the transfer pricing determination of ALP. The court's decision was based on the detailed analysis of the arguments presented by the appellant and the precedents cited in support of their positions.
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