2015 (12) TMI 1781 - AT - Income Tax

Inclusion of Related Party Transactions in Transfer Pricing Analysis: Tribunal Decision Sends Issue for Fresh Adjudication

M/s. Symantec Software Versus DCIT 10 (1) Mumbai

The Tribunal allowed the appellant's challenge regarding the inclusion of a company with significant related party transactions as a comparable in ... TPA - comparable selection - ‘M/s. Man Diesel India Limited’, as comparable company - Held that:- The undisputed facts on record are that the aforesaid company was having RPT transactions which appear to be well above the accepted limits. Requisite documents evidencing these facts are already held on record. But, these facts were not examined by the lower authorities. In view of the judgments relied upon by the Ld. Counsel, we find that since this issue goes to the root of the matter, the assessee should be given opportunity to raise a legal plea even at this stage before the Tribunal. In all fairness and to meet ends of justice, we find it appropriate to send this issue back to the file of AO/TPO for a fresh decision with respect to the said company. The assessee shall put forth all requisite material before the AO/ TPO in support of its claim, for which proper opportunity should be provided. With these directions, we send this issue back to the file of the AO/TPO. Thus, additional ground is treated to be allowed for statistical purposes. Issues:Challenge to the inclusion of a company with significant related party transactions as a comparable company for transfer pricing analysis.Detailed Analysis:Issue 1: Additional Ground Admitted for AdjudicationThe appellant challenged the inclusion of a company with significant related party transactions as a comparable in the transfer pricing analysis. The appellant submitted an additional ground before the Tribunal, arguing that the company in question should not have been considered a comparable due to its related party transactions exceeding acceptable limits. The Tribunal admitted this additional ground for adjudication based on existing facts and in the interest of justice, citing the judgment of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. 229 ITR 383.Issue 2: Arguments and SubmissionsThe appellant's counsel presented detailed arguments, supported by the annual accounts of the company in question, highlighting the substantial related party transactions exceeding acceptable thresholds. The counsel referenced various judgments to support the appellant's right to dispute a comparable before the Tribunal for the first time. In contrast, the Departmental Representative opposed the submissions, emphasizing the absence of a related party transaction filter application. However, both parties agreed on the presence of relevant documents on record.Issue 3: Tribunal's DecisionAfter considering the submissions from both sides and the undisputed facts regarding the significant related party transactions of the company in question, the Tribunal concluded that the issue warranted further examination. The Tribunal found that the lower authorities had not adequately assessed these crucial facts. Relying on the judgments cited by the appellant's counsel, the Tribunal decided to send the issue back to the Assessing Officer/Transfer Pricing Officer for a fresh decision. The Tribunal directed the appellant to provide all necessary material to support its claim during this reassessment. Consequently, the additional ground was deemed allowed for statistical purposes, and the appeal was partly allowed.In conclusion, the Tribunal's decision highlighted the importance of considering related party transactions in transfer pricing analysis and ensuring a fair opportunity for the appellant to present its case. The judgment emphasized the need for a thorough examination of all relevant facts to reach a just decision in transfer pricing disputes.