High Court upholds exclusion of comparables in transfer pricing case emphasizing consistent parameters

The High Court dismissed the appeal by the Appellants-Revenue challenging the exclusion of certain comparables in a transfer pricing case. The Court emphasized that issues related to comparables and filters do not raise substantial questions of law unless the Tribunal's finding is evidently perverse. The Court reiterated the importance of consistent parameters in transfer pricing cases and upheld the Tribunal's decision to exclude specific comparables based on functional dissimilarity. The appeal was found devoid of merit, and no costs were awarded.

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Issues:
Transfer Pricing - Exclusion of comparables based on functional dissimilarity

Analysis:
The Appellants-Revenue filed an appeal under section 260A of the Income Tax Act, 1961, challenging the order of the ITAT, Bangalore Bench 'B', dated 18.10.2016, for A.Y. 2009-10. The main issue raised was whether the Tribunal erred in excluding certain comparables, namely Accentia Technologies Ltd., Eclerx Services Ltd., Infosys BPO Ltd., and Cosmic Global Ltd., due to functional dissimilarity. The Tribunal, after considering the arguments, found that these companies were not good comparables based on functional dissimilarity. The Tribunal directed the AO/TPO to exclude these companies from the final list of comparables. The Tribunal cited a previous order in the case of e4e Business Solutions India Pvt. Ltd. vs. DCIT, where it was established that the functional profile of the assessee and the mentioned companies was similar, justifying their exclusion as comparables.

In a related judgment, the High Court observed that unless the Tribunal's finding is ex facie perverse, an appeal under section 260A of the Act is not maintainable. The Court emphasized that issues related to the selection of comparables and the application of filters do not give rise to substantial questions of law. The Court clarified that dissatisfaction with the Tribunal's factual findings is not sufficient to invoke section 260A. The appeals filed by the Revenue were found to be devoid of merit and were dismissed. The Court highlighted the importance of consistent parameters for both Revenue and Assessees in transfer pricing cases.

After hearing the counsels, the Court concluded that no substantial question of law arose in the present case. The appeal by the Appellants-Revenue was dismissed, and no costs were awarded. The judgment reiterated the need for adherence to established principles in transfer pricing cases and the limited scope for invoking section 260A based on dissatisfaction with factual findings.

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