2018 (7) TMI 478 - HC - Income Tax

Court dismisses Revenue's appeal on transfer pricing in software services for AY 2007-08.

Pr. Commissioner Of Income Tax-2 And Assistant Commissioner Of Income Tax, Circle 12 (1) Versus M/s Magma Design Automation India Pvt. Ltd.

The Court dismissed the Revenue's appeal against the Income Tax Appellate Tribunal's order on transfer pricing adjustment in software development and ... Comparable selection - substantial question of law - Held that:- This Court in Prl.Commissioner of Income Tax & Anr. Vs. M/s.Softbrands India Pvt. Ltd. (2018 (6) TMI 1327 - KARNATAKA HIGH COURT ) has held that in these type of findings of the learned Tribunal remained final fact findings of the learned Tribunal and are binding on the lower authorities of the Department as well as this Court and unless an established ex-facie perversity is found in the findings of the learned Tribunal, the appeal u/s.260A of the Act is not maintainable. Issues:Appeal against the Order of the Income Tax Appellate Tribunal regarding transfer pricing adjustment in software development and customer support services for Assessment Year 2007-08.Analysis:The Revenue raised substantial questions of law regarding the exclusion of comparables by the Tribunal for transfer pricing adjustment in software development and customer support services segments. The Tribunal excluded certain comparables based on its own decisions in other cases, which were not yet final. The Tribunal directed the exclusion of specific comparables and considered the segmental results of certain companies. The Tribunal's decision was based on detailed analysis and comparison with previous cases.The Court referred to a previous judgment stating that unless the Tribunal's finding is blatantly incorrect, an appeal under Section 260-A of the Act is not maintainable. The Court emphasized that issues related to the selection of comparables do not generally give rise to substantial questions of law. The Court clarified that dissatisfaction with the Tribunal's findings alone is not sufficient to invoke Section 260-A. Therefore, the appeals filed by the Revenue were dismissed as lacking merit, and no costs were awarded. The Court highlighted the importance of consistent application of parameters in such cases, whether the appeal is filed by the Revenue or the Assessee.After considering the arguments from both sides, the Court concluded that no substantial question of law arose in the present case. Consequently, the Appeal filed by the Revenue was dismissed, and no costs were awarded. The Court directed that a copy of the Order be sent to the Respondent-Assessee, concluding the judgment on the matter of transfer pricing adjustment for the specified assessment year.