TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>High Court admits appeal challenging ITAT order for AY 2007-08 under Section 260A. TNMM, ALP, comparables emphasized.</h1> <h3>The Pr. Commissioner of Income Tax-1 Versus Honeywell Turbo (I) Pvt. Ltd.</h3> The Pr. Commissioner of Income Tax-1 Versus Honeywell Turbo (I) Pvt. Ltd. - TMI Issues involved:1. Challenge to the order of the Income Tax Appellate Tribunal for Assessment Year 2007-08 under Section 260A of the Income Tax Act, 1961.2. Consideration of internal TNMM as the most appropriate method when relevant data for comparison is not available for transfer pricing analysis.3. Exclusion of ICRA Online Ltd. from the list of comparables due to high profit margin.4. Inclusion of ACE Softwares Exports Ltd. as comparable despite the absence of segmental data.Analysis:Issue 1: Challenge to the Tribunal's orderThe appellant challenged the order of the Income Tax Appellate Tribunal (Tribunal) for Assessment Year 2007-08 under Section 260A of the Income Tax Act, 1961. The appeal raised questions of law regarding the methodology used for transfer pricing analysis and the selection of comparables for determining the Arms Length Price (ALP) of the business support services provided to Associated Enterprises (AEs).Issue 2: Use of internal TNMM methodThe Tribunal considered the internal Transactional Net Margin Method (TNMM) as the most appropriate method for transfer pricing analysis, even when relevant data for comparison was not available. This decision was challenged by the Revenue, raising a question of law regarding the correctness of using internal TNMM without comparable data.Issue 3: Exclusion of ICRA Online Ltd. from comparablesThe Tribunal excluded ICRA Online Ltd. from the list of comparables due to its abnormally high profit margin of 63.33% for the subject assessment year, which was deemed abnormal compared to previous and subsequent years. The Tribunal's decision was based on the abnormality of the profit margin, which was not reflective of normal business profitability, leading to the exclusion of ICRA Online Ltd. from the final list of comparables.Issue 4: Inclusion of ACE Softwares Exports Ltd. as comparableThe Assessing Officer and the Dispute Resolution Panel rejected the plea to include ACE Softwares Exports Ltd. in the final set of comparables for design engineering services due to functional dissimilarity and being a loss-making enterprise. However, the Tribunal found that the activities of ACE Softwares Exports Ltd., particularly in CAD/CAM services, were functionally comparable to the engineering services provided by the respondent assessee. The Tribunal concluded that the loss incurred by ACE Softwares Exports Ltd. in the subject assessment year was a normal business incident and not due to external factors, justifying its inclusion in the final set of comparables.In conclusion, the High Court admitted the appeal on the substantial question of law related to the use of internal TNMM method and directed the Registry to communicate the order to the Tribunal for further proceedings. The judgment provides detailed analysis and reasoning for each issue raised, emphasizing the importance of factual findings and normal business conditions in determining comparables for transfer pricing analysis.
TaxTMI 