2019 (3) TMI 144 - AT - Income Tax

Tribunal directs exclusion of comparables in transfer pricing analysis, emphasizes brand value.

M/s. Enchanting Travels Pvt. Ltd. Versus The Income Tax Officer, Ward-2 (1) (4), Bengaluru

M/s. Enchanting Travels Pvt. Ltd. Versus The Income Tax Officer, Ward-2 (1) (4), Bengaluru - TMI Issues:1. Challenge to the order of lower authorities on grounds of natural justice.2. Transfer pricing issues raised by the appellant.3. Dispute over the inclusion of comparables in determining arm's length price.Issue 1:The appellant challenged the lower authorities' order, alleging violations of natural justice. They argued that the order was bad in law and failed to adhere to principles of natural justice. The appellant specifically raised concerns regarding the Transfer Pricing Officer's reference and the subsequent confirmation by the Dispute Resolution Panel. The appellant contended that there was no evidence of tax evasion motive, questioning the validity of the additions made under Chapter X.Issue 2:The appellant contested the transfer pricing analysis conducted by the authorities. They argued that the rejection of their analysis was unjustified and that the comparables chosen were not suitable. Specifically, the appellant objected to the inclusion of Cox & Kings Ltd. as a comparable, citing its brand value and diverse activities. The appellant also highlighted the need for adjustments to account for differences in risk exposure and the benefit of the +/-5% range under section 92C(2).Issue 3:The primary dispute revolved around the inclusion of two comparables, Kerala Travels Interserve Ltd. and Cox & Kings Ltd., in determining the arm's length price for international transactions. The appellant contended that Kerala Travels Interserve Ltd. was not a suitable comparable due to its revenue sources being significantly different from the appellant's business. The Tribunal agreed, directing the exclusion of Kerala Travels Interserve Ltd. from the list of comparables. Similarly, the Tribunal ruled in favor of the appellant regarding Cox & Kings Ltd., noting its brand value and diverse revenue streams, which made it unsuitable as a comparable for the appellant's business.In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the exclusion of the disputed comparables and the recomputation of the arm's length price for international transactions. The judgment emphasized the importance of considering brand value and business activities in selecting comparables for transfer pricing analysis, in line with relevant legal precedents.