Tribunal Corrects Errors in Determining Arm's Length Price for Software Services

The Tribunal rectified errors in its order regarding the determination of the arm's length price in international transactions of software development services. The Tribunal acknowledged and corrected the omission of excluding 4 comparable companies, deeming it a mistake apparent on the face of the record. Consequently, the Tribunal directed the Transfer Pricing Officer to exclude all 7 comparable companies listed, leading to the allowance of the miscellaneous petition by the assessee. The case underscores the significance of clarity and accuracy in determining arm's length prices for international transactions to uphold the integrity of Tribunal orders.

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Issues:
1. Rectification of errors in the order of Tribunal regarding determination of arm's length price in international transaction of rendering software development services.

Analysis:
The judgment pertains to a miscellaneous petition filed under section 254(2) of the Income-tax Act, 1961 seeking rectification of errors in the Tribunal's order dated 02.08.2019. The primary issue before the Tribunal was the determination of the arm's length price (ALP) concerning international transactions of software development services provided by the assessee to its associated enterprise (AE). The assessee had requested the exclusion of 7 comparable companies, with 4 companies already excluded based on decisions from a previous case. The remaining 3 companies were subject to objections raised by the ld. DR, discussed in paras 11 to 15 of the Tribunal's order. However, the Tribunal failed to provide a specific conclusion on the exclusion of the 4 companies previously identified for exclusion, leading to the filing of the petition.

The Tribunal acknowledged the omission in its order regarding the exclusion of the 4 companies and deemed it a mistake apparent on the face of the record. It was noted that there was no dispute regarding the exclusion of these companies based on previous decisions cited by the assessee's counsel. Consequently, the Tribunal rectified the mistake by directing the Transfer Pricing Officer (TPO) to exclude all 7 comparable companies listed in para 9 of the order from the list of comparable companies. The Tribunal's decision to rectify the error and provide a specific directive regarding the exclusion of the companies resulted in the allowance of the miscellaneous petition by the assessee.

In conclusion, the judgment highlights the importance of ensuring clarity and accuracy in determining the arm's length price for international transactions, emphasizing the need for precise conclusions and rectification of errors to maintain the integrity of the Tribunal's orders.

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