2022 (4) TMI 1330 - HC - Income Tax

High Court Upholds ITAT's Exclusion of Comparables in Income Tax Appeal

The High Court accepted the appeal after condoning the delay in filing and re-filing. However, in the Income Tax Appeal challenging the ITAT order, the ... TP Adjustment - comparable selection - ITAT rejecting Persistent Systems Ltd., E-Infochips Banlagore Ltd., Infinite Data Systems Pvt. Ltd. and Zylog Systems Ltd. as comparables - HELD THAT:- It would be incorrect to state that the ITAT did not take into account the relevant facts while excluding the aforesaid four companies as comparables. It is also pertinent to mention that in the assessee’s own case, this Court has dismissed appellant’s appeal [2017 (5) TMI 1483 - DELHI HIGH COURT] raising similar grievance. Consequently, this Court does not find any substantial question of law arising on this aspect and therefore declines to frame any question. Issues:1. Delay in filing and re-filing the appeal.2. Exclusion of certain companies as comparables in the Income Tax Appeal challenging the ITAT order.Analysis:1. The High Court condoned the delay of 75 days in filing and 144 days in re-filing the appeal after considering the reasons provided in the applications. The appeal was accepted and taken on record, and the applications were disposed of accordingly.2. In the Income Tax Appeal, the Appellant challenged the ITAT's order dated 26th February 2019 for the Assessment Year 2010-11. The Appellant contended that the ITAT erred in rejecting certain companies as comparables for benchmarking international transactions. Specifically, Persistent Systems Ltd., E-Infochips Banlagore Ltd., Infinite Data Systems Pvt. Ltd., and Zylog Systems Ltd. were excluded, and the Appellant argued that clear and cogent reasons were not provided for their exclusion.3. The ITAT's order was examined, which revealed that detailed reasons were given for excluding the aforementioned companies as comparables. For instance, Persistent Systems Ltd. was rejected due to the unavailability of segmental financials, E-Infochips Banagalore Ltd. was excluded for having significant intangible assets and lack of segmental financials, Infinite Data Systems Pvt. Ltd. was deemed functionally dissimilar and showed exceptional growth, and Zylog Systems Ltd. was considered unsuitable due to diversified operations and substantial brand value.4. The High Court concluded that the ITAT had provided cogent reasons for excluding the companies as comparables. It was noted that in a previous case involving the same Appellant, a similar grievance was raised, and the appeal was dismissed by the Court. As a result, the Court found no substantial question of law arising from the exclusion of the companies and declined to frame any question. Consequently, the appeal was dismissed.Overall, the High Court upheld the ITAT's decision to exclude the companies as comparables, finding that sufficient reasons were provided for their exclusion, and no substantial question of law was found to warrant further consideration.