TaxTMI 
TaxTMI 
2018 (7) TMI 52
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....l Global Solution Centre Pvt. Ltd., and also in case of Vmoksha Technologies Pvt. Ltd., and all the required tests were satisfied in case of the comparable's chosen by TPO"? 3. The learned Tribunal, after discussing the rival contentions of both the Appellant-Revenue and Respondent-Assessee, has returned a finding as under: "7. Having considered the rival submissions as well as relevant material on record we find that the turnover is a relevant factor for the purpose of determining the comparability of the proposed companies for the purpose of determining the arms length price. The Hon'ble Bombay High Court in case of Vs M/s. Pentair Water India Pvt. Ltd. (supra) while dealing with the issue of the comparability of companies having high turnover in comparison to the assessee held in para 5 and 6 as under. "5. On perusal of the impugned Order passed by the Tribunal dated 23.05.2014, we find that the Tribunal has recorded the reasons for not accepting the said three companies are comparable by stating as follows: [i] HCL Comnet Systems & Services Ltd:- We find force in the submission of the learned AR that this company cannot be a comparable as the turnover of this comp....
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....Court has upheld that there was no infirmity in finding of the Tribunal on this issue wherein it was held that the company having turnover of more than 23 times of the assessee's turnover cannot be compared with the assessee. A similar view has been taken by the Hon'ble Punjab and Haryana High Court in case of Agilent Technologies (International) Pvt. Ltd., V/s. ACIT (supra). It is pertinent to note that this Tribunal in a series of decision has taken a consistent view that in case turnover filter is applied it should be in the multiple of the assessee's turnover and accordingly the Tribunal has taken a view that in normal circumstances ten times of the assessee's turnover on both sides lower as well as higher would be an appropriate tolerance range of turnover while selecting the comparable companies. In the case in hand the assessee's turnover is Rs. 71.37 crores. Accordingly by applying the said parameter of ten times of assessee's turnoveron both sides the companies which are having less than 7.1 crores and more than Rs. 713 crores on turnover would be excluded. Thus we find from the above details that these six companies are breaching the said tolerance range of turnover eithe....
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....erating Profit Margin of comparable Companies are considered by the Authorities and applied to the cases of the Assessees to determined the 'Arm's Length Price' and make Transfer Pricing Adjustments. Rules 10-A, 10-AB, 10-B, 10-C & 10- CA of the Income Tax Rules, 1962 prescribe the manner for working out 'Arms Length Price' under aforesaid prescribed Methods. 37. Section 92-CA of the Act envisages that the Assessing Authority, if he considers necessary or expedient so to do, he can with the previous approval of the Principal Commissioner, refer the computation of 'Arm's Length Price' to Transfer Pricing Officer (TPO), another Departmental Authority only, who is supposed to have special knowledge and training for computing the 'Arm's Length Price' in the international transactions. The Report of the Transfer Pricing Officer is binding on the Assessing Authority as per Section 92-CA (4) of the Act, but where the Assessee raises an objection against the Draft Assessment Order of the Assessing Authority based on such Report of the Transfer Pricing Officer, the Assessee Company within 30 days can either accept the said Draft Order or file its objections before the Dispute Resolution....
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....on their inclusion to get high profit ratio leading to higher Transfer Pricing adjustments, whereas the assessee would like to keep the comparables in a narrower range to justify its Transfer Pricing Analysis and profits declared. 42. In sum and substance, we find that such an exercise having been undertaken by the Authorities below may have resulted not only in high pitched Transfer Pricing Adjustments in the declared profits of the Assessee, but a flood of such appeals go before the Tribunal itself where finally the inclusion or exclusion of comparables has been determined by the Tribunal on due analysis giving its own reasons. 43. The contention raised before us that in view of some different views taken by the Tribunal by different Benches at different places, the present appeals under Section 260-A of the Act deserve to be entertained and admitted by this Court for laying down certain Guidelines about the Filters or Most Appropriate Method to be adopted for determination of the 'Arm's length price', does not, in our considered opinion falls within the parameters of the substantial question of law. None of the sides was able to point out any perversity in the Orders of the ....
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....s are selected from District Judges or Advocates and Accountant Members selected from practicing Chartered Accountants or persons of CIT level in the Department). Therefore this quasi- judicial forum is expected and as some of the nicely articulated Judgments and Orders from the Tribunal would indicate, the Orders passed by the Tribunal should normally put an end and quietus to the findings of facts and factual aspects of assessment. The lower Revenue Authorities cannot be allowed to make it their prestige issue, if their stand is not upheld by the Tribunal and agitate against their Orders before the higher Courts by resort to Section 260-A or Section 261 of the Act merely because they are dissatisfied with the findings of facts by the Tribunal. 47. In the case before us now, the pick of comparables, short-listing of them, applying of filters, etc., are all fact finding exercises and therefore the final Orders passed by the Tribunal are binding on the lower Authorities of the Department as well as High Court. 48. The Tribunal of course is expected to act fairly, reasonably and rationally and should scrupulously avoid perversity in their Orders. It should reflect due application....
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....The respondent assessee arrived at weighted average. 10. The TPO found that M/s. HMT Limited needed to be included in the comparables. However, the TPO found that the turnover of M/s. HMT Limited was more than twice the turnover of the assessee company and, thus, could not be considered as a comparable. 11... 12... 13. The learned Tribunal observed that during the transfer pricing proceedings, the TPO had selected M/s. HMT Limited as one of the comparables on functional similarity, but while determining the ALP, he had not included M/s. HMT limited as a comparable. The learned Tribunal held: "7.3 We heard the rival submissions and perused the material placed on record. M/s. HMT Ltd., is in the segment of manufacturing of tractors and power tillers. The functionality of the M/s. HMT Ltd., and the assessee are more or less in similar. The Ld. AR of the assessee submitted that all the functions of M/s. HMT Ltd., and M/s. VST Tillers are one and the same. The TPO has rejected M/s. HMT Ltd., as comparable merely because of the turnover. The turnover of the M/s. HMT Ltd., for the AY 2005-06 was Rs. 248.00 Cr. as against the assessee's company turnover of Rs. 120.00 Cr. It is ....
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....ces Limited was not correct, the Court held that the reasons given by the Tribunal were justified and any inclusion or exclusion of comparables per se cannot be treated as a question of law unless it is demonstrated to the Court that the Tribunal or any other lower Authority took into account the irrelevant consideration or excluded the relevant entries in the 'Arm's Length Price' determination. The relevant paragraphs 9 to 11 of the said judgment is quoted below for ready reference: "9. This Court is of the opinion that the rationale that Ashok Leyland was deriving major part of its revenue from wind energy segment and that there was an extraordinary event of merger and likewise M/s. Kitco Ltd. deriving income from government entity and Mitcon Consultancy & Engineering Services Ltd, is deriving less than 75% revenue from consultancy services, is a reasonable basis for their exclusion. 10. Any inclusion or exclusion of comparables per se cannot be treated as a question of law unless it is demonstrated to the Court that the Tribunal or any other lower authority took into account irrelevant consideration or excluded relevant factors in the ALP determination that impact signific....
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....able with the respondent assessee. Even before us, no submissions were advanced justifying the order of the Assessing Officer that the services rendered by KALS Ltd. and Helios & Matheson Ltd. are comparable for the subject assessment year with that of the respondent assessee. In the above view, as the findings of the Tribunal being one of the fact which has not been shown to be perverse, the question as proposed does not give rise to any substantial question of law. Thus, not entertained." 52. There are several such judgments from different High Courts which were cited at the bar, but there is no need to multiply them here, as in essence the ratio of all these judgments is similar with the view which we have taken above, viz. that unless a perversity in the findings of fact in this regard is established before the High Court, no substantial question of law arises for consideration under Section 260-A of the Act. Need to give an early quietus and to the findings of fact by the Tribunal in the realm of International Taxation. 53. The huge quantum of borderless Trade and International Transactions earning lot of Foreign Exchange and revenues for India through international ....