TaxTMI 
TaxTMI 
2018 (7) TMI 52
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....and BNR Udyog Ltd contrary to its own earlier decisions in cases of M/s. Societe General 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....
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....o such conclusions. The concurrent findings of facts arrived at by the Authorities below, cannot be re-appreciated by this Court in the present Appeal." 8. Thus the Hon'ble High 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....
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.... by the Board. 36. It appears from the true facts of the various cases before us and the arguments of the learned counsels that the TNNM Method appears to be the most popular and widely adopted Method for determining the 'Arm's length price' in which the Operating 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 wh....
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....a Turnover Filter giving a far too wide or narrower range of comparables or even though comparable Entities were functionally different entities from the Entities in the list of Departmental comparables, as against the comparables sought to be provided by the assessees but the Revenue Department generally insists 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....
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.... any particular case to determine the aspects of determination of 'Arm's Length Price' as is sought to be raised before us. Need for giving Primacy to the Tribunal in the area of fact finding: 46. Undoubtedly, the Income Tax Tribunal is the final and highest fact finding body under the Act. It is manned by Expert Members (Judicial Members 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,....
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.... law pronounced by the Courts are quoted below. "9. The respondent assessee adopted Transactional Net Margin Method (TNMM) as the appropriate method to determine the ALP of its international transactions of purchase of raw materials and components. The assessee identified five comparables and it made adjustment on account of idle capacity on comparables in order to arrive at ALP of its purchase transaction. 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 manufacturin....
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....f the Income Tax Act, 1961." B. Similarly, the Division Bench of Delhi High Court in the case of Principal, Commissioner of Income Tax-9 Vs. WSP Consultants India (P) Limited in the judgment dated 03/11/2017, [2017] 253 Taxman 58 (Delhi)] held that the learned Income Tax Appellate Tribunal was justified in upholding the contention of the assessees that inclusion of three comparables i.e. M/s. Ashok Leyland Projects Services Limited, Kitco Limited and Mitcon Consultancy and Engineering Services 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 an....
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....oducts which is different from the activity undertaken by the respondent assessee, namely, rendering of software service to its holding company. Further, the impugned order also records that no attempt was even made by the Revenue before it to bring on record any change in the nature of activities carried out by KALS Ltd. and Helios & Matheson Ltd. in the subject assessment year, making them functionally comparable to the respondent assessee. In the aforesaid facts, the Tribunal rendered a finding of fact that KALS Ltd. and Helios & Matheson Ltd. are not comparable 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 n....
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....tained by High Court against the findings of the Tribunal, without putting it to a strict scrutiny of the existence of the substantial questions of law, it is likely to open the flood-gates for this litigation to spill over on the dockets of the High Courts and up to the Supreme Court, where such further delay may further cause serious damage to the demand of expeditious judicial dispensation in such cases. 55. A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answering such substantial question of law. On the other h....