TaxTMI 
TaxTMI 
2023 (4) TMI 859
X X X X Extracts X X X X
X X X X Extracts X X X X
....) CIVIL APPEAL NO. 8608 OF 2022 (Arising from SLP(Civil) No. 3941/2019) CIVIL APPEAL NO. 8554 OF 2022 (Arising from SLP(Civil) No. 20996/2022 @ Diary No. 1981/2019) CIVIL APPEAL NO. 8622 OF 2022 (Arising from SLP(Civil) No. 6108/2019) CIVIL APPEAL NO. 8609 OF 2022 (Arising from SLP(Civil) No. 5361/2019) CIVIL APPEAL NO. 8702 OF 2022 (Arising from SLP(Civil) No. 5365/2019) CIVIL APPEAL NO. 8621 OF 2022 (Arising from SLP(Civil) No. 6106/2019) CIVIL APPEAL NO. 8620 OF 2022 (Arising from SLP(Civil) No. 6104/2019) CIVIL APPEAL NO. 8610 OF 2022 (Arising from SLP(Civil) No. 5362/2019) CIVIL APPEAL NO. 8611 OF 2022 (Arising from SLP(Civil) No.5364/2019) CIVIL APPEAL NO. 8619 OF 2022 (Arising from SLP(Civil) No. 6103/2019) CIVIL APPEAL NO. 8617 OF 2022 (Arising from SLP(Civil) No. 5366/2019) CIVIL APPEAL NO. 8625 OF 2022 (Arising from SLP(Civil) No. 7372/2019) CIVIL APPEAL NO. 8624 OF 2022 (Arising from SLP(Civil) No. 7369/2019) CIVIL APPEAL NO. 8618 OF 2022 (Arising from SLP(Civil) No. 7368/2019) CIVIL APPEAL NO. 8627 OF 2022 (Arising from SLP(Civil) No. 7374/2019) CIVIL APPEAL NO. 8665 OF 2022 (Arising from SLP(Civil) No. 8289/2019) CIVIL APPEAL NO. 8623 OF 2022 (Arising from SLP(Civil) N....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... NO. 8674 OF 2022 (Arising from SLP(Civil) No. 10128/2019) CIVIL APPEAL NO. 8679 OF 2022 (Arising from SLP(Civil) No. 11670/2019) CIVIL APPEAL NO. 8594 OF 2022 (Arising from SLP(Civil) No. 21082/2022 @ Diary No. 11608/2019) CIVIL APPEAL NO. 8680 OF 2022 (Arising from SLP(Civil) No. 11671/2019) CIVIL APPEAL NO. 8686 OF 2022 (Arising from SLP(Civil) No. 12346/2019) CIVIL APPEAL NO. 8703 OF 2022 (Arising from SLP(Civil) No. 21279/2022 @ Diary No. 11689/2019) CIVIL APPEAL NO. 8600 OF 2022 (Arising from SLP(Civil) No. 21092/2022 @ Diary No. 11858/2019) CIVIL APPEAL NO. 8676 OF 2022 (Arising from SLP(Civil) No11073/2019) CIVIL APPEAL NO. 8677 OF 2022 (Arising from SLP(Civil) No. 11074/2019) CIVIL APPEAL NO. 8683 OF 2022 (Arising from SLP(Civil) No. 11675/2019) CIVIL APPEAL NO. 8684 OF 2022 (Arising from SLP(Civil) No. 11677/2019) CIVIL APPEAL NO. 8689 OF 2022 (Arising from SLP(Civil) No. 14973/2019) CIVIL APPEAL NO. 8690 OF 2022 (Arising from SLP(Civil) No. 14974/2019) CIVIL APPEAL NO. 8685 OF 2022 (Arising from SLP(Civil) No. 12344/2019) CIVIL APPEAL NO. 9412 OF 2022 (Arising from SLP(Civil) No. 16209/2019) CIVIL APPEAL NO. 8678 OF 2022 (Arising from SLP(Civil) No. 11669/2019) CIVIL APP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2022 (Arising from SLP(Civil) No. 15801/2019) CIVIL APPEAL NO. 9021 OF 2022 (Arising from SLP(Civil) No. 22601/2022 @ Diary No. 21305/2019) CIVIL APPEAL NO. 9022 OF 2022 (Arising from SLP(Civil) No. 22602/2022 @ Diary No. 21399/2019) CIVIL APPEAL NO. 9024 OF 2022 (Arising from SLP(Civil) No. 22604/2022 @ Diary No. 21498/2019) CIVIL APPEAL NO. 9026 OF 2022 (Arising from SLP(Civil) No. 22606/2022 @ Diary No. 22013/2019) CIVIL APPEAL NO. 9027 OF 2022 (Arising from SLP(Civil) No. 22607/2022 @ Diary No. 22030/2019) CIVIL APPEAL NO. 9028 OF 2022 (Arising from SLP(Civil) No. 22608/2022 @ Diary No. 22059/2019) CIVIL APPEAL NO. 9029 OF 2022 (Arising from SLP(Civil) No. 22609/2022 @ Diary No. 22126/2019) CIVIL APPEAL NO. 9416 OF 2022 (Arising from SLP(Civil) No. 18595/2019) CIVIL APPEAL NO. 9031 OF 2022 (Arising from SLP(Civil) No. 22611/2022 @ Diary No. 23113/2019) CIVIL APPEAL NO. 9032 OF 2022 (Arising from SLP(Civil) No. 22612/2022 @ Diary No. 23114/2019) CIVIL APPEAL NO. 9033 OF 2022 (Arising from SLP(Civil) No. 22613/2022 @ Diary No. 23130/2019) CIVIL APPEAL NO. 9035 OF 2022 (Arising from SLP(Civil) No. 22615/2022 @ Diary No. 23146/2019) CIVIL APPEAL NO. 9037 OF 2022 (Arising from SLP(C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hupesh Kumar Pathak, Adv. Ms. Meera Mathur, AOR Mr. Kishore Kunal, AOR Mr. Senthil Jagadeesan, AOR Mr. Harpreet Singh Ajmani, AOR Mr. Syed Jafar Alam, AOR Mr. D Nageswar Rao, Adv. Mr. Ambhoj Kumar Sinha, AOR Mr. Shreyash Shah, Adv. Ms. Runamoni Bhuyan, AOR Mr. Tushar Mehta, Solicitor General Mr. Balbir Singh, A.S.G. Mr. Samarvir Singh, Adv. Mr. Naman Tandon, Adv. Mr. Zoheb Hussain, Adv. Mr. Rajat Nair, Adv. Mr. Rupesh Kumar, Adv. Mr. Shyam Gopal, Adv. Mr. Prahlad Singh, Adv. Mr. Prasenjeet Mohapatra, Adv. Ms. Monica Benjamin, Adv. Anu Sura, Adv. Mr. Raj Bahadur Yadav, AOR Mr. H. Raghavendra Rao, AOR Mrs. Anil Katiyar, AOR Mr. Kunal Verma, AOR Mr. Aakarshan Aditya, AOR Mr. Vivek Sarin, Adv. Mr. Dibya Prashant Singh, Adv. Mr. Satish C. Kaushik, Adv. Mr. Hardeep Singh Anand, AOR M/S. Khaitan & Co., AOR Mr. Ajay Bhargava, Adv. Mrs. Vanita Bhargava, Adv. Mr. Sanand Ramakrishnan, AOR Ms. Archana Sahadeva, AOR Mr. K. K. Chythanya, Sr. Adv. Mr. Tata Krishna, Adv. Mr. S. Sharath, Adv. Mr. Anand Sukumar, AOR Mr. S. Sukumaran, Adv. Mr. Bhupesh Kumar Pathak, Adv. Mr. K. K. Chythanya, Sr. Adv. Mr. Sharath S., Adv. Mr. Tata Krishna, Adv. Mr. Anand Sukumar, Adv. Mr. S. Sukumaran, Adv. Mr. Bhupesh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the scheme of transfer pricing, the arm's length price is to be determined taking into consideration the guidelines stipulated under the aforesaid provisions of the IT Act and the Rules. It is submitted that therefore it is always open for the High Court to consider and/or examine, whether the guidelines stipulated under the Act and the Rules, while determining the arm's length price have been followed by the Tribunal or not. 2.3 It is submitted that if the arm's length price is determined by the Tribunal de hors the guidelines stipulated under the Act and the Rules, more particularly Rules 10A to 10E of the Rules, the determination can be said to be perverse which is always subject to the scrutiny by the High Court in an appeal under Section 260A of the Act. 2.4 It is submitted that therefore the view taken by the High Court of Karnataka in the case of Softbrands India (P) Ltd. (supra) is required to be corrected by this Court. 3. S/Shri Arvind P. Datar, Tarun Gulati, Percy Pardiwala, learned Senior Advocates and other learned counsel appearing on behalf of the respective assessees have vehemently submitted that once the arm's length price is determined by the Tribunal takin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal before the High Court but also, as held by the High Court in the case of Softbrands India (P) Ltd. (supra), the same ought to have been demonstrated. 3.6 It is further submitted that some instances where a substantial question of law can arise in Transfer Pricing matter is where the issue relates to whether at all a transaction falls within the definition of 'international transaction', or if two enterprises are 'associated enterprises' as per the definition under the IT Act. The question of comparability of two companies or selection of filters are usually question of fact, which primarily depend on the functions performed, assets employed and risks assumed by the tested party as well as comparable transactions. Unless perversity in the findings of the Tribunal is pleaded and demonstrated, by placing material on record, no substantial question of law can arise and, therefore, there can be no interference by the High Court. To the extent there can be no dispute between the parties, in view of the settled legal proposition dealing with sections 260A of the Act and section 100 of the Code of Civil Procedure, 1908. 3.7 It is submitted that in all the appeals filed by the Revenue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and the Rules, referred hereinabove. In the specific facts of batch of cases wherein department has approached this Court, the exercise of application of detailed guidelines set out in the IT Act and the Rules was indeed carried out and ironed out by Tribunal with assistance of tax payers representatives and department officers by looking a publicly available information mostly in the form of audited financials etc., of companies as prescribed in the IT Act and the Rules. Contrasting the appeals/ pleadings filed before High Court of Karnataka by taxpayers and department available as part of batch of appeals filed would enable appreciation of the case made out before the High Court. This is essential to appreciate the correctness of conclusions by the High Court in this batch of appeals/petitions. Tax department is attempting to seek intervention of this Court in present batch of department's cases without reference to/de hors any of this relevant background facts. Over last two decades, Tribunal and various High Courts have applied the guidelines laid down in the IT Act and the Rules contributing to evolution of a process. Intervention in the department's appeals in present batch o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f law arises as no perversity is pleaded and demonstrated. It is submitted that therefore the impugned judgments and orders passed by the High Court dismissing the appeals preferred by the Revenue are not required to be interfered with by this Court. 4. We have heard Shri Balbir Singh, learned ASG appearing on behalf of the Revenue and learned senior counsel/counsel appearing on behalf of the respective assessees at length. 5. In the present batch of Civil Appeals preferred by the Revenue, the respective High Courts, more particularly the Karnataka High Court have/has dismissed the appeals preferred by the Revenue in which the Revenue challenged the determination of the arm's length price by the Tribunal, relying upon and/or considering the decision of the Karnataka High Court in the case of Softbrands India (P) Ltd. (supra). In the case of Softbrands India (P) Ltd. (supra), the High Court has taken the view that the determination of arm's length price by the Tribunal shall be final against which an appeal under Section 260A of the IT Act is not required to be entertained. Therefore, the short question which is posed for the consideration of this Court is, whether in every case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otice issued under subsection (3) of section 92D, the Assessing Officer may proceed to determine the arm's length price in relation to the said international transaction [or specified domestic transaction] in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him: Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the arm's length price should not be so determined on the basis of material or information or document in the possession of the Assessing Officer." 20. Section 92C(1) thus visualizes determination of the "arms-length price" (ALP) by any of five enumerated methods, "being the most appropriate method", having regard to the "nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the board may prescribe, namely (a) comparable uncontrolled price method, (b) resale price method, (c) cost + method, (d) profit split method, (e) transactional net margin method, (f) any such other m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers and examine whether the same is done judiciously and on the basis of the relevant material/evidence on record. The High Court can also examine whether the comparable transactions have been taken into consideration properly or not, i.e., to the extent non- comparable transactions are considered as comparable transactions or not. Therefore, the view taken by the Karnataka High Court in the case of Softbrands India (P) Ltd. that in the transfer pricing matters, the determination of the arm's length price by the Tribunal is final and cannot be subject matter of scrutiny under Section 260A of the IT Act cannot be accepted. 8. Thus, in each case, the High Court should examine whether the guidelines laid down in the Act and the Rules are followed while determining the arm's length price. Therefore, we are of the opinion that the absolute proposition of law laid down by the Karnataka High Court in the case of Softbrands India (P) ltd. (supra) that in the matter of transfer pricing, determination of the arm's length price by the Tribunal shall be final and cannot be subject matter of scrutiny and the High Court is precluded from examining the correctness of the determination of the arm....