2016 (10) TMI 1035 - HC - Income Tax

TPA - exclusion of two comparables i.e. M/s Infosys Ltd. and M/s. Persistent Systems Ltd. - Held that - M/s Infosys Ltd. is engaged not merely in software development both offsite and onsite and that it receives the substantial revenues on account of onsite software financial development the activity which the assessee does not carry out. ALso M/s Infosys Ltd. is that concern also owns brand intangibles- an advantage which the assessee does not possess.Lastly, the assessee is captive as opposed to status of M/s Infosys Ltd. M/s Persistent Systems Ltd- could not have been included. No substantial question of law arises Treatment of foreign exchange gain or loss in the transfer price determination of ALP - Held that - In foreign exchange gain or loss is concerned, the ITAT was of the opinion that the reliance upon the Safe Harbour Notification dated 18.09.2013 was not appropriate since having regard to the fact that the Rule was introduced prospectively and could not have been applied to AY 2010-2011. The assessee also relies upon the decision in the previous order for the AY 2009-20010 in Pr. Commissioner of Income Tax-3 vs. Fiserv India Pvt. Ltd.(2016 (1) TMI 1276 - DELHI HIGH COURT) where the identical question was settled in its favour. For this reason too, the second question urged does not arise.

Summary

Issues:
1. Exclusion of comparables M/s Infosys Ltd. and M/s. Persistent Systems Ltd.
2. Treatment of foreign exchange gain or loss in transfer price determination of ALP.

Analysis:

Exclusion of Comparables:
The revenue in this appeal raised the issue of excluding two comparables, M/s Infosys Ltd. and M/s. Persistent Systems Ltd. The appellant argued that M/s Infosys Ltd. is engaged in activities not carried out by the assessee, such as substantial revenues from onsite software financial development and ownership of brand intangibles. It was highlighted that M/s Persistent Systems Ltd. data could not have been included based on previous orders and the similarity between the assessee and Cashedge India group. The court found that no substantial question of law arose regarding the exclusion of these comparables, as the differences in activities and ownership of intangibles were significant.

Treatment of Foreign Exchange Gain or Loss:
Regarding the treatment of foreign exchange gain or loss in transfer pricing, the ITAT held that relying on the Safe Harbour Notification dated 18.09.2013 was not appropriate due to its prospective application, which did not cover the relevant assessment year (AY 2010-2011). The assessee cited a previous order for AY 2009-2010 where a similar question was settled in their favor. As a result, the court concluded that no substantial question of law arose concerning the treatment of foreign exchange gain or loss. Therefore, the appeal was dismissed based on the discussion and findings on both issues.

In summary, the High Court of Delhi dismissed the appeal as it found no substantial questions of law arising from the exclusion of comparables M/s Infosys Ltd. and M/s. Persistent Systems Ltd., as well as the treatment of foreign exchange gain or loss in the transfer pricing determination of ALP. The court's decision was based on the detailed analysis of the arguments presented by the appellant and the precedents cited in support of their positions.