2015 (8) TMI 3 - AT - Income Tax

Transfer pricing adjustment - international related party transaction of the Appellant with respect to the provision of software development services - selection of Wipro Technology Services Ltd. as comparable - Held that - We uphold that the submission of the assessee that Wipro Technology Services Ltd. cannot be considered as a comparable, in view of the binding judgement of the Jurisdictional High Court in the assessee s own case for the AY 2006-07 which was followed by the Coordinate Bench of the Tribunal in the assessee s own case for the AY 2008-09. Consistent with the view taken therein we direct the AO to exclude Wipro Technology Services Ltd. as a comparable and recompute the Arm s length price.

Summary

Issues: Transfer pricing adjustment made by the AO under section 143(3) r.w.s. 144C(5) of the Income Tax Act, 1961 for the Assessment Year 2010-11.

Detailed Analysis:

1. Issue of Transfer Pricing Adjustment:
The appeal was filed by the assessee against the order of the AO regarding the transfer pricing adjustment made for the Assessment Year 2010-11. The assessee, a company engaged in software development and export, challenged the transfer pricing adjustments made by the AO, Ld. TPO, and Hon'ble DRP. The grounds raised by the assessee included contentions regarding the vitiated assessment order, jurisdictional errors in the reference made to the TPO, non-satisfaction of conditions under section 92C(3) of the Act, and errors in determining the arm's length price (ALP) for international transactions related to software development services. The assessee argued that the adjustments were made without proper economic analysis, disregarding prior years' data, applying arbitrary filters, and including incomparable companies in the final set of comparables.

2. Elimination of Wipro Technology Services Ltd. as Comparable:
During the proceedings, the Ld. Counsel for the assessee argued for the exclusion of Wipro Technology Services Ltd. as a comparable, citing previous Tribunal and High Court decisions. The Tribunal upheld the assessee's submission based on the binding judgment of the Jurisdictional High Court for the AY 2006-07 and the Coordinate Bench's decision for the AY 2008-09. The Tribunal directed the AO to exclude Wipro Technology Services Ltd. as a comparable and recompute the Arm's length price. The elimination of Wipro Technology Services Ltd. was considered crucial for the assessee to obtain total relief, leading to the partial allowance of the assessee's appeal.

3. Other Grounds Not Adjudicated:
The Ld. Standing Counsel for the Revenue opposed the exclusion of Wipro Technology Services Ltd. as a comparable but failed to demonstrate any factual differences from previous years. As the elimination of Wipro Technology Services Ltd. was deemed sufficient to provide relief to the assessee, other grounds raised by the assessee were not adjudicated by the Tribunal, considering them to be of an academic nature. Therefore, the Tribunal's decision focused on the specific issue of eliminating Wipro Technology Services Ltd. as a comparable for the transfer pricing adjustment, resulting in the partial allowance of the assessee's appeal.

In conclusion, the Tribunal's judgment addressed the transfer pricing adjustment issue, specifically the exclusion of Wipro Technology Services Ltd. as a comparable, based on previous judicial decisions, and highlighted the importance of adhering to established legal principles in transfer pricing assessments.