2017 (9) TMI 1693 - HC - Income Tax

Inclusion and exclusion of comparables for determining the arms length price (ALP) for the purpose of transfer pricing adjustment - as submitted that the conclusions of the ITAT in respect of each of the comparables are perverse - Held that - Neither in the questions of law as urged by the Revenue nor in the grounds in the memorandum of Appeal is there a specific plea that the conclusions of the ITAT are perverse. In any event, the ground of perversity is not to be casually urged. It has to be supported by a proper pleading which again has to be on the basis of a detailed study of the impugned order of the ITAT pointing out to the High Court in what manner the ITAT s conclusions can be said to be perverse. The exclusion and inclusion of comparables is by and large an exercise of analysis of facts. If there has to be a substantial question of law framed on such an issue, the Revenue should come up with a proper plea based on a detailed study of the impugned order of the ITAT. This Court is therefore not persuaded in the present case to hold that any substantial question of law has arisen for consideration from the impugned order of the ITAT.

Summary

Issues:
Appeal against ITAT order on transfer pricing adjustment for international transactions - Inclusion and exclusion of comparables for determining ALP.

Analysis:
The High Court heard an appeal by the Revenue challenging the ITAT's order regarding transfer pricing adjustment for the Assessment Year 2006-07. The main issue raised by the Revenue was the inclusion and exclusion of comparables for determining the arms length price (ALP) in relation to international transactions with the Assessee's Associated Enterprise. The ITAT's order was scrutinized, and it was noted that the ITAT provided detailed reasoning for its conclusions. However, the Revenue contended that the reasons provided by the ITAT were incomplete as they discussed only one ground out of several grounds supporting the Dispute Resolution Panel's conclusions. The Revenue further argued that the ITAT's conclusions on the comparables were perverse. The Court observed that the Revenue did not specifically plead that the ITAT's conclusions were perverse, and the ground of perversity should be supported by a proper pleading based on a detailed analysis of the ITAT's order. Since this condition was not met, and the word 'perversity' was not used in the questions of law or grounds presented, the Court found no substantial question of law for consideration.

The Court emphasized that the inclusion and exclusion of comparables involve factual analysis, and for a substantial question of law to be framed on this issue, the Revenue must provide a detailed plea based on a thorough examination of the ITAT's order. In this case, the Court was not convinced that any substantial question of law arose from the ITAT's order. Therefore, the Court dismissed the appeal by the Revenue against the ITAT's order on transfer pricing adjustment for international transactions, specifically concerning the inclusion and exclusion of comparables for determining the arms length price.