2016 (6) TMI 1350 - HC - Income Tax

TP adjustment - selection of comparable - functinal similarity - inclusion of SIRO Clinpharm Pvt. Limited as a comparable - Tribunal while upholding the inclusion of SIRO Clinpharm Pvt. Limited as a comparable, was justified in directing the Assessing Officer to make certain adjustment on account of different business model adopted by the said comparable - HELD THAT - We are unable to understand how the Revenue could have any grievance to the impugned order of the Tribunal on the above account. Further, we find that the impugned order has relied upon the decision of the Tribunal in ITO Vs. M/s. Zydus Altana Healthcare Pvt. Ltd. 2010 (4) TMI 883 - ITAT MUMBAI wherein on similar facts the Tribunal had restored the issue to the Assessing Officer to make suitable adjustment in view of M/s. Siro Clinpharm Pvt. Ltd. who conduct clinical trials on its own. No substantial question of law. Depreciation on the assets of the assessee s Ankleshwar plant - the said assets had not been used by the assessee company - HELD THAT - It is agreed position between the parties that the issue stands concluded against the Revenue in respect of same respondent assessee relating to assessment year 2001-02. No substantial question of law.

Summary

Issues:
1. Inclusion of 'SIRO Clinpharm Pvt. Limited' as a comparable for analysis.
2. Adjustment on account of different business models.
3. Exclusion of interest from the total cost base for determining ALP.
4. Allowance of depreciation on assets of the assessee's Ankleshwar plant.

Analysis:

Inclusion of 'SIRO Clinpharm Pvt. Limited' as a comparable:
The Tribunal accepted the Revenue's contention to use M/s. Siro Clinpharm Pvt. Ltd. for comparability analysis but with adjustments due to differences in the business model. The Tribunal's decision aligned with the Revenue's submission to send the issue back to the Assessing Officer for necessary adjustments. Citing a previous case, the Tribunal's order was consistent with making adjustments for comparability. Thus, the question regarding this issue did not raise any substantial legal question and was not entertained.

Adjustment on account of different business models:
The Revenue did not press this question as a similar issue for a subsequent assessment year had been decided in favor of the respondent-assessee by the CIT (A), which the Revenue accepted without challenging before the Tribunal. Consequently, as the Revenue did not pursue this question, it was deemed that no substantial question of law arose, and therefore, this question was not entertained.

Exclusion of interest from the total cost base for determining ALP:
The parties agreed that a previous decision by the Court had concluded this issue against the Revenue. Referring to a specific case, it was established that the matter had been settled in favor of the respondent-assessee. Consequently, as the issue had already been decided in a prior case, it was determined that no substantial legal question arose, and thus, this question was not entertained.

Allowance of depreciation on assets of the assessee's Ankleshwar plant:
The Court noted that the issue had been settled against the Revenue in a previous decision related to the same respondent-assessee for a different assessment year. Referring to the precedent set by a prior case, it was established that this issue did not raise any substantial legal question, and therefore, it was not entertained. Consequently, the appeal was dismissed without any order as to costs.