2015 (12) TMI 1809 - HC - Income Tax

TPA - Comparable selection - HELD THAT - Merely stating that the issue of comparable is factual in nature and cannot be applied as a matter of general principle would not be sufficient to distinguish the reliance placed by the Appellant on the Tribunal s decision in M/s. Frost Sullivan 2012 (4) TMI 120 - ITAT MUMBAI . When according to the Tribunal the facts are different in the case relied upon it should be pointed out in the impugned order and not ignored on the basis of generality. The facts as demonstrated by the Appellant is that both in case of M/s. Frost Sullivan (supra) and that of the Appellant prima facie appear to be identical. Tribunal in the impugned order ought to have considered the decision of the Tribunal in the case of M/s. Frost Sullivan (supra) in some greater detail pointing out the distinctions before coming to the conclusion that the same cannot be applied in the case of the Appellant. Tribunal on consideration of the facts pointed out by the Appellant could most certainly for reasons to be recorded yet come to conclusion that the decision in case of M/s. Frost Sullivan (supra) is not applicable to the present facts. Before coming to the conclusion the contention of the Appellant must be dealt with so as to ensure that the assessee concerned does not leave the portals of the Tribunal with a feeling that he has received unfair treatment inasmuch as his submission of being covered by the decision of Coordinate Bench of the Tribunal was not considered. The substantial question of law as formulated is answered in the affirmative i.e. in favour of the Appellant-Assessee and against the Respondent-Revenue only to the extent of the issue of transfer pricing. We set aside the order of the Tribunal to the extent it disposes of the Revenue s appeal with regard to the issue of transfer pricing and restore the issue of transfer pricing to the Tribunal for fresh disposal in accordance with law by a reasoned order. Needless to state that the Tribunal would consider the applicability of the decision of the Tribunal dated 24th February 2012 rendered in the case of M/s. Frost Sullivan (supra) to the fact of the present case.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal for Assessment Year 2004-05 regarding Transfer Pricing Adjustment.

Analysis:
The appellant challenged the Income Tax Appellate Tribunal's order for the Assessment Year 2004-05, specifically questioning the non-consideration of submissions, precedents, and relevant factors in the impugned order, leading to the claim that it was perverse. The High Court admitted the appeal as it raised a substantial question of law and proceeded with final disposal due to the narrow scope of the dispute.

The appellant, engaged in research, marketing, and consultancy services related to the economy, had an International Transaction with an Associated Enterprise (AE) - Gartner Ireland. The Transfer Pricing Officer (TPO) determined the Arms Length Price (ALP) at 20.42%, based on 102 comparables, while the appellant's margin was 7.91%, within the +5% range of the arithmetic mean. The Commissioner of Income Tax (Appeals) allowed the appeal, noting the lack of comparables due to non-furnishing of Annexure I by the TPO.

The Revenue then appealed to the Tribunal, which set aside the CIT(A)'s order, directing fresh consideration by the Assessing Officer/TPO. The appellant contended that the Tribunal failed to follow its decision in a similar case, M/s. Frost & Sullivan, where identical comparables led to a 20.42% margin, similar to the appellant's case. Despite the appellant's reliance on this precedent, the Tribunal disregarded it, leading to the appellant's grievance of unequal treatment.

The High Court emphasized the importance of equality of treatment under the Rule of Law, highlighting the need for proper consideration of precedents and distinctions in similar cases. The Court found that the Tribunal's failure to address the appellant's reliance on the Frost & Sullivan case in detail was unjust, leading to the decision in favor of the appellant on the issue of transfer pricing.

Consequently, the High Court set aside the Tribunal's order on transfer pricing, directing a fresh disposal considering the Frost & Sullivan precedent and ensuring fair treatment to the appellant. The Court emphasized the need for reasoned consideration and application of relevant precedents in such cases, ensuring a just outcome for the appellant.