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2018 (7) TMI 2198 - HC - Income TaxMaintainability of appeal in HC u/s 260A - TP Adjustment - Negative working capital adjustment - Whether the Tribunal was right in directing the TPO to consider the claim of risk adjustment even when there is no reliable method to convert the qualitative difference into quantitative difference and to make adjustment on account of risk level? - Whether Tribunal was right in taking different stands on adjustments to comparables margins to make them comparable to the tested party, so that the assessee benefits both ways and Revenue looses both ways since it goes against the principles of quality and natural justice? - HELD THAT - As decided in own case 2018 (6) TMI 1327 - KARNATAKA HIGH COURT has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue u/s 260-A of the Act is not maintainable. We are therefore of the considered opinion that the present appeals filed by the Revenue do not give rise to any substantial question of law and the suggested substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are found to be devoid of merit and the same are liable to be dismissed. We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an Arm s Length Price in the case of the assessee with which the assessee may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all a sufficient reason to invoke Section 260-A of the Act before this Court.
Issues:
1. Appeal filed by the Appellants-Revenue under section 260A of the Income Tax Act, 1961. 2. Consideration of substantial questions of law arising from the ITAT order for A.Y. 2010-11. Analysis: 1. The first substantial question of law raised by the Revenue pertained to the direction given by the ITAT to the Transfer Pricing Officer (TPO) to consider the claim of risk adjustment. The ITAT's order highlighted that since the TPO had already worked out the working capital adjustment and not accepted the assessee's claim, the principle of consistency required the consideration of risk adjustment as well, subject to the assessee providing relevant details. The court emphasized the need for the TPO to consider the risk adjustment, even if there was no initial working provided by the assessee, to maintain consistency in the assessment process. 2. The second substantial question of law raised by the Revenue involved the ITAT's decision on adjustments to comparables margins. The ITAT's order referenced a similar case from the Hyderabad Bench and concluded that negative working capital adjustment was not justified in the case at hand. However, a recent judgment highlighted that appeals under section 260A of the Act should only be entertained if there is an ex-facie perversity in the ITAT's findings. The court emphasized that issues related to comparables selection and application of filters do not necessarily give rise to substantial questions of law. The judgment clarified that dissatisfaction with the ITAT's factual findings alone is not sufficient to invoke section 260A. In conclusion, the High Court dismissed the appeal filed by the Appellants-Revenue, stating that no substantial question of law arose in the case. The court reiterated that the mere dissatisfaction with the ITAT's findings is not a valid reason to invoke section 260A. The judgment emphasized the need for substantial questions of law to be based on interpretations of legal provisions or significant issues like treaty interpretations or BEPS, rather than factual disagreements on comparables selection.
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