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2018 (7) TMI 2215 - HC - Income TaxAddition of income-tax paid by the assessee-company on behalf of an expatriate employee - HELD THAT - Agreement between the Assessee and the Employee Mr.Prakash Bare, contemplates that the income tax liability on the salary to be paid to the employee Mr.Prakash Bare, shall be borne by the company and this contractual liability agreed upon by the assessee is liable for deduction u/s.37 of the Act. No prohibition in law is pointed out by the learned counsel for the Revenue to deduct the expenditure towards the contractual income tax liability paid by the assessee as an allowable expenditure u/s.37. See TATA YODOGAWA LTD. VERSUS COMMISSIONER OF INCOME-TAX 2010 (9) TMI 715 - JHARKHAND HIGH COURT . TP Adjustment - comparable selection - HELD THAT - This Court in a recent judgment in Softbrands India Pvt. Ltd 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 under Section 260-A of the Act is not maintainable.
Issues involved:
1. Whether the Tribunal was justified in setting aside the addition made by the assessing authority regarding the income tax paid by the assessee on behalf of an expatriate employee? 2. Whether the Tribunal was right in excluding certain comparables in Transfer Pricing study when the assessee had included them, and the orders relied upon by the Tribunal were not final? Detailed Analysis: Issue 1: The Appellants-Revenue filed an appeal under section 260A of the Income Tax Act, 1961, challenging the ITAT order related to the addition of income tax paid by the assessee on behalf of an expatriate employee. The Tribunal allowed the assessee's appeal based on precedents, including the case of Tata Yadogawa Ltd., where it was held that income tax paid on behalf of an employee is an allowable expenditure under section 37 of the Act. The High Court agreed with this view, emphasizing that the contractual liability agreed upon by the assessee to pay income tax on the salary of the employee is deductible under section 37 of the Act. The Court cited relevant legal precedents to support this conclusion, ultimately finding no substantial question of law on this issue. Issue 2: Regarding the exclusion of certain comparables in the Transfer Pricing study, the Tribunal relied on a previous decision involving M/s. Airbus India Operations Pvt. Ltd. to exclude Bodhtree Consulting Ltd. from the list of comparable companies. However, a recent judgment in a separate case highlighted that unless there is an evident error in the Tribunal's findings, an appeal under section 260A is not maintainable. The Court emphasized that questions related to comparability do not generally give rise to substantial questions of law. Therefore, the Court found no merit in the Revenue's appeal on this issue and dismissed it, stating that dissatisfaction with the Tribunal's factual findings is not sufficient to invoke section 260A. The appeal was thus dismissed with no costs. In conclusion, the High Court dismissed the appeal filed by the Appellants-Revenue on both issues, finding no substantial questions of law in either the treatment of income tax paid on behalf of an employee or the exclusion of certain comparables in the Transfer Pricing study.
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