2018 (7) TMI 2227 - HC - Income Tax

TPA - selection of comparable - substantial question of law or fact - Maintainability of appeal in High court - HELD THAT - This Court in a recent judgment in M/s. 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 appellants, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable. No substantial question of law arises in the present case also

Summary

Issues:
1. Interpretation of provisions under the Income Tax Act regarding deduction of expenditure for export turnover.
2. Transfer Pricing adjustments and selection of comparables for TP study.

Interpretation of Provisions under the Income Tax Act:
The appeal under section 260A of the Income Tax Act, 1961 raised questions regarding the inclusion of expenditure in export turnover and total turnover for computing deductions under section 10A. The Appellants-Revenue initially framed substantial questions of law, but later withdrew some of them. The counsel for the Appellants acknowledged the decision of the Division Bench of the High Court in a similar case and the subsequent affirmation by the Supreme Court. The Supreme Court's ruling emphasized that expenses excluded from export turnover must also be excluded from total turnover to align with legislative intent. This interpretation ensures fairness and logic in computing deductions under section 10A.

Transfer Pricing Adjustments and Selection of Comparables:
The Tribunal's findings in the case highlighted disputes between the Appellants-Revenue and the Respondent-assessee regarding Transfer Pricing (TP) adjustments and the selection of comparables. The Tribunal referred to previous decisions and directed the Transfer Pricing Officer (TPO) to exclude certain comparables based on turnover range criteria. The Tribunal's decision was influenced by the assessee's case for the exclusion of specific companies. The High Court, citing a previous judgment, emphasized that unless there is evident perversity in the Tribunal's findings, appeals under section 260A are not maintainable in such cases. The Court clarified that issues related to the selection of comparables for determining the Arm's Length Price do not typically give rise to substantial questions of law. Therefore, the appeal by the Revenue was dismissed, emphasizing the need for consistent application of parameters in such cases.

In conclusion, the judgment addressed issues related to the interpretation of provisions under the Income Tax Act and Transfer Pricing adjustments, providing clarity on the inclusion of expenses in turnover calculations and the selection of comparables for TP studies.