2019 (7) TMI 1963 - HC - Income Tax

TP Adjustment - International transactions/activities in respect of one of the services rendered to its associated enterprises i.e. (AE) - Assessee was engaged in knowledge management systems - Whether ITAT erred in concluding that for the AYs in question the Assessee had rendered Knowledge Process Outsourcing (KPO) services to its Associated Enterprises which according to the Assessee was contrary to the documents on record? - Revenue on the other hand points out that for these very AYs on the question of exclusion of comparables the Revenue s appeals against the impugned order of the ITAT have been dismissed by this Court - HELD THAT - In view of the above submission it is considered appropriate to direct that the impugned order of the ITAT returning the above finding qua the activity of the Assessee for the AYs in question will not constitute a precedent if such issue were to arise in future in the Assessee s cases. In other words the question framed by the Court for consideration in these appeals is left open for decision in an appropriate case.

Summary

Issues:
- Appeal against ITAT orders for AY 2011-2012 and AY 2012-2013.
- Error in ITAT's finding on Assessee's engagement in knowledge management systems and international transactions.
- Disagreement on rendering Knowledge Process Outsourcing (KPO) services to Associated Enterprises.

Analysis:
1. The High Court heard two appeals by the Assessee against the ITAT orders for AY 2011-2012 and AY 2012-2013. The primary issue revolved around the ITAT's conclusion regarding the Assessee's involvement in knowledge management systems and international transactions, specifically in providing Knowledge Process Outsourcing (KPO) services to its Associated Enterprises.

2. The Appellant contended that the ITAT's finding on the Assessee's provision of KPO services to its Associated Enterprises was erroneous and contradicted the evidence on record. On the other hand, the Revenue's counsel highlighted that the Revenue's appeals challenging the exclusion of comparables for the same assessment years had been dismissed by the Court, making the Appellant's grievance on the ITAT's finding academic.

3. Consequently, the High Court directed that the ITAT's decision regarding the Assessee's activities for the relevant assessment years would not set a precedent for future cases involving similar issues. The Court left open the question framed for consideration in the appeals for determination in a suitable case, emphasizing that the current decision was specific to the circumstances of the Assessee's case.

4. Ultimately, the appeals were disposed of based on the above considerations, with the Court clarifying that the ITAT's ruling on the Assessee's activities would not establish a binding precedent for future cases. The judgment aimed to address the specific concerns raised by the parties while preserving the opportunity for a more conclusive decision on the matter in a suitable context.