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2019 (4) TMI 2128 - AT - Income TaxTP Adjustment - Validity of order of DRP in comparable selection - HELD THAT - DRP had passed a cryptic order and had not specifically decided the ground raised by the assessee with respect to each of the comparables and had only decided the functional comparability of Infosys. We may also point out that the DRP in para 6.5 has mentioned that the assessee has objected to six comparables. However the DRP had only mentioned four comparables in the table below para 6.5, whereas the objection was raised in respect of six comparables. This also shows the total nonapplication of mind by the DRP. Order passed by the DRP is cryptic, stereotyped and is without any reasoning. In fact the DRP has followed the reasoning given by the TPO without any discretions of the objections of the assessee in respect of both the segments. We expect the DRP to give a reasoned and cogent finding while dealing with the contention of the assessee with respect to exclusion / inclusion of the comparables. As the order was silent on material aspects, therefore we remand the whole of the TP issue pertaining to inclusion / exclusion to the file of the DRP with a direction to pass a reasoned and speaking order. Appeals of the assessee is allowed for statistical purpose.
Issues:
- Appeal against Assessing Officers' orders under section 143(3) r.w.s.144C(13) - Exclusion and inclusion of comparable cases for transfer pricing adjustment - Consideration of software development services and ITeS - Reasoning and non-application of mind by the Dispute Resolution Panel (DRP) - Cryptic and stereotyped order by the DRP - Remand of the transfer pricing issue to the DRP Analysis: 1. Appeal against Assessing Officers' orders: The appeal was filed by the assessee against the orders of the Assessing Officers passed under section 143(3) r.w.s.144C(13) in compliance with the directions of the Dispute Resolution Panel (DRP). 2. Exclusion and inclusion of comparable cases: The DRP considered objections raised by the assessee regarding the selection of comparable cases for transfer pricing adjustment. The DRP directed the Transfer Pricing Officer (TPO) to exclude certain cases as they were functionally different from the assessee. The DRP also instructed the TPO to include specific cases as comparables and recalculate the transfer pricing adjustment accordingly. 3. Consideration of software development services and ITeS: The issue of software development services and ITeS was raised in the appeals, and the assessee argued that recent pronouncements favored their position. The assessee requested that binding decisions be considered by the DRP while remanding the matters. 4. Reasoning and non-application of mind by the DRP: The DRP's order was criticized for being unreasoned and showing a total non-application of mind. Discrepancies were noted in the DRP's mention of objections against six comparables but only listing four in the table, indicating a lack of attention to detail. 5. Cryptic and stereotyped order by the DRP: The order passed by the DRP was deemed cryptic, stereotyped, and lacking in reasoning. It was observed that the DRP followed the TPO's reasoning without adequately addressing the assessee's objections. The DRP's failure to provide a reasoned and cogent finding led to the decision to remand the transfer pricing issue back to the DRP. 6. Remand of the transfer pricing issue to the DRP: Due to the deficiencies in the DRP's order, the Tribunal remanded the entire transfer pricing issue, concerning the inclusion/exclusion of comparables, back to the DRP. The DRP was directed to pass a reasoned and speaking order, following the procedures under the Act and Rules, to address the assessee's contentions effectively. In conclusion, the Tribunal allowed the assessee's appeals for statistical purposes, emphasizing the importance of a well-reasoned and detailed decision-making process by the DRP in transfer pricing matters.
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