2018 (7) TMI 297 - HC - Income Tax

TPA - comparable selection - ALP - substantial question of law or fact - Held that - A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases - the appeals of the present tenor as to whether the comparables have been rightly picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law. 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. See Prl. Commissioner of Income Tax & Anr. v- M/s Softbrands India Pvt. Ltd. (2018 (6) TMI 1327 - KARNATAKA HIGH COURT )

Summary

Issues:
Transfer Pricing - Exclusion of comparables based on functional dissimilarity

Analysis:
The Appellants-Revenue filed an appeal under section 260A of the Income Tax Act, 1961, challenging the order of the ITAT, Bangalore Bench 'B', dated 18.10.2016, for A.Y. 2009-10. The main issue raised was whether the Tribunal erred in excluding certain comparables, namely Accentia Technologies Ltd., Eclerx Services Ltd., Infosys BPO Ltd., and Cosmic Global Ltd., due to functional dissimilarity. The Tribunal, after considering the arguments, found that these companies were not good comparables based on functional dissimilarity. The Tribunal directed the AO/TPO to exclude these companies from the final list of comparables. The Tribunal cited a previous order in the case of e4e Business Solutions India Pvt. Ltd. vs. DCIT, where it was established that the functional profile of the assessee and the mentioned companies was similar, justifying their exclusion as comparables.

In a related judgment, the High Court observed that unless the Tribunal's finding is ex facie perverse, an appeal under section 260A of the Act is not maintainable. The Court emphasized that issues related to the selection of comparables and the application of filters do not give rise to substantial questions of law. The Court clarified that dissatisfaction with the Tribunal's factual findings is not sufficient to invoke section 260A. The appeals filed by the Revenue were found to be devoid of merit and were dismissed. The Court highlighted the importance of consistent parameters for both Revenue and Assessees in transfer pricing cases.

After hearing the counsels, the Court concluded that no substantial question of law arose in the present case. The appeal by the Appellants-Revenue was dismissed, and no costs were awarded. The judgment reiterated the need for adherence to established principles in transfer pricing cases and the limited scope for invoking section 260A based on dissatisfaction with factual findings.