2018 (7) TMI 470 - HC - Income Tax

TPA - exclude the expenditure in foreign currency from the export turnover and the total turnover for provision in section 10A - searching for comparable companies of the assessee under TNMM - substantial question of law - Held that - This Court in Prl.Commissioner of Income Tax & Anr. Vs. M/s.Softbrands India Pvt. Ltd. (2018 (6) TMI 1327 - KARNATAKA HIGH COURT ) has held that in these type of findings of the learned Tribunal remained final fact findings of the learned Tribunal and are binding on the lower authorities of the Department as well as this Court and unless an established ex-facie perversity is found in the findings of the learned Tribunal, the appeal u/s.260A of the Act is not maintainable.

Summary

Issues:
1. Appeal under section 260A of the Income Tax Act, 1961 regarding substantial questions of law arising from the order of the ITAT, Bangalore Bench 'A', Bangalore for A.Y. 2004-2005.

Analysis:
1. Substantial Question of Law No.1:
The Appellants-Revenue raised a question regarding the inclusion of expenditure incurred in foreign currency from export turnover and total turnover. The counsel for the Appellants did not press this question, citing the decision of the Division Bench of the High Court and the subsequent affirmation by the Supreme Court in a similar case. The Supreme Court emphasized the need for consistency in excluding certain expenses from both export and total turnover to maintain legislative intent and avoid illogical results.

2. Substantial Questions of Law Nos.2, 4, and 5:
The Tribunal discussed issues related to Transfer Pricing and Transfer Pricing Adjustments. It upheld the inclusion of a company in the list of comparables based on functional similarity. However, it directed the exclusion of another company due to high brand value and goodwill, in line with established legal precedents. The Tribunal also directed the inclusion of a comparable company in the list based on functional comparability and absence of persistent losses.

3. Substantial Questions of Law Nos.3 and 6:
The counsel for the Appellants did not press these questions, leading to their dismissal without further analysis.

4. Judicial Precedent and Conclusion:
The judgment referred to a previous decision emphasizing that unless a Tribunal's finding is ex facie perverse, an appeal under section 260A of the Act is not maintainable. The Court highlighted the importance of fair and quick judicial decisions in international trade cases. It concluded that the appeals filed by the Revenue did not raise substantial questions of law, as the issues related to comparables and transfer pricing did not meet the requirements of section 260A. The Court dismissed the appeal, emphasizing the need for consistent application of parameters in such cases.

This detailed analysis covers the various substantial questions of law raised in the appeal and the Court's reasoning and conclusions based on legal precedents and established principles in tax law.