2018 (10) TMI 192 - HC - Income Tax

TPA - comparable selection - substantial question of law - Held that - Tribunal came to the conclusion that the activities on account of the Infrastructure Management Services and E-learning and Digital Consulting constitute 17% and 35% respectively of the total revenue. These are IT enabled services. These are not akin to software design and development services being rendered by the Assessee and therefore benchmarking was improper. The comparables relied upon by the Transfer Pricing Officer were thus not comparable at all. Assessee rendered services such as software design and development. These are mere services which have been rendered in prior assessment year 2008-2009. If those services enable the Tribunal to take a view in favour of the Assessee for the prior assessment year, then, even for the following assessment year, the Tribunal found it safe to rely upon its own findings and conclusions for the prior assessment year. Very detailed reasons have been assigned but essentially on the above lines in the order under appeal. We have found that these are factual matters. We are unable to find any substantial question of law resulting from such an exercise. In fact, in the case of Principal Commissioner of Income Tax-1 v/s Barclays Technology Centre India Private Limited 2018 (8) TMI 574 - BOMBAY HIGH COURT a Division Bench of this Court had an occasion to consider somewhat similar questions and it found that the Tribunal s view deserves to be upheld. This Court was rather surprised as to why the Revenue brings such Appeals to this court and regularly. The Courts in India seem to be taking a view that the Revenue has routinely brought such matters before this Court knowing fully well that the Transfer Pricing particularly with regard to exclusion and inclusion of certain comparables to determine Arm s Length Price (ALP) would not necessarily give rise to purely legal questions or substantial questions of law.

Summary

Issues:
Challenge to the order of the Pune Bench of the Income Tax Appellate Tribunal dated 10th April, 2015 for the Assessment Year 2009-2010.

Analysis:
The Revenue challenged the order, claiming the question at paragraph 4.1 as a substantial question of law. However, the Assessee argued that the Tribunal's order was based on a mixed question of fact and law, with findings consistent with the evidence presented. The Assessee contended that the Appeal should be dismissed.

The case involved a company providing support to a USA-based establishment in software development. The Transfer Pricing Officer made an upward adjustment to the total income, which was challenged by the Assessee. The Tribunal considered the grounds of the Assessee to be identical to a previous assessment year and relied on its prior order, concluding that the activities in question did not require benchmarking. The Tribunal found the comparables used by the Transfer Pricing Officer to be unsuitable, leading to a decision in favor of the Assessee.

The High Court found no substantial question of law in the Appeal, emphasizing that the matters were resolved based on factual findings. The Court noted a previous judgment upholding a similar view and criticized the Revenue for routinely filing appeals without demonstrating perversity of findings or failure to adhere to legal principles. The Court concluded that the Appeal failed due to the absence of substantial legal questions and upheld the Tribunal's decision without costs.

In summary, the High Court dismissed the Appeal challenging the Tribunal's order, emphasizing the factual nature of the case and the lack of substantial legal questions. The Court criticized the Revenue for filing routine appeals without demonstrating errors in the findings, ultimately upholding the Tribunal's decision based on factual consistency.