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2019 (5) TMI 1273 - HC - Income TaxTP adjustment - selection of comparable M/s.Lubrizol - substantial question of law - whether ITAT was right in law in not holding that Lubrizol was not comparable or in the alternative, should have directed the Assessing Officer to provide adjustment in respect of the criteria due to which the appellant was differentiated from Lubrizol? - HELD THAT - Assessee pointing out para 6.2 of the order passed by the learned Income Tax Appellate Tribunal regarding Transportation Cost, submitted that since the Assessee had incurred additional cost for Transportation from Gujarat to Chennai, whereas the cost of transportation in the comparable case of M/s.Lubrizol was less and therefore, suitable adjustment should be made in this regard while determining the Arms Length Price in the case of the Assessee. The learned Tribunal has found that since the Assessee has not been able to establish the cost of transportation in the comparable case of M/s.Lubrizol lesser than the Assessee, the argument of the Asessee that suitable adjustment should be made was not upheld. We are of the opinion that the said finding of the learned Tribunal does not give rise to any substantial question of law requiring our consideration u/s 260A. A Division Bench of Karnataka High Court, where one of us (Dr.Justice Vineet Kothari) was a party in the case of Principal Commissioner of Income Tax v. Softbrands India P. Ltd. 2018 (6) TMI 1327 - KARNATAKA HIGH COURT has held by a detailed judgment that in the case of determination of Arms Length Price, unless a perversity in the order passed by the learned Tribunal is established, no substantial question of law will arise requiring interference u/s 260A. - Appeals dismissed
Issues:
1. Determination of Arms Length Price in international transactions. 2. Adjustment for transportation cost in computing the Arms Length Price. Analysis: Issue 1: Determination of Arms Length Price in international transactions The Assessee filed appeals under Section 260A of the Income Tax Act, challenging the order of the Income Tax Appellate Tribunal for the Assessment Years 2009-2010 and 2010-2011. The substantial questions of law raised by the Assessee pertained to the comparability of M/s.Lubrizol, a company involved in international transactions. The Tribunal remanded the matter to the Assessing Officer for reconsideration, specifically regarding the procurement of raw materials and tolling fee for Zinc. The Tribunal emphasized the need for proper adjustments based on the differences between the Assessee and Lubrizol in terms of raw material costs and transportation expenses. The Tribunal's decision was based on a detailed analysis of the financial aspects and procurement methods of both entities involved in the transactions. Issue 2: Adjustment for transportation cost in computing the Arms Length Price Regarding the transportation cost, the Assessee argued that since they incurred higher transportation expenses compared to Lubrizol, adjustments should be made in determining the Arms Length Price. However, the Tribunal found that the Assessee failed to establish that Lubrizol's transportation costs were lower, leading to the rejection of the Assessee's argument for adjustments. The Tribunal's decision was based on the principle that unless a perversity in the Tribunal's order is proven, no substantial question of law arises for consideration under Section 260A of the Act. The judgment cited a precedent from the Karnataka High Court emphasizing that the Tribunal's factual findings in transfer pricing assessments are final and binding, and unless there is a clear error in judgment, interference by higher courts is not warranted. In conclusion, the High Court dismissed the appeals, stating that no substantial question of law arose for their consideration. The judgment highlighted the importance of respecting the Tribunal's expertise in fact-finding exercises related to transfer pricing assessments, emphasizing that the Tribunal's decisions should be final unless they exhibit perversity or a lack of application of mind.
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