2019 (7) TMI 311 - HC - Income Tax

TP adjustment - exclusion of the company E-Infochips Bangalore Ltd. in the final set of comparables for the purposes of the transfer pricing (TP) exercise - HELD THAT - What appears to have weighed with the ITAT in agreeing with the DRP to exclude the said comparable is its wide ranging clientele. As found to be providing hi-tech engineering consulting and product innovation services, not just to software developers but also to other sectors like aerospace, defence, healthcare, media and broadcast, medical devices, security and surveillance etc. The exclusion of the said comparable cannot, therefore, be said to be unjustified. Infinite Data Systems Private Limited exclusion ITAT has based its conclusions on a detailed analysis of the profile of the said comparable vis-a-vis the Assessee. Choice of comparables for the TP analysis has been explained by this Court in Rampgreen Solutions Pvt. Ltd. v. CIT, 2015 (8) TMI 931 - DELHI HIGH COURT . Even otherwise, the Court is not persuaded that the impugned order of the ITAT suffers from any serious error in law or gives rise to any substantial question of law.

Summary

Issues:
1. Delay in filing and re-filing the appeal.
2. Validity of the ITAT's order regarding exclusion of comparables for transfer pricing exercise.

Analysis:
1. The High Court considered the delay in filing and re-filing the appeal, which was condoned and allowed. The appeal (ITA 553/2019) by the Revenue challenged the ITAT's order from 20th August 2018 for the AY 2010-11.

2. The main issue raised by the Revenue was the ITAT's affirmation of the Dispute Resolution Panel's direction to exclude E-Infochips Bangalore Ltd. from the final set of comparables for transfer pricing purposes. The ITAT's decision was based on the wide-ranging clientele of E-Infochips, providing services to various sectors beyond software development.

3. The Court was presented with a chart by the Revenue's counsel, showing the findings of the Transfer Pricing Officer (TPO)/Assessing Officer (AO) regarding E-Infochips Bangalore Ltd. The ITAT's agreement with the DRP to exclude E-Infochips as a comparable was justified due to its diverse services to sectors like aerospace, defence, healthcare, and others.

4. Additionally, the ITAT also excluded Infinite Data Systems Private Limited as a comparable after a detailed analysis of its profile compared to the Assessee. The legal position on choosing comparables for transfer pricing analysis was referenced to a previous case (Rampgreen Solutions Pvt. Ltd. v. CIT, 2015 SCC Online Del 11310).

5. The Court found no serious error in law or substantial question of law arising from the ITAT's order. Consequently, the appeal by the Revenue was dismissed. The judgment upheld the ITAT's decision regarding the exclusion of certain comparables for the transfer pricing exercise.