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2020 (12) TMI 671 - HC - Income TaxTP Adjustment - Comparable selection - whether Infosys Ltd is comparable to the assessee? - substantial question of law - HELD THAT - It is the cardinal principle of law that tribunal is fact finding authority and a decision on facts on the tribunal can be gone into by the High Court only if a question has been referred to it, which says the finding of the tribunal is perverse - SEE SUDARSHAN SILKS SAREES VS. CIT 2008 (4) TMI 5 - SUPREME COURT . The issue whether Infosys Ltd is comparable to the assessee and is functionally dissimilar is a finding of fact. From perusal of paragraphs 12 to 13.2.8 of the order passed by the Commissioner of Income Tax (Appeals) as well as para 21 and 22 of the order of the tribunal, it is evident that the Commissioner of Income Tax (Appeals) has dealt with the findings recorded by the transfer pricing officer and the same has been approved by the tribunal by assigning cogent reasons. The aforesaid findings are finding of fact. Even in substantial questions of law, no element of perversity has either been pleaded or demonstrated before this court. - Decided in favour of assessee.
Issues:
1. Whether the Tribunal was justified in removing certain comparables based on functional dissimilarity without conducting a FAR analysis? 2. Whether the assessee is entitled to claim depreciation on goodwill? Analysis: Issue 1: The appeal under Section 260A of the Income Tax Act, 1961 was preferred by the revenue challenging the Tribunal's decision to remove certain comparables based on functional dissimilarity without conducting a Functional Analysis Report (FAR). The Tribunal directed the Transfer Pricing Officer to exclude certain companies as comparables on the basis of functional dissimilarity. The revenue argued that the Tribunal erred in selectively rejecting comparability criteria and should have remitted the issue to the Transfer Pricing Officer for a fresh transfer pricing study. The revenue contended that the Tribunal's order was perverse as it did not consider low margin comparables and failed to review the reasons given by the Transfer Pricing Officer. However, the assessee defended the Tribunal's decision, citing previous judgments and asserting that Infosys Ltd. was not functionally comparable to the assessee. The High Court held that the issue of comparability was a finding of fact, and since no element of perversity was demonstrated, the substantial questions of law were answered against the revenue and in favor of the assessee. Issue 2: The second issue revolved around whether the assessee was entitled to claim depreciation on goodwill. The Tribunal had allowed the assessee's claim for depreciation on goodwill. The revenue contended that the Tribunal's decision was erroneous, while the assessee relied on the Tribunal's order and previous judgments to support their claim. The High Court examined the findings of the Commissioner of Income Tax (Appeals) and the Tribunal, noting that the profile of McAfee was similar to the assessee, justifying the exclusion of Infosys Ltd. The High Court upheld the Tribunal's decision regarding the claim for depreciation on goodwill, emphasizing that it was a finding of fact. The High Court dismissed the appeal, finding no merit in the revenue's arguments. In conclusion, the High Court dismissed the appeal filed by the revenue, upholding the Tribunal's decisions on both issues related to the comparability of companies and the claim for depreciation on goodwill.
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