2023 (8) TMI 679 - HC - Income Tax

TP Adjustment - comparable selection - HELD THAT - For Accentia Technology Ltd. Tribunal notes that it has developed its own software, it is in the business of medical transcription services and not the BPO services and during the period in issue, it experienced an extraordinary economic event i.e., it had acquired 96% stake in Oak Technologies Inc. which added heft to both its top and bottom line. For Cosmic Global Ltd, the Tribunal has returned a finding of fact that it operated on a business model which was different from that of the respondent/assessee. According to the Tribunal, Cosmic Global Ltd outsourced a major part of its business and that in the relevant period, it had registered abnormal profit. According to us, these are findings of fact which cannot be termed as perverse. Even otherwise, we find that there is no question of law proposed by the appellant/revenue categorizing these findings as perverse. We are not inclined to interfere with the impugned order. According to us, no substantial question of law arises for our consideration.

Summary

Issues involved:
Condonation of delay in filing and re-filing the appeal, Exclusion of comparables for Arm's Length Price (ALP) determination, Working capital adjustment, Misdirection by Tribunal in excluding comparables.

Condonation of Delay:
The petitioner sought condonation of delay of 5 days in filing and 28 days in re-filing the appeal. The respondent did not oppose the applications, and the delay was condoned. The applications were disposed of accordingly.

Arm's Length Price (ALP) Determination:
The appeal pertained to Assessment Year (AY) 2009-10. The main issue was whether the Tribunal rightly excluded four comparables for ALP computation in international transactions. The CIT(A) had excluded Accentia Technology Ltd., Eclerx Services Ltd., Coral Hub Ltd., and Cosmic Global Ltd. The Tribunal sustained the exclusion of the comparables and remanded the working capital adjustment issue to the Assessing Officer (AO).

Working Capital Adjustment:
The respondent had cross-appealed against the CIT(A) order concerning working capital adjustment. The Tribunal remanded this issue to the AO, which was not contested by the appellant as it was not part of the instant appeal.

Misdirection in Excluding Comparables:
The appellant contended that the Tribunal erred in excluding Eclerx Services Ltd. and Coral Hub Ltd., citing a previous court decision. However, the Tribunal's exclusion of Accentia Technology Ltd. and Cosmic Global Ltd. was challenged by the appellant. The Tribunal's findings showed functional dissimilarity between the respondent and the two comparables, which the appellant disputed. The Tribunal's detailed factual findings on the businesses of Accentia Technology Ltd. and Cosmic Global Ltd. were considered non-perverse, and no legal question was found for consideration. The appeal was closed, with the possibility of further action based on a pending Supreme Court appeal.