2023 (9) TMI 1164 - HC - Income Tax

TP Adjustment - Direction issued by the Tribunal to exclude Avani, Wipro, E-Zest and Persistent - HELD THAT - Assessee is in the business of software development services - HELD THAT - We find that insofar as Avani, Wipro, and Persistent are concerned, the Tribunal has returned a finding of fact that no segmental data is available. These three comparables are in the business of software products and services and no segmental data is available. The finding of fact recorded by the Tribunal vis- -vis Avani is that it deals in software products and services, there is a categoric finding that no segmental data is available and, therefore, it is not a good comparable. Likewise, the same position was obtained vis- -vis Wipro. Wipro also, according to the Tribunal, deals in software products and services and no segmental data, according to it, is available vis- -vis this entity as well. Tribunal has, in fact, examined the matter and concluded that Persistent as a comparable had to be excluded, as no segmental data was available. This brings us to the last comparable which is E-Zest. In this case also, we find that the Tribunal also returned a finding that the said entity dealt in software product development services and high-end technical services which, according to it, fell under the umbrella of Knowledge Process Outsourcing (KPO) services. Based on this, the Tribunal concluded that E-Zest had to be excluded from the array of comparables as the respondent/assessee was not a KPO service. Thus concerning the four (4) comparables in issue, the Tribunal has returned findings of fact. Given this position, we are not inclined to interfere with the impugned order.

Summary

Issues Involved:
1. Application for condonation of delay in re-filing the appeal.
2. Challenge to the order passed by the Income Tax Appellate Tribunal regarding exclusion of comparables for Assessment Year 2008-09.

Issue 1: Application for Condonation of Delay:
An application was filed by the appellant seeking condonation of a 258-day delay in re-filing the appeal. The respondent did not oppose the application, and the delay was condoned. The application was disposed of accordingly.

Issue 2: Challenge to ITAT Order on Exclusion of Comparables:
The appeal by the appellant/revenue was against the ITAT order dated 23.05.2018 for Assessment Year 2008-09. The ITAT had dealt with cross-appeals from both the appellant/revenue and the respondent/assessee. The appellant's appeal was specifically related to AY 2008-09. The respondent had sought the exclusion of nine comparables, out of which the ITAT directed the exclusion of eight, except for Softsol.

The appellant's challenge was focused on the exclusion of four comparables: Avani, Wipro, E-Zest, and Persistent. The appellant argued that the Tribunal's approach was unsustainable, while the respondent supported the findings of fact by the Tribunal.

Upon examination, it was found that the Tribunal had excluded Avani, Wipro, and Persistent due to the unavailability of segmental data. The appellant contended that the respondent had accepted Persistent as a comparable before the TPO, and the objection was raised for the first time before the Tribunal. However, the Court held that the Tribunal, being the final fact-finding authority, had examined the matter and decided on the exclusion based on the lack of segmental data.

Regarding E-Zest, the Tribunal found that it provided services falling under Knowledge Process Outsourcing (KPO), which differed from the respondent's business. The Tribunal concluded that E-Zest should be excluded as a comparable.

Ultimately, the Court declined to interfere with the ITAT order, stating that no substantial question of law arose for consideration. The appeal was closed, and parties were directed to act based on the digitally signed copy of the judgment.