2024 (11) TMI 319 - HC - Income Tax

TP Adjustment - comparable selection - excluding Infosys BPO Ltd. and TCS E-serve Ltd. from the list of comparables - HELD THAT - As decided in Transcend MT Services Pvt. Ltd 2024 (7) TMI 1548 - DELHI HIGH COURT as for Infosys BPO Ltd. and TCS E-Serve Ltd. is concerned, it could not be disputed before us that they were mega entities and could not have been included in the list of comparables bearing in mind the judgment rendered by the Court in CIT v. Agnity India Technologies Pvt. Ltd. 2013 (7) TMI 696 - DELHI HIGH COURT No substantial question of law.

Summary

Issues:
1. Exclusion of Infosys BPO Ltd. and TCS E-serve Ltd. from comparables for determining arm's length price.
2. Acceptance of low margin comparables by ITAT over high margin comparables applied by TPO.
3. Stringent standards of comparability set by ITAT.

Analysis:
1. The Principal Commissioner challenged the ITAT judgment regarding the exclusion of Infosys BPO Ltd. and TCS E-serve Ltd. as comparables for determining the arm's length price of international transactions. The High Court noted that the dispute was confined to the exclusion of these entities. Referring to a previous case, it was established that mega entities like Infosys BPO Ltd. and TCS E-serve Ltd. should not be included in the list of comparables based on relevant judgments.

2. The ITAT's decision to accept low margin comparables chosen by the Assessee over high margin comparables applied by the TPO was questioned. The Principal Commissioner argued that this acceptance disregarded the decision of the Hon'ble Apex Court in a specific case, emphasizing the doctrine of election and the 'Doctrine' of Approbation and Reprobation. The High Court found that the present case did not raise any substantial question of law in this regard.

3. The ITAT's approach in setting stringent standards of comparability and seeking an exact replica of the taxpayer for analysis was also challenged. The Principal Commissioner contended that such stringent standards would defeat the flexibility provided in comparability analysis for determining the arm's length price under TNMM. However, the High Court, after considering the arguments and precedents, concluded that the appeal lacked merit and dismissed it accordingly.