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2018 (8) TMI 199 - HC - Income TaxTPA - comparable selection of M/s. Dolphin Medical Services Pvt. - Held that - Tribunal s finding that M/s. Dolphin Medical Services Pvt. Ltd., is to be included as a comparable to determine the ALP of the Respondent-Assessee, is a finding of fact. This finding of fact is not shown to be perverse in any manner. Risk adjustment - grievance of the Revenue is that no details were provided by the Respondent to the DRP on account of risk adjustment as claimed by it - Held that - We find that the impugned order of the Tribunal itself records the fact that the necessary material in support of its claim was given by the Respondent to the DRP on 17th September, 2013 while the order of the DRP was passed on 31st December, 2013. This finding of fact by the Tribunal has not been shown to be incorrect. Locational advantage - TPO and DRP had enhanced the ALP by taking into account the locational advantage of the Respondent while determining the ALP on non-related transactions by comparable entities operating in India - Held that - The Tribunal s finding is that the comparable selected to determine the ALP were entities operating in India just as the Assessee. Thus, the Tribunal by the impugned order has held that no adjustment of ALP on account of locational advantage is called for. This, as both the comparables as well as and the Respondent, are situated in India. Thus, no locational difference. Consequently, no locational advantage. Appeal admitted on the substantial question of law at (b) - Whether in law and on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to get the benefit of section 10B of the Act, on the interest income derived?
Issues:
1. Inclusion of M/s. Dolphin Medical Services Ltd. as a comparable entity for determining Arms Length Price (ALP). 2. Entitlement to benefit under section 10B of the Income Tax Act on interest income. 3. Adjustment for risk assessment without providing specific details. 4. Permissibility of adjustment based on locational advantages in determining ALP. Analysis: Issue 1: Inclusion of M/s. Dolphin Medical Services Ltd. as a comparable entity The Tribunal directed the inclusion of M/s. Dolphin Medical Services Ltd. as a comparable entity to determine the ALP of the transaction between the Respondent-Assessee and its parent Associated Enterprises (AE). The Appellant-Revenue contested this inclusion, arguing that M/s. Dolphin Medical Services Ltd. was not functionally comparable with the assessee. However, the Tribunal found that M/s. Dolphin Medical Services Ltd. was functionally similar to the Respondent-Assessee, both being involved in clinical trial services. The Tribunal's decision was based on factual findings and not shown to be erroneous. Therefore, the appeal on this issue was not entertained. Issue 2: Entitlement to benefit under section 10B on interest income The Tribunal held that the assessee was entitled to the benefit of section 10B of the Act on the interest income derived. This issue was admitted for consideration as a substantial question of law, indicating a need for further examination and deliberation. Issue 3: Adjustment for risk assessment The Revenue contended that the Respondent did not provide sufficient details on risk adjustment to the DRP. However, the Tribunal found that the necessary material supporting the claim was indeed provided to the DRP within the specified timeline. As this finding was not proven incorrect, the issue did not raise a substantial question of law and was not entertained. Issue 4: Adjustment based on locational advantages The TPO and DRP had initially enhanced the ALP by considering the locational advantage of the Respondent. However, the Tribunal determined that no adjustment for locational advantage was necessary since both the comparables and the Respondent were situated in India, eliminating any significant locational differences. Therefore, the proposed question did not give rise to a substantial question of law and was not entertained. In conclusion, the judgment addressed various key issues related to the Income Tax Act, including the inclusion of comparable entities, entitlement to benefits, risk assessment adjustments, and locational advantage considerations. Each issue was analyzed based on factual findings and legal interpretations to determine the appropriate course of action.
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