2020 (11) TMI 201 - AT - Income Tax

Rectification of mistake u/s 254 - TP Adjustment - Comparable selection - omission in the order of the Tribunal in the final conclusion on exclusion of the 4 companies viz., Sasken Communication Technologies Ltd., Persistent Systems Ltd., Tata Elxsi Ltd. and Infosys Ltd. - HELD THAT - There has been an omission in the order of the Tribunal in the final conclusion on exclusion of the aforesaid 4 companies and the said omission constitutes a mistake apparent on the face of record. It is clear from the observations of the Tribunal that there was no dispute that these 4 companies were to be excluded in the light of decisions rendered in the cases referred to by the ld. counsel for the assessee and set out in the last para of page 6 of the order of Tribunal Order of Tribunal suffers from a mistake and the said mistake is rectified by adding the following sentence at the end of para 16 of the order of Tribunal - In the light of the aforesaid discussion, we direct the TPO to exclude all the 7 comparable companies set out in para 9 of the order of Tribunal from the list of comparable companies. Miscellaneous petition by the assessee is allowed.

Summary

Issues:
1. Rectification of errors in the order of Tribunal regarding determination of arm's length price in international transaction of rendering software development services.

Analysis:
The judgment pertains to a miscellaneous petition filed under section 254(2) of the Income-tax Act, 1961 seeking rectification of errors in the Tribunal's order dated 02.08.2019. The primary issue before the Tribunal was the determination of the arm's length price (ALP) concerning international transactions of software development services provided by the assessee to its associated enterprise (AE). The assessee had requested the exclusion of 7 comparable companies, with 4 companies already excluded based on decisions from a previous case. The remaining 3 companies were subject to objections raised by the ld. DR, discussed in paras 11 to 15 of the Tribunal's order. However, the Tribunal failed to provide a specific conclusion on the exclusion of the 4 companies previously identified for exclusion, leading to the filing of the petition.

The Tribunal acknowledged the omission in its order regarding the exclusion of the 4 companies and deemed it a mistake apparent on the face of the record. It was noted that there was no dispute regarding the exclusion of these companies based on previous decisions cited by the assessee's counsel. Consequently, the Tribunal rectified the mistake by directing the Transfer Pricing Officer (TPO) to exclude all 7 comparable companies listed in para 9 of the order from the list of comparable companies. The Tribunal's decision to rectify the error and provide a specific directive regarding the exclusion of the companies resulted in the allowance of the miscellaneous petition by the assessee.

In conclusion, the judgment highlights the importance of ensuring clarity and accuracy in determining the arm's length price for international transactions, emphasizing the need for precise conclusions and rectification of errors to maintain the integrity of the Tribunal's orders.