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TMI Blog2024 (10) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent : Mr. P. J. Pardiwalla, Senior Advocate, a/w Mr. Nitesh Joshi i/b Mr. Atul Jasani ORDER 1 This appeal came to be dismissed by an order dated 14th January 2019. Based on an application made by the Revenue that the order passed by this Court came to be set aside in view of the orders passed by the Apex Court in the case of Sap Labs India Private Limited v. Income Tax Officer, Circle 6, Bangalore in Civil Appeal No.8463 of 2022 along with a batch of appeals, the present appeal got listed on 6th July 2023. 2 The issue before the Apex Court was whether in every case where the Tribunal determines the Arm s Length Price, ( ALP ) the same shall attain finality and the High Court is precluded from considering the determination of the ALP determined by the Tribunal, in exercise of powers under Section 260A of the Income Tax Act 1961 ( the Act ). The Apex Court answered the issue by observing that within the parameters of Section 260A of the Act in an appeal challenging the determination of the ALP, it is always open for the High Court to examine in each case whether while determining the ALP, the guide-lines laid down under the Act and the Rules are followed or not and whether the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the case and in law, the Tribunal was correct in excluding the Infosys as comparable on the ground of its higher turnover and having higher assets? (f) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in excluding Transworld Infotech Ltd., from the list of comparable companies? (g) Whether on the facts and in the circumstance of the case and in law, the Tribunal erred in excluding KALS Information Solutions Ltd. and M/s. Helios Matherson Information Technology Ltd. from the list of comparables on the basis of previous years documentations of the assessee without verifying the functions performed by the comparables in the year under consideration? (h) Whether on the facts and in the circumstance of the case and in law, the Tribunal erred in excluding the company ICRA Online and ignoring the comparable company even though separate profitability of the respective segment is available on the record? 3 Re Question (a):- (i) In the subject Assessment Year, the Respondent had incurred an expenditure of Rs. 33.17 lakhs for increasing its share capital. The Respondent claimed deduction under Section 35D of the Act, in its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give rise to any substantial question of law. Thus, not entertained. 5 So far as Question (c) to (h) are concerned, they raise issues of computation of income from international transactions. The fact common to the above questions (c) to (h) are that Respondent is, inter alia, engaged in providing three types of services to its Associated Enterprise viz: (a) software development services, (b) design, engineering, testing and authoring services and (c) business support services. The Respondent adopted the TNM Method, is the most appropriate method to determine the Arms Length Price (ALP) of International Transaction entered into by it with its Associated Enterprises (AE). On the basis of the transfer pricing study by the Respondent, it was submitted by it that no adjustment under Section 92C of the Act is called for to determine the ALP of its transactions with its AE's. The Transfer Pricing Officer (TPO) accepted the TNM Method , as the most appropriate method to determine the ALP of the transactions entered into between the Respondent and its AE. However, the TPO redetermined the ALP after excluding certain entities selected as comparables and including others as comparables. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Tribunal has been examined in the light of the above observations. Mr. Singh, further states that the Revenue seeks to challenge the impugned order as it is perverse. 6 Re Question (c): (i) The Respondent in its transfer pricing study to determine the ALP of its transactions with its AE, had included the VJIL Consulting Ltd., (VJIL) as a comparable. However, the TPO has rejected the same as comparable on the ground that it had incurred loss during the year. This view was not disturbed by the DRP. (ii) On appeal by the Respondent, the Tribunal in the impugned order records a finding that M/s. VJIL was not a persistent loss making company. In fact, it had earned profits for the preceding five Assessment Years. Therefore, the Tribunal held that M/s. VJIL not being a persistent a loss making company, cannot be disregarded as comparable merely because it incurred loss in the previous year relevant to subject Assessment Year.(iii) The objection of the Revenue before us is not on the above finding of the Tribunal but it is urged that M/s. VJIL is not comparable as the Respondent Company was working on cost + method unlike the comparable i.e. M/s. VJIL. However, this is a submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parable. This on application on functions, assets and risks test. Besides, the impugned order of the Tribunal places reliance upon the decision of the Delhi High Court in CIT v/s. Agnity India Technologies Pvt. Ltd., reported in 219 Taxmann. 26 wherein it held that M/s. Infosys Technologies Ltd., being a giant company has larger profits and, therefore, is not a comparable with a company which is smaller in size. The facts here are identical. (iv) The Revenue has not pointed out why the above finding of the Tribunal is not correct. Therefore, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. 9 Re Question (f): (i) The TPO had included M/s. Transworld India Ltd., as a comparable. The Respondent had contended that it cannot be included but the same did not find favour with the DRP. (ii) On appeal, the impugned order of the Tribunal on facts found that the revenue derived from exports of software was just 2.21% of its total revenue while Respondent derived 100% of its revenue for export of software. Thus, the filter which was adopted by the TPO of excluding companies having less then 25% of its earnings from export was adopted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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