Case Note & Summary
The appeal was filed by the Pr. Commissioner of Income Tax-3 under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT) 'K' Bench, Mumbai, dated 13th January 2017, for the assessment year 2009-10. The assessee, Warburg Pincus India Pvt. Ltd., is engaged in the business of investment advisory services. It filed its return of income on 30th September 2009 declaring total income of Rs.17,44,90,750/- and book profit of Rs.16,47,55,751/- under Section 115JB. The return was processed under Section 143(1) and later selected for scrutiny. A reference under Section 92CA(1) was made to the Transfer Pricing Officer (TPO) for computation of arm's length price in relation to international transactions. The TPO carried out a functional analysis (FAR) and selected certain comparables. The assessee objected to the inclusion/exclusion of certain comparables. The ITAT, after considering the submissions, excluded M/s. Integrated Capital Services Ltd. and M/s. Motilal Oswal Investment Advisors Pvt. Ltd. and included M/s. ICRA Management Consulting Services Ltd. and M/s. IDC Ltd. as comparables. The Revenue challenged this order, proposing two questions of law: (i) whether the Tribunal was right in excluding/including comparables ignoring the FAR analysis by the TPO, and (ii) whether the Tribunal erred by relying on case laws without judging comparability on facts. The High Court, after hearing the parties, held that the Tribunal's decision was based on proper functional analysis and did not give rise to any substantial question of law. The appeal was dismissed.
Headnote
A) Income Tax - Transfer Pricing - Comparability Analysis - Section 92CA, Income Tax Act, 1961 - The Tribunal excluded M/s. Integrated Capital Services Ltd. and M/s. Motilal Oswal Investment Advisors Pvt. Ltd. and included M/s. ICRA Management Consulting Services Ltd. and M/s. IDC Ltd. as comparables for determining arm's length price. The High Court held that the Tribunal's decision was based on proper functional analysis and did not give rise to a substantial question of law. (Paras 1-4)
B) Income Tax - Appeal - Substantial Question of Law - Section 260A, Income Tax Act, 1961 - The Court held that the Tribunal's findings on comparability were factual and did not involve any perversity or error of law warranting interference under Section 260A. The appeal was dismissed. (Paras 1-4)
Issue of Consideration
Whether the Tribunal was correct in excluding M/s. Integrated Capital Services Ltd. and M/s. Motilal Oswal Investment Advisors Pvt. Ltd. and including M/s. ICRA Management Consulting Services Ltd. and M/s. IDC Ltd. as comparables, ignoring the FAR analysis carried out by the TPO, and whether the Tribunal erred by relying on case laws without judging comparability on facts.
Final Decision
The appeal is dismissed. No substantial question of law arises.
Law Points
- Transfer pricing
- comparability analysis
- functional analysis (FAR)
- substantial question of law
- exclusion of comparables
- inclusion of comparables
- Income Tax Act
- 1961
- Section 260A
- Section 92CA
Case Details
2022 LawText (BOM) (09) 106
Income Tax Appeal No. 376 of 2018
Dhiraj Singh Thakur, Valmiki Sa Menezes
Mr. Suresh Kumar for appellant, Mr. Manish Kanth i/b Mr. Atul K. Jasani for respondent
The Pr. Commissioner of Income Tax-3
Warburg Pincus India Pvt. Ltd.
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Nature of Litigation
Income tax appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
Remedy Sought
The Revenue sought to challenge the Tribunal's order regarding selection of comparables for transfer pricing analysis.
Filing Reason
The Revenue was aggrieved by the Tribunal's decision to exclude and include certain comparables, allegedly ignoring the FAR analysis by the TPO.
Previous Decisions
The Income Tax Appellate Tribunal 'K' Bench, Mumbai passed an order dated 13th January 2017 for the assessment year 2009-10, which was challenged in this appeal.
Issues
Whether the Tribunal was right in excluding M/s. Integrated Capital Services Ltd. and M/s. Motilal Oswal Investment Advisors Pvt. Ltd. and including M/s. ICRA Management Consulting Services Ltd. and M/s. IDC Ltd. as comparables ignoring the FAR analysis carried out by the TPO?
Whether the Tribunal erred by relying on several case laws and not judging the comparability on the facts of the case?
Submissions/Arguments
The appellant (Revenue) argued that the Tribunal ignored the FAR analysis carried out by the TPO while selecting comparables.
The appellant also argued that the Tribunal erred by relying on case laws without judging comparability on the facts of the case.
Ratio Decidendi
The Tribunal's findings on comparability are factual and based on proper functional analysis; they do not give rise to a substantial question of law under Section 260A of the Income Tax Act, 1961.
Judgment Excerpts
This is an appeal under section 260A of the Income Tax Act, 1961 against the order dated 13th January 2017 passed by the Income Tax Appellant Tribunal 'K' Bench, Mumbai relevant to the assessment year 2009-10.
The following questions of law have been proposed for our consideration : (i) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right by holding that M/s. Integrated Capital Services Ltd. and M/s. Motilal Oswal Investment Advisors Pvt. Ltd. are to be excluded and M/s. ICRA Management Consulting Services Ltd. and M/s. IDC Ltd. are to be included as comparables ignoring the FAR analysis carried out by the TPO? (ii) Whether, on the facts and in circumstances of the case and in law, the Tribunal erred by relying upon several case laws and not judging the comparability on the facts of the case though facts of each case are different and not squarely applicable to the facts of other cases?
Procedural History
The assessee filed its return of income for AY 2009-10. The case was selected for scrutiny and a reference was made to the TPO under Section 92CA(1). The TPO passed an order selecting comparables. The assessee appealed to the CIT(A) and then to the ITAT. The ITAT passed the order dated 13th January 2017, which was challenged by the Revenue in this appeal under Section 260A before the High Court.
Acts & Sections
- Income Tax Act, 1961: 260A, 92CA, 115JB, 143(1)
