‘Similarity Of Services’ Is Principal Point In Comparability Exercise Under Rule 10B(2)(A) Of IT Rules: Delhi High Court
While dismissing Revenue’s appeal filed against ITAT’s order challenging the exclusion of comparable, the Delhi High Court held that no substantial question of law arises in case of assessee since the ITAT had taken definitive conclusion based on appreciation of the material, that the Transfer Pricing Officer (TPO) had wrongly included the three comparable viz. Acropetal Technologies Ltd, BNR Udyog Ltd and Informed Technologies India Ltd for the purposes of benchmarking international transaction.
The Division Bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that “Rule 10(B)(2)(a) required that, when carrying out a comparability analysis of international transactions, with an uncontrolled transaction, the reference point should be, inter alia, the services provided by the entities which are being compared”.
Advocate Neeraj Jain argued on behalf of the Assessee, while the Revenue was represented by Advocate Kunal Sharma.
The brief facts of the case were that, after finding international transactions of the assessee with its AE, the AO made a reference to the TPO, who recommended upward transfer pricing adjustment, after proposing three new comparable. When the matter reached ITAT, those three comparable were removed. Hence, the Revenue approached the High Court.
After considering the submission, the Bench found that the TPO had accepted the fact that assessee provided ITeS and BPO services, the ITAT examined the moot question whether the services offered by the three entities were comparable to those of the assessee.
The Bench observed from the order of the Tribunal that those comparable rendered services that were completely different from assessee.
The Bench further observed that Rule 10B(2)(a) required that, when carrying out a comparability analysis of international transactions, with an uncontrolled transaction, the reference point should be, inter alia, the services provided by the entities which are being compared.
Finding that the ITAT had carried out extensive comparability exercise and excluded the comparable not only on account of difference in operating margins but also on account of difference in services, the High Court refrained from interfering with Tribunal’s order.
Cause Title: PCIT v. Omniglobe Information Technologies (India) Pvt Ltd [2023: DHC: 6392-DB]
