M/S. PRISM NETWORKS PRIVATE LIMITED,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5(1)(2), BANGALORE

PDF · subscribers
ITA 349/BANG/2021Status: HeardITAT Bangalore11 February 2022AY 2016-172 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order to exclude companies with turnover exceeding Rs. 200 Crores from the list of comparables, following established precedents. It also addressed the assessee's plea for inclusion of certain companies.

What were the facts?

The assessee sought to exclude companies with turnover exceeding Rs. 200 Crores from the list of comparables. The Tribunal considered previous judgments and the relevance of turnover in determining comparability.

What were the issues?

The primary issue was the relevance of turnover as a filter for selecting comparable companies in transfer pricing. Another issue concerned the inclusion of specific companies as comparables.

Which sections of the Income-tax Act were involved?

Section 92C

AI-generated summary — verify with the full judgment below

decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon’ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon’ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra).

14.

In view of the aforesaid decision, we hold that 7 companies listed in Sl.No.(ii), (iii), (v), (vi) to (x) of Grd.No.6 raised by the Assessee whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies.

15.

Apart from the exclusion of the comparable companies, the Assessee has also pleaded for inclusion of certain companies. The Assessee has raised ground No.7 in this regard which reads as follows: “7. The Ld. TPO / Ld. DRP erred in not accepting the assessee's contention of inclusion of following 6 companies which were considered by assessee as its comparables in the TP study. The Ld. TPO ought to have considered the availability of data and ought to have selected these companies as Comparable Companies. Sankhva Infotech Ltd. i. Evoke Technologies Pvt Ltd ii.

IT(TP)A No.349/Bang/2021 Page 14 of 16

Sasken Communication Technologies Ltd. iii. Insummation Technologies Pvt Ltd iv. Kireeti Soft Technologies Ltd v. Maveric Systems Ltd.” vi.

16.

At the time of hearing, learned Counsel for the Assessee submitted that out of 6 comparable companies set out in ground No.7, he would press for adjudication for inclusion of 5 companies except Sasken Communication Technologies Ltd. As far as inclusion of the aforesaid 5 companies are concerned, the Assessee included the aforesaid 5 companies in its TP study as comparable companies. The TPO did not accept them as comparable companies for the reason that the data with reference to these companies was not available in the public domain. In the objections filed before the DRP, the Assessee specifically pointed out that the data relating to these companies are available in the public domain and has also filed the details in the submissions before the DRP and the same was captured as follows:

A3 Comparables filtered by Assessee: Rejected by TPO -- whose rejections are objected by Assessee Sl. Margin TPO's Assessee's contentions Name of the No. (PL1) contentions Comparable Assessee : [Same [Same contention for 6 companies] 1 Sankhya Infotech Ltd. 4.46% contention for 6 Objection No.6 (as part of Form 35A, companies] submitted on 12- Mar-2020] 2 Evoke Technologies Assessee : Pvt Ltd 6.56% Data not available in Screenshot of initial dump obtained from 3 Sasken Assessee : public domain. Capitaline database was shared with Communication 6.94% Hence rejected TPO. All these companies' annual Technologies Ltd reports are available as public Isummation Assessee : 4 documents in the website of Ministry Technologies Pvt Ltd 9.57% of Corporate Affairs (MCA). All these Kireeti Soft Assessee : 5 companies have their respective Technologies Ltd 9.73% websites as well. Copies of Annual Assessee : 6 reports are provided in Appendix to 9.64% Objections in the Paperbook, as Maveric Systems Ltd follows:

More judgments on Section 92C

All 1,769 judgments and leading authorities on Section 92C →

Recent GST High Court judgments

Search GST case law →