Supreme Court: The appellant challenged the orders passed by Karnataka High Court wherein the appeal challenging the findings of the Income Tax Appellate Tribunal (‘Tribunal’) on ‘Transfer Pricing’ issue was dismissed on the ground that the issues decided by the Tribunal were questions of fact and as perversity was neither pleaded nor argued nor demonstrated by placing material to that effect, no substantial question of law arose for consideration under Section 260-A of the Income Tax Act, 1961 (‘Income Tax Act’). While exercising its civil appellate jurisdiction, the division bench of M.R. Shah* and M.M. Sundresh J.J. set aside the impugned order and remitted back to the High Courts concerned to decide and dispose of the respective appeals and examine in each and every case whether the guidelines laid down under the Income Tax Act and the Rules were followed while determining the Arm’s Length Price by the Tribunal. It further ruled that the High Court is not precluded from considering the determination of the Arm’s Length Price determined by the ITAT, in exercise of its powers under Section 260-A of the Income Tax Act.
Issue for consideration
Whether in every case where the Tribunal determines the arm’s length price, the same shall attain finality and the High Court is precluded from considering the determination of the Arm’s Length Price determined by the Tribunal, in exercise of powers under Section 260-A of the Act?
Court Analysis
The Court navigated through Chapter 10 namely Section 92, 92-A to 92-CA, 92-D and 92-F and Rules 10-A to 10-E under the Income Tax Act and stated that there could not be an absolute proposition of law that in all cases where the Tribunal has determined the Arm’s Length Price, the same had attained finality and could not be the subject matter of scrutiny by the High Court in an appeal under Section 260-A of the Income Tax Act.
The Bench asserted that it was always open for the High Court to consider and examine whether the Arm’s Length Price had been determined while taking into consideration the relevant guidelines under the Act and the Rules.
The Bench noted that the High Court could examine the question of comparability of two companies or selection of filters and examine whether the same was done judiciously and on the basis of the relevant material/evidence on record. Further, the High Court could also examine whether the comparable transactions were taken into consideration properly i.e., to the extent non-comparable transactions were considered as comparable transactions or not.
With the above observation, the Bench set aside the impugned order passed by the High Court which had dismissed the Revenue Department’s appeal and the appeals preferred by the assessee and accordingly remitted back the matter to the High Courts concerned to decide and dispose of the respective appeals afresh and examine in each and every case whether the guidelines laid down under the Act and the Rules, referred to hereinabove, were followed while determining the Arm’s Length Price by the Tribunal. The Court, however, was quick to clarify that the order was passed without entering into the merits of the case.
[SAP Labs India Private Limited v Income Tax Officer, Circle 6, Bangalore, 2023 SCC OnLine SC 449, decided on 19-04-2023]
Judgment authored by Justice M.R. Shah
Advocates who appeared in this case :
For the parties- Senior Advocate K.K. Chythanya, Advocate Sharath S., Advocate Anand Sukumar, Advocate S. Sukumaran, Advocate Bhupesh Kumar Pathak, Advocate on Record Meera Mathur, Advocate on Record Kishore Kunal, Advocate on Record Senthil Jagadeesan, Advocate on Record Harpreet Singh Ajmani, Advocate on Record Syed Jafar Alam, Advocate D Nageswar Rao, Advocate on Record Ambhoj Kumar Sinha, Advocate Shreyash Shah Advocate on Record Runamoni Bhuyan, Solicitor General Tushar Mehta, Additional Solicitor General Balbir Singh, Advocate Samarvir Singh, Advocate Naman Tandon, Advocate Zoheb Hussain, Advocate Rajat Nair, Advocate Rupesh Kumar, Advocate Shyam Gopal, Advocate Prahlad Singh, Advocate Prasenjeet Mohapatra, Advocate Monica Benjamin, Advocate Anu Sura, Advocate on Record Raj Bahadur Yadav, Advocate on Record H. Raghavendra Rao, Advocate on Record Anil Katiyar, Advocate on Record Kunal Verma, Advocate on Record Aakarshan Aditya, Advocate Vivek Sarin, Advocate Dibya Prashant Singh, Advocate Satish C. Kaushik, Advocate on Record Hardeep Singh Anand, Advocate on Record Khaitan & Co., Advocate Ajay Bhargava, Advocate Vanita Bhargava, Advocate on Record Sanand Ramakrishnan, Advocate on Record Archana Sahadeva, Senior Advocate K. K. Chythanya, Advocate Mr. Tata Krishna, Advocate S. Sharath, Advocate on Record Anand Sukumar, Advocate S. Sukumaran, Advocate Bhupesh Kumar Pathak, Senior Advocate K. K. Chythanya, Advocate Sharath S., Advocate Tata Krishna, Advocate Anand Sukumar, Advocate S. Sukumaran, Advocate Bhupesh Kumar Pathak, Advocate on Record Meera Mathur, Advocate on Record Kavita Jha, Advocate on Recoord KSN & Co., Advocate V Balachandran, Advocate Kr Vasudevan, Advocate Siddharth Naidu, Advocate Salil Kapoor, Advocate Ananya Kapoor, Advocate Sanat Kapoor, Advocate Sumit Lalchandani, Advocate Vibhu Jain, Advocate on Record Praveen Swarup, Advocate Rajendra Singhvi, Advocate R.P. Tolani, Advocate Suresh Tolani, Advocate Darpan Kirpalani, Advocate Arundhati Chakraborty.