Case Law Details
SAP Labs India Private Vs ITO (Supreme Court of India)
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 260A of the Act?
The Supreme Court in this case was considering 100s of cross SLPs both of assessee and department which particularly arose out of decision of Karnataka High court where earlier it was held by the Ld Court that the findings of Tribunal re determination of ALP is final as the tribunal is highest fact finding authority as determination of ALP is essentially a question of fact.
The present batch of Civil Appeals, mostly by the Revenue and few of the assessees arises out of judgments and orders passed by the various High Courts, more particularly the High Court of Karnataka, dismissing the appeals challenging the findings of the Income Tax Appellate Tribunal (for short, ‘Tribunal’) on ‘Transfer Pricing’ issues on the ground that the issues decided by the Tribunal are questions of fact and as perversity is neither pleaded nor argued nor demonstrated by placing material to that effect, no substantial question of law arises for consideration under Section 260A of the Income Tax Act, 1961 (for short, ‘IT Act’). The High Court of Karnataka has dismissed the appeals preferred by the Revenue by relying upon its earlier judgment in the case of PCIT v. Softbrands India (P) Ltd., reported in (2018) 406 ITR 513 (Karnataka).
The High Court can also examine the question of comparability of two companies or selection of filters and examine whether the same is done judiciously and on the basis of the relevant material/evidence on record. The High Court can also examine whether the comparable transactions have been taken into consideration properly or not, i.e., to the extent non- comparable transactions are considered as comparable transactions or not. Therefore, the view taken by the Karnataka High Court in the case of Softbrands India (P) Ltd. that in the transfer pricing matters, the determination of the arm’s length price by the Tribunal is final and cannot be subject matter of scrutiny under Section 260A of the IT Act cannot be accepted.
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