Case Law Details
PCIT Vs Honeywell International (India) Pvt. Ltd. (Delhi High Court)
Introduction: The Delhi High Court recently addressed an appeal filed by the Principal Commissioner of Income Tax (PCIT) against Honeywell International (India) Pvt. Ltd. The case pertains to the Assessment Year 2007-08 and focuses on the exclusion of certain comparables, namely Accentia Technologies Ltd., Eclerx Services Ltd., Mold-Tek Technologies Limited, and TSR Darashaw Ltd. The court upheld the order of the Income Tax Appellate Tribunal (ITAT), which directed the exclusion of these comparables due to functional dissimilarity.
Detailed Analysis: Honeywell International, engaged in providing back-office support services, including call center services and corporate service segment (CSS) to its Associated Enterprises (AEs), faced transfer pricing adjustments by the Transfer Pricing Officer (TPO). The TPO made upward adjustments in both the Information Technology Enabled Services (ITES) Segment and CSS.
The dispute reached the Commissioner of Income Tax (Appeals) [CIT(A)], who, in an order dated 31.01.2014, allowed the appeal and excluded the comparables based on functional dissimilarity. The TPO’s adjustments were set aside. The Revenue appealed to the ITAT, which upheld the CIT(A)’s decision.
The functional dissimilarities highlighted included Accentia’s amalgamation during the relevant financial year, Eclerx and Mold-Tek’s involvement in high-end services different from the low-end services provided by Honeywell, and TSR’s merger and unusual high margins during the period.
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