Case Law Details
Syngenta Services Private Limited Vs ACIT (ITAT Mumbai)
Introduction: In a recent judgment, the Income Tax Appellate Tribunal (ITAT) Mumbai provided significant clarity on the treatment of comparables in transfer pricing assessments, particularly when financial data is available but needs extrapolation. The case in question, Syngenta Services Private Limited Vs. ACIT, centered on the taxpayer’s challenge against the assessment order that included and excluded certain comparables for benchmarking international transactions.
Detailed Analysis: Syngenta Services Private Limited, engaged in providing Business Support Services, contested the Transfer Pricing Officer’s (TPO) selection of comparables in its transfer pricing study. The main contention revolved around the TPO’s rejection of comparables selected by the taxpayer and the introduction of new comparables, significantly impacting the average margin and consequently, the arm’s length price.
The ITAT’s ruling focused on two crucial aspects: the exclusion of comparables chosen by the TPO and the inclusion of comparables initially rejected. The tribunal meticulously examined the functional dissimilarity, extraordinary events such as acquisitions/mergers, and the lack of segmental data as grounds for excluding certain comparables introduced by the TPO.
For inclusion, the tribunal addressed the issue of rejecting comparables due to different financial year endings. It emphasized that if audited quarterly financial results are available, the financial data can be reasonably extrapolated to align with the taxpayer’s financial year. This approach was affirmed by referencing decisions from the Delhi High Court, underscoring the principle that comparables cannot be dismissed solely based on different financial year-endings if reasonable extrapolation of data is feasible.
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