Brief of the case:
Punjab & Haryana High Court held in CIT Vs DSM Anti Infectives India ltd that the benchmark comparable which was used to compare with the comparable company that should be considered only of that year of which TP case was involved. In other words if any comparable point which was used in comparing with the comparable company for international transactions did not remain comparable point in any other year then, it did not mean that that company did not remain comparable anymore for that particular year. Moreover the percentage of the raw material of total sales consumed by the benchmark company was not to be considered. Only the filters had to be fulfilled, quantum of filter was not required to be fulfilled.
Facts of the case:
The ld. Tribunal had considered the company Torrent Gujarat Biotech Limited a company to be comparable company because all the parameters were fulfilled which AO decided for the company to be comparable for international transactions. Net Worth was also one of the filters adopted by the AO to make the company benchmark but assesse was of the view that in the next year of the A.Y of which the above case belongs, the net worth of that comparable company was negative so it did not remain comparable anymore.
Contention of the assesse:
Assessee was of the view that where facts were identical from year to year then similar filters should be adopted every year for benchmarking international transactions though in the next year it did not fulfill the condition of filters. In other words filters had to be seen of that year of which transaction had to be seen. As Torrent Gujarat Biotech Limited had not fulfilled the filter of net worth as it was having negative net worth. It was of the view that as the raw material PEN-G used by company Standard Pharmaceuticals Limited was negligible as compared to its total sales or raw material. SO the above 2 companies were not comparable.
Contention of the revenue:
Revenue was of the view that the above said company should be comparable irrespective of the percentage of use of PEN-G by them since companies selected should be functionally comparable and not identical, So the order of tribunal was not perverse
Held by High Court:
High Court held that the view the view of the assesse that the benchmark company was having negative worth so not comparable was absurd because that benchmark company was having negative net worth in the next year but having positive net worth in the year to which the above case belong. Moreover revenue was right in mentioning that the percentage of PEN-G of total sales or raw material did not matter any way.