UOP India Private Limited Vs PCIT 9 (Delhi High Court)
Introduction: The case of UOP India Private Limited Vs. PCIT (Delhi High Court) revolves around the exclusion of Onward Technologies Limited (OTL) as a comparable in a transfer pricing study. The Income Tax Appellate Tribunal (ITAT) was directed by the Delhi High Court to reconsider this exclusion under Section 254 of the Income Tax Act, 1961.
Detailed Analysis
1. Background of the Case The case involves the transfer pricing study of UOP India Private Limited. The Transfer Pricing Officer (TPO) initially accepted OTL as a comparable in the study, as embedded in the appellant’s transfer pricing report.
2. Exclusion of Comparables The Commissioner of Income Tax (Appeals) excluded two other comparables, L&T Ramboll Consulting Engineers Ltd and Mitcon Consultancy Services, through an order dated 18.05.2017. Both the appellant and the revenue filed appeals with the ITAT, leading to the impugned order dated 03.03.2023.
3. Operative Directions by ITAT The ITAT passed directions excluding several comparables, including OTL, from the study. This exclusion led to further proceedings and appeals, and the case reached the Delhi High Court.
4. Scope of ITAT’s Powers The central issue before the Delhi High Court was the scope and ambit of the ITAT’s powers under Section 254 of the Income Tax Act. The TPO had initially accepted OTL as a comparable, and the Tribunal’s exclusion of OTL raised questions about its authority to do so.
5. Arguments Counsel for the appellant argued that once the TPO accepted OTL as a comparable, it should not have been excluded by the ITAT. The appellant contended that the Assessing Officer (AO) had no choice but to accept the TPO’s order. If the revenue disagreed, they could have exercised revisionary power under Section 263 of the Act.
On the other hand, counsel for the revenue argued that the ITAT, under Section 254 of the Act, possesses plenary powers similar to those of the first appellate authority. They contended that since there were factual disputes, the ITAT had the authority to entertain additional grounds and exclude OTL as a comparable.
6. High Court’s Decision The Delhi High Court found that the matter required further examination, particularly concerning the scope and powers of the ITAT under Section 254. The Court set aside the impugned order and directed the ITAT to reconsider the issue, focusing on the validity of OTL’s exclusion as a comparable.
Conclusion: The Delhi High Court’s decision highlights the need for a reevaluation by the ITAT regarding the exclusion of Onward Technologies Limited as a comparable in the transfer pricing study. The case underscores the importance of understanding the scope and powers of the ITAT under Section 254 of the Income Tax Act in such matters.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. We have heard learned counsel for the parties.
2. We are inclined to admit the appeal. Accordingly, the following question of law is framed for consideration:
(i) Whether the Income Tax Appellate Tribunal [in short, “Tribunal”] has misdirected itself on facts and in law in excluding the comparable Onward Technologies Limited [in short, “OTL”] while bench marking the engineering, technical and inspection segment, in the course of exercising its powers under Section 254 of the Income Tax Act, 1961 [in short, “Act”]?”
3. With the consent of the counsel for the parties, the appeal is taken up for final hearing and disposal, at this stage itself.
4. Briefly, the record shows that the Transfer Pricing Officer (TPO) had accepted OTL as a comparable, which was embedded in the appellant/assessee ’ s transfer pricing study report.
4.1 The record also shows that the appellant/assessee had carried the matter in appeal before the Commissioner of Income Tax (Appeals) on other grounds, not connected with the exclusion of OTL as a comparable.
4.2 The CIT(A), via order dated 18.05.2017, excluded two comparables, i.e., M/s L&T Ramboll Engineering Consulting Services [in short, “L&T”] and Mitcon Consultancy Services [in short, “Mitcon”].
4.3 This resulted in both the appellant/assessee as well as the
respondent/revenue preferring appeals with the Tribunal.
5. The Tribunal, via the impugned order dated 03.03.2023, passed the following operative directions:
“13. In a nutshell, we hold that the following comparables are directed to be excluded:-
