High Court Cannot Rework Comparables Like a TPO: Karnataka HC

PCIT Vs FMC India Pvt Ltd. (Karnataka High Court)

High Court Cannot Rework Comparables Like a TPO: Karnataka HC Dismisses Revenue’s Transfer-Pricing Appeals

Transfer-Pricing Findings Cannot Be Reopened Under Section 260A Without Perversity

The Karnataka High Court has dismissed the Revenue’s appeals challenging the exclusion of a functionally dissimilar comparable, reconsideration of the foreign-exchange revenue filter, allowance of working-capital adjustment and restriction of the transfer-pricing adjustment to international transactions.

The Court held that the issues raised by the Revenue essentially required reconsideration of factual findings recorded by the Income Tax Appellate Tribunal. The High Court’s jurisdiction under Section 260A cannot be invoked merely to conduct a fresh comparability or FAR analysis. Unless the Tribunal’s findings are shown to be perverse, based on no evidence or contrary to the statutory scheme, no substantial question of law arises.

Assessee’s Business and Transfer-Pricing Adjustment

FMC India Pvt. Ltd. was engaged in selling its finished products to third parties in India and reselling chemicals and formulations imported from FMC Corporation, USA. It also imported raw materials, including lithium metal, and finished goods for trading from its associated enterprises in the USA and the UK.

The assessee additionally rendered business development, SAP application support, human-resource and regulatory-affairs management services to different divisions of the FMC group.