Case Law Details
Brief of the Case
Bombay High Court held In the case of CIT vs. M/s. Pentair Water India Pvt. Ltd. that we find no infirmity in the findings of the Tribunal. In fact, the Tribunal has endorsed the views of the CIT Appeals whilst coming to such conclusions. The concurrent findings of facts arrived at by the Authorities below, cannot be re-appreciated by this Court in the present Appeal. In the present Appeal, the Revenue has not been able to controvert or deny the data relied upon by the Authorities below to come to such conclusion. The said Companies are no doubt large and distinct companies having large turnovers where the area of development of subject services are different and as such the profit earned there from cannot be a bench-marked or equated with the assessee.
Facts of the Case
The Assessee is engaged in the business of manufacture of fibre glass pressure vessel used for water treatment, swimming pool equipments and and set up an in-house facility for catering to its needs on the area of engineering, designing & product development. The Company has rendered such services in the relevant assessment year 2007-2008 to some of its group companies abroad and that the Respondent is the subsidiary to Pentair INC, USA and is involved in the same business.
The Assess has filed returns of Income on 30.10.2007 disclosing total income of Rs.5,28,09,795/- on which total tax was Rs.1 ,81 ,1 3,280/-. An Order under Section 92CA was passed on 27.10.2010 by the TPO and the AO on 21.12.2010 added an amount of Rs.1,68,60,877/- in the Order passed under Section 143 (3).
Contention of the Assessee
The ld counsel of the assessee submitted that both the Authorities have concurrently come to the conclusion that the said Companies are not comparable and, as such, this Court cannot re-appreciate the evidence on record to come to any concurrent finding. Learned Counsel further submits that these concurrent findings of facts based on the material on record cannot be re-appreciated by this Court in the present Appeal as there is no substantial question of law which arise therein. Learned Counsel further pointed out that to answer the said two substantial questions of law, this Court would have to re-appreciate the material on record which is not at all permissible. Learned Counsel further submits that the bifurcation intended to be affected by the learned Counsel appearing for the Appellant was not even raised before the Tribunal and, consequently, the above Appeal deserves to be rejected.
Contention of the Revenue
The ld counsels of the revenue raised two substantial questions of law –
- The Income Tax Appellate Tribunal has erred in holding that the profits on costs of five comparable companies as abnormal without giving reasons how the functions discharged, assets deployed and risks assumed of such companies were different from the Respondent-Company.
- The Tribunal has also erred in holding that the size and turnover of the company are deciding factors for treating a company as comparable.
Held by ITAT
ITAT held that company named HCL Comnet Systems & Services Ltd cannot be a comparable as the turnover of this company is 260.18 crores while in the case of the Assessee, the turnover is around Rs.11 crores only. While making the selection of comparables, the turnover filter, in our opinion, has to be the basis for selection. A company having turnover of Rs.11 crores cannot be compared with a company which is having turnover of Rs.260 crores which is more than 23 times the turnover of the Assessee. This company cannot be regarded to be in equal size to the Assessee.
Further held that Infosys BPO Ltd., turnover in respect of this Company is Rs.649.56 crores while the turnover of the Assessee is around Rs. 11 crores which is much more than 65 times of the Assessee’s turnover. We, therefore, do not find any illegality or infirmity in the order of CIT (A) in excluding this Company out of the comparables.
Further held that Wipro Ltd., turnover reported in this company is Rs.939.78 crores while in the case of the Assessee the turnover is around Rs.11 crores. Therefore, on the basis of the turnover filter itself this company cannot be regarded to be comparable to the Assessee and accordingly, we do not find any infirmity in the finding of CIT (A) while he excluded this company on the turnover criteria. He relied on Sony India (P) Ltd. vs. DCIT, 114 ITD 448 Delhi, E-Gain Communication, 2008 TIOL 282 ITAT (Pune) Deloittee Consulting India Pvt. Ltd. vs. DCIT and ITA No. 1082/H yd/2010 Genisys Integrating System (India)(P.) Ltd. vs DCIT, 53 Sot 159 (Bang)”
Held by High Court
High Court held that we find no infirmity in the findings of the Tribunal. In fact, the Tribunal has endorsed the views of the CIT Appeals whilst coming to such conclusions. The concurrent findings of facts arrived at by the Authorities below, cannot be re-appreciated by this Court in the present Appeal. In the present Appeal, the Revenue has not been able to controvert or deny the data relied upon by the Authorities below to come to such conclusion. The said Companies are no doubt large and distinct companies where the area of development of subject services are different and as such the profit earned there from cannot be a bench-marked or equated with the assessee.
The ld counsel of the assessee rightly relied upon the Judgment of the Delhi High Court reported in (2013) 36 taxmann.com 289(Delhi) in the case of Commissioner of Income-tax vs. Agnity India Technologies (P.) Ltd. Also for the assessment year 2005-06 whilst examining similar circumstances, ITAT held that the condition in any uncontrolled transaction between independent enterprises for the purpose of such comparison, economically relevant characteristics must be sufficiently comparable if two parties are to be placed in a similar situation. The turnover is obviously a relevant factor to consider the comparability.
In view of the above, we find that the said two substantial questions of law proposed by the learned Counsel appearing for the Appellant do not arise in the present Appeal taking note of the concurrent findings of fact arrived at by the Authorities below.
