Facts of the Case

The present appeals (ITA Nos. 839 & 840 of 2018) were filed by the Revenue challenging the orders dated 07.12.2017 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench.

The dispute relates to Transfer Pricing adjustments for Assessment Years 2008-09 and 2009-10, wherein the ITAT directed exclusion of certain companies as comparables, namely:

  • Infosys Limited
  • KALS Information Systems Limited
  • Wipro Limited

The ITAT based its decision on its earlier order dated 31.10.2014 passed in the assessee’s own case for Assessment Year 2007-08.

Issues Involved

  1. Whether the ITAT was justified in excluding large companies like Infosys Ltd., Wipro Ltd., and KALS Information Systems Ltd. as comparables for determining Arm’s Length Price (ALP).
  2. Whether such exclusion raises any substantial question of law under Section 260A of the Income Tax Act, 1961.
  3. Applicability and interpretation of Rule 10B(4) of the Income Tax Rules, 1962 in determining comparability.

Petitioner’s (Revenue’s) Arguments

  • The Revenue contended that the ITAT erred in directing exclusion of the above companies as comparables.
  • It was argued that these companies were valid comparables considered by the Transfer Pricing Officer (TPO) for determining ALP.
  • The Revenue sought reconsideration of comparables excluded by the ITAT.

Respondent’s (Assessee’s) Arguments

  • The assessee submitted that the issue was already settled in its favour in earlier Assessment Year 2007-08.
  • The Revenue’s appeal for AY 2007-08 (ITA No. 613/2015) had already been dismissed by the Delhi High Court on 19.08.2015.
  • Therefore, the principle of consistency should apply, and no interference was warranted.

Court’s Findings / Order

  • The Delhi High Court observed that the ITAT had relied on its earlier order in the assessee’s own case, which had already been upheld by the Court.
  • The Court reaffirmed that:
    • The exclusion of comparables by ITAT was based on valid reasoning.
    • The findings were consistent with Rule 10B(4) and judicial precedents.
  • The Court relied on the precedent:
    • Chryscapital Investment Advisors (India) Pvt. Ltd. v. DCIT (2015) 277 CTR (Del) 137
  • It was held that:

No substantial question of law arises.

  • Accordingly, both appeals were dismissed.

Important Clarification

  • The judgment reiterates that selection/exclusion of comparables is largely a factual exercise, and unless perversity is shown, it does not give rise to a substantial question of law.
  • It reinforces judicial consistency where the same issue has already been adjudicated in earlier years of the same assessee.

Sections / Rules Involved

  • Section 260A, Income Tax Act, 1961
  • Rule 10B(4), Income Tax Rules, 1962
  • Transfer Pricing provisions relating to Arm’s Length Price (ALP)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2869-DB/NAC14092021ITA8392018_151210.pdf

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