Facts of the Case

The assessee, Copal Research India Pvt. Ltd., was subjected to transfer pricing assessment in relation to its international transactions. During assessment proceedings, the Transfer Pricing Officer selected six comparables for determining the Arm’s Length Price.

The assessee objected to the inclusion of those comparables before the Dispute Resolution Panel (DRP), but the DRP upheld the TPO’s approach. Subsequently, the Income Tax Appellate Tribunal examined the comparability analysis and expressed doubts regarding the appropriateness of those six comparables. The ITAT remitted the matter back to the TPO for fresh reconsideration.

Aggrieved by the ITAT’s remand order, the Revenue preferred appeals before the Delhi High Court.

 Issues Involved


  1. Whether the ITAT was justified in doubting the inclusion of six comparables selected by the TPO for ALP determination?
  2. Whether remanding the matter back to the TPO caused prejudice to the Revenue?
  3. Whether any substantial question of law arose under Section 260A of the Income Tax Act?

 Petitioner’s Arguments (Revenue’s Arguments)

  • The Revenue argued that both the TPO and DRP had duly recorded reasons for inclusion of the six comparables.
  • Notices had been issued and procedural compliance had been made before finalizing the comparables.
  • The ITAT ought not to have interfered with the comparability analysis after due application of mind by lower authorities.
  • The Revenue contended that the Tribunal’s remand order was unnecessary and legally unsustainable.

 Respondent’s Arguments (Assessee’s Position)

  • The assessee supported the ITAT’s findings questioning the comparability analysis.
  • It was contended that the selected comparables required reconsideration for proper ALP determination.
  • The remand provided an opportunity for proper factual evaluation in accordance with transfer pricing principles.

 Court Findings / Court Order

The Delhi High Court examined the submissions and the reasoning adopted by the ITAT. The Court observed that the Revenue was not prejudiced by the remand order because it retained liberty to raise all submissions before the Transfer Pricing Officer during reconsideration proceedings.

The High Court held that since the ITAT had merely remitted the matter for reconsideration and had not conclusively foreclosed any argument of the Revenue, no substantial question of law arose for consideration under Section 260A.

Accordingly, the appeals filed by the Revenue were dismissed.

 Important Clarification

The judgment clarifies that where the ITAT remands a transfer pricing matter for fresh examination without deciding the issue conclusively, such remand does not ordinarily give rise to a substantial question of law under Section 260A.

The Court emphasized that remand orders preserving rights of both parties are procedural in nature and do not cause legal prejudice.

Sections Involved

  • Section 260A – Appeal to High Court
  • Section 92C – Computation of Arm’s Length Price (ALP)
  • Section 92CA – Reference to Transfer Pricing Officer (TPO)
  • Transfer Pricing Provisions under Chapter X of the Income Tax Act, 1961

Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8750-DB/SRB22032017ITA1882017_160937.pdf

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