Authority: High Court of Karnataka, Bengaluru

Order Date: 26 June 2018

Case Overview

  • Parties: Appellants – Commissioner of Income Tax (Central) and Deputy Commissioner of Income Tax, Circle‑6, Bangalore; Respondent – M/s Swiss Re Global Business Solutions India Private Limited (formerly Swiss Re Shared Services (India) Private Limited).
  • Proceeding: Appeal under Section 260‑A of the Income Tax Act, 1961 (ITA No.884/2017) against the Income Tax Appellate Tribunal ‘B’ Bench order dated 13‑04‑2017 for Assessment Year 2012‑13.
  • Core Issue: Whether the Tribunal was correct in excluding six companies (Universal Print Systems Ltd, Informed Technologies India Ltd, Infosys BPO Ltd, Microgenetics Systems Ltd, TCS E‑Serve Ltd, BNR Udyog Ltd) as comparables for Transfer Pricing analysis, based on a turnover filter.
  • Tribunal Findings: Turnover is a relevant factor; the assessee’s turnover for AY 2012‑13 was Rs 71.37 crores. A tolerance range of ten times the assessee’s turnover (i.e., Rs 7.1 crores to Rs 713 crores) was applied. The six companies exceeded this range and were therefore excluded. Earlier exclusions of HCL Comnet (turnover Rs 260.18 crores vs. Rs 11 crores), Infosys BPO (Rs 649.56 crores), and Wipro (Rs 939.78 crores) were also upheld.
  • Legal Discussion: The Court examined provisions of the Income Tax Act (Secs 92, 92‑A, 92‑C, 92‑CA) and related Rules (10‑A to 10‑CA). It emphasized that the determination of Arm’s Length Price (ALP) is a factual exercise performed by the Transfer Pricing Officer (TPO) and the Tribunal, not a matter for the High Court unless the Tribunal’s findings are ex‑facie perverse.
  • Precedents Cited: Decisions of Bombay High Court (Pentair Water India), Madras High Court (Commissioner of Income Tax vs Same Deutz‑Fahr), Delhi High Court (Principal Commissioner vs WSP Consultants), Bombay High Court (Commissioner vs PTC Software), Supreme Court (M. Janardhana Rao v Jt CIT), and various other High Court judgments reinforcing that selection of comparables is a factual finding.

Final Outcome

  • The Court held that no substantial question of law arose under Section 260‑A; the Tribunal’s factual findings were not perverse.
  • Consequently, the Revenue’s appeal was dismissed with no order as to costs.
  • The judgment reaffirmed that the Tribunal’s selection of comparables, including the turnover filter, remains binding unless shown to be manifestly erroneous.

Topics: Transfer Pricing, Income Tax Tribunal, Section 260‑A