Arm Embedded Technologies Pvt Ltd … vs Deputy Commissioner Of Income Tax … on 12 July, 2021
In the rejoinder, the Ld. A.R. submitted that it is true that the assessee had included M/s. CG-VAK Software Exports Ltd. as its own comparable. However, there is no bar that the assessee cannot challenge the same before the higher forums. In this regard, the Ld. A.R. placed his reliance on the decision rendered by Hon’ble Bombay High Court in the case of CIT Vs. M/s. Tata Power Solar Systems Ltd. (Income Tax Appeal No.1120 of 2014 dated 16.12.2016). In the above said case, the Tribunal had held that merely because the assessee has included certain comparable companies in the list of comparable companies in its TP study, the same would not by itself estop a party from establishing that these companies are not comparable. In the above said case, the assessee had sought exclusion of two companies named M/s. Indo Wind `Energy Ltd. And BF Utilities Ltd. The observations made by Hon’ble Bombay High Court upholding the view taken by the Tribunal are extracted below:-
IT(TP)A No.1824/Bang/2017 ARM Embedded Technologies Pvt. Ltd., Bangalore
(c) By the impugned order, the Tribunal allowed the Respondent Assessee’s appeal. It held that merely because an Assessee has included M/s. Indowind Energy Ltd. And B.F. Utilities Ltd. in its list of comparables to determine the ALP would not by itself estop a party from establishing that these companies are not comparable. The impugned order found that the two comparables viz. M/s. Indowind Energy Ltd. and B.F. Utilities Ltd., were engaged in completely different line of business i.e. generation of wind energy while the Respondent-Assessee is engaged in generation of solar energy. Thus, not functionally comparable. In the above view, the impugned order on the basis of Function, Assets & Risk (FAR) analysis excluded M/s. Indowind Energy Ltd. and B.F. Utilities Ltd. from the list of final comparables to determine the ALP.
(d) We find that the impugned order of the Tribunal holding that a party is not barred in law from withdrawing from its list of comparables, a company, if the same is found to have been included on account of mistake as on facts, it is not comparable. The Transfer Pricing Mechanism requires comparability analysis to be done between like companies and controlled and un-controlled transactions. This comparison has to be done between like companies and requires carrying out of FAR analysis to find the same. Moreover, the Assessee’s submission in arriving at the ALP is not final. It is for the TPO to examine and fine out the companies listed as comparables which are, in fact comparable. The impugned order has on FAR analysis found that M/s. Indowind Energy Ltd. and B.F. Utilities Ltd. are not comparable. They are in a different area i.e. wind energy while the Respondent-Assessee is in the field of solar energy.
Source : indiankanoon
