IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1336 OF 2017 Pr. Commissioner of Income Tax-4, Pune .. Appellant. v/s. M/s. Visteon Engineering Centre (India) Pvt. Ltd., .. Respondent. Mr. Sham Walve with Mr. Pritish Chatterjee, for Appellant. CORAM: M.S.SANKLECHA & NITIN JAMDAR, JJ. DATE : 3rd SEPTEMBER, 2019. P.C:- This Appeal under Section 260-A of Income Tax Act, 1961 (the Act), challenges order dated 21 st October, 2015, passed by Income Tax Appellate Tribunal (the Tribunal). impugned order dated 21st October, 2015 is in respect of Assessment Year 2008-09. 2 Revenue urges following questions of law, for our consideration: (a) Whether on facts and in circumstance of case and in law, Tribunal was justified in law in directing that AO/TPO to make transfer pricing adjustment in respect of international transaction only and not on entire sales? (b) Whether on facts and in circumstances of case and in law, Tribunal was justified in directing TPO to exclude Genesys International Corp Ltd. from set of comparable? (c) Whether on facts and in circumstances of case and in law, Tribunal was justified in directing to grant risk adjustment without appreciating that assessee S.R.JOSHI 1 of 5 ::: Uploaded on - 09/09/2019 ::: Downloaded on - 10/09/2019 10:14:52 ::: itxa-1336-2017 has failed to show why risk adjustment is warranted by demonstrating link of risk with financial results of comparable? 3 Re. Question (a):- (i) impugned order of Tribunal allowed Respondent- Assessee s appeal on this issue by placing reliance upon decision of its Co-ordinate bench in case of M/s. Sandvik Asia Pvt. Ltd., v/s. ACIT decided on 27th September, 2013. In above case, it has been held that transfer pricing adjustment has to be restricted only to international transaction and cannot be applied to other transaction; (ii) Revenue being aggrieved by above order of Tribunal filed appeal to this Court being Income Tax Appeal No.1088 of 2015 (CIT v/s. Sandvik Asia Pvt. Ltd.,). This appeal was dismissed on 26th April, 2018 on this very question; (iii) Mr. Walve, learned Counsel appearing for Appellant, very fairly states that this issue, thus stands concluded by order of this Court in Sandvik Asia (supra). This Court while deciding this issue relied upon various decisions of this Court to hold that transfer pricing adjustment cannot be done at entity level but has only to be done in respect of international transactions of Assessee with its Associated Enterprises (AE) (iv) In view of above, question as framed does not give rise to any substantial question of law. Thus, not entertained. 4 Re. Question (b):- (i) Respondent is joint venture company and is in business of providing IT based Engineering Services for developing of CAD/CAM in Auto Parts;; S.R.JOSHI 2 of 5 ::: Uploaded on - 09/09/2019 ::: Downloaded on - 10/09/2019 10:14:52 ::: itxa-1336-2017 (ii) In respect of IT based Engineering Services provided by Respondent to its AE, Transfer Pricing Officer (TPO) had applied Transaction Net Margin Method (TNMM) to determine Arms Length Price (ALP) of services rendered to its AE. For aforesaid, TPO had included M/s. Genesys International Corporation Ltd., (Genesys) as comparable; (iii) In appeal impugned order of Tribunal excluded M/s. Genesys as comparable. On facts, it found that M/s. Genesys was providing Geospatial technologies. It required skilled manpower and scientists as well as civil engineers to provide its services. Further, it noted that services rendered by Respondent is with regard to IT based engineering services in respect of developing in CAD/CAM of M/s. Genesys auto parts. Thus, Tribunal found that so-called comparable is functionally different from Respondent. Therefore, would not be eligible comparable; (iv) Tribunal relied upon decision of its Co-ordinate Bench in case of Hyundai Motors India Engg. Pvt. Ltd. v/s. ITO ( Income Tax Appeal No. 1850/Hyd/2012 decided on 21st February, 2014) on similar fact, excluded M/s. Genesys from list of comparable to determine ALP of sale of M/s. Hyundai Motors (supra) to its AEs. It found that as R & D services in respect of auto parts, is functionally different from Geospatial Services. Thus, holding even in present facts M/s. Genesys is not comparable; (v) only contention urged on behalf of Revenue in support of impugned order is that M/s. Genesys was chosen as comparable of Respondent-Assessee itself. Therefore, it would be bound by its S.R.JOSHI 3 of 5 ::: Uploaded on - 09/09/2019 ::: Downloaded on - 10/09/2019 10:14:52 ::: itxa-1336-2017 selection and cannot now urge to contrary; (vi) So far as submission of Revenue is concerned of Assessee being barred from withdrawing company selected by it as comparable is concerned, we find that same is no longer res-integra. In CIT v/s. Tata Power Solar Systems Ltd., [2019] 77 taxmann.com 326, this Court negatived on identical submission on behalf of Revenue by observing as under:- We find that impugned order of Tribunal holding that party is not barred in law from withdrawing from its list of comparables, company, if same is found to have been included on account of mistake as on facts, it is not comparable. 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 same. Moreover, Assessee s submission in arriving at ALP is not final. It is for TPO to examine and find out companies listed as comparables which are, in fact comparable. impugned order has on FAR analysis found that M/s. Indowind Energy Ltd. and B.F. Utilities Ltd. are not comparable. They are in different area i.e. wind energy while Respondent- Assessee is in field of solar energy. One must not loose sight of fact that Transfer Pricing Regime is anti-tax avoidance provision and not anti-tax evasion provision. It is not based on premises that tax payer s price with its AE is not actual price. After having accepted price declared by Assesssee, it proceeds to determine Bench Mark price of such transaction to determine ALP of transaction with AE. Thus, entire exercise of Transfer Pricing provision is not adversarial in that sense but enquiry to S.R.JOSHI 4 of 5 ::: Uploaded on - 09/09/2019 ::: Downloaded on - 10/09/2019 10:14:52 ::: itxa-1336-2017 determine bench mark price by finding price of identical transaction between unrelated parties. Thus, we find no merit in primary submission on behalf of Revenue; (vii) On merits, we note that impugned order on facts found that M/s. Genesys is engaged in different business and, therefore, not functionally similar. This finding of fact is not shown to be perverse in any manner by Revenue; (viii) In above view, question as proposed does not give rise to any substantial question of law. Thus, not entertained. 5 Re. Question (c):- (i) We note from impugned order of Tribunal, that Appellant did not dispute that appropriate risk adjustment between Respondent-Assessee and its comparable is necessary in determining ALP. only grievance of Revenue before Tribunal was appropriate grant of risk adjustment to determine ALP is to be decided by Adjudicating Authority; (ii) impugned order of Tribunal has accepted grievance of Revenue and restored issue to TPO/Assessing Officer with direction to examine allowability of risk adjustment as claimed; (iii) In above facts and circumstances, question as proposed is pre-mature and does not give rise to any substantial question of law. Thus, not entertained. 6 Accordingly, Appeal dismissed. (NITIN JAMDAR,J.) (M.S.SANKLECHA,J.) S.R.JOSHI 5 of 5 Pr. Commissioner of Income-tax-4, Pune v. Visteon Engineering Centre (India) Pvt. Ltd