Uday S. Jagtap 753-17-ITXA-38=.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 753 OF 2017 Pr. Commissioner of Income Tax-1 Appellant v/s. Sygenta Bioscience Pvt. Ltd. Respondent Mr. Suresh Kumar for appellant Mr. Nitesh Joshi i/b Mr. Atul K. Jasani for respondent CORAM : M.S. SANKLECHA & NITIN JAMDAR, J.J. DATED : 16th SEPTEMBER, 2019 P.C. 1. By this appeal, appellant Revenue has challenged order passed by Income Tax Appellate Tribunal, Mumbai, dated 25th May, 2016. present appeal pertains to Assessment Year 2008-09. 2. appellant has placed following questions of law for our consideration which according to appellant are substantial questions of law :- (a) Whether on facts and circumstances of case and in law, Tribunal erred in holding that Alphageo (India) 1 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc Ltd. is not comparable to assessee s Research & Technical Services business even though assessee is carrying on function of research and development activity in field of agro chemical industry, while Alpha Geo (India) Ltd. Is involved in business of research and development of seismic data functions similar to functions performed by assessee herein? (b) Whether on facts and circumstances of case and in law, Tribunal erred in holding that Alphageo (India) Ltd. is not comparable to assessee s Research & Technical Services business even though assessee and Transfer Pricing Officer (TPO) has conducted comparability analysis by adopting companies performing similar functions and activities without any similarity of products or industry? (c) Whether on facts and circumstances of case and in law, Tribunal erred in holding that Alphageo (India) Ltd. is not comparable to assessee s Research & Technical Services business even though ITAT, Bangalore held, in case of Bosch Ltd. Vs. ACIT (LTU) (IT(TP)A No. 670/Bang/2011 dated 20.08.2015), that M/s. Alphageo (India) Ltd., is in business of research and development of seismic data, functions similar to functioned performed by Bosch Ltd. i.e. research and development activities in field of automobile industry? (d) Whether on facts and circumstances of case and in law, Tribunal erred in holding that refundable deposit of Rs.1,86,47,800/- made by assessee with SIPCOT is allowable towards cost of acquisition of lease right, when transfer by way of assignment of deposit with SIPCOT by 2 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc assessee as Vendor to Purchaser is part settlement of overall consideration decided by parties to transaction at Rs.6,45,00,000/- for transfer of lease-hold land, building and plant and machinery? 3. respondent assessee Sygenta Bioscience Pvt. Ltd. carries out research and technical services to Syngenta Group which is in business of HYV Seeds and Crop Protection Sciences internationally. 4. return of income for Assessment Year 2008-09 was filed by respondent assessee on 30 th September, 2008 declaring total income as NIL. After adjusting brought forward loss and respondent assessee paid tax on book profit of Rs.1,60,96,269/-. 5. questions of law at (a), (b) and (c) are essentially same viz. whether M/s. Alphageo (India) Ltd. (M/s. Alphageo) could be considered as comparable for bench marking to determine Arms Length Price (ALP) of its services to its Associate Enterprises (AE). Thus, being considered together. 6. case of respondent assessee was selected for scrutiny. reference was made to Transfer Pricing Officer (TPO) under Section 92CA of Income Tax Act (Act) for determination of Arms Length Price (ALP) in case of international transactions of respondent assessee. In its Transfer Pricing Study, respondent assessee included 9 comparables, one of them was M/s. Alphageo. TPO rejected three of comparables as being functionally 3 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc different. respondent assessee had filed reply and had stated that as three of nine comparables selected as comparables had been rejected on ground of not being functionally similar, M/s. Alphageo also be removed as comparable for being functionally different. TPO did not accept same and proceeded to consider M/s. Alphageo and others (excluding three) as comparable and proceeded to make adjustment of Rs. 1,55,48,991/- by order dated 30th September, 2011. In terms of above, Assessing Officer i.e. Deputy Commissioner of Income Tax passed assessment order on 24th January, 2012 under Section 143(3) r/w Section 144C of Act. 7. respondent assessee filed appeal before Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals) dismissed appeal filed by respondent assessee by order dated 2nd December, 2014. 8. respondent assessee thereafter filed appeal before Income Tax Appellate Tribunal. respondent assessee contended that ALP arrived at was not correct. Tribunal upheld contention of respondent assessee that M/s. Alphageo was not comparable for bench marking ALP. Thus, restoring issue to Assessing Officer / Transfer Pricing Officer to rework ALP. Accordingly, impugned order dated 22nd April, 2016 Tribunal allowed appeal of respondent on this issue. 4 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc 9. We have heard Mr. Suresh Kumar, learned Counsel appearing for appellant and Mr. Joshi, learned Counsel appearing for respondent. 10. main contention advanced by Mr. Suresh Kumar on this question is that as respondent assessee having itself included M/s. Alphageo as one of comparables then it cannot now argue that this entity should not have been considered as comparable. It is not case of Revenue before us that M/s. Alphageo is includable as comparable on merits, but only that respondent had relied upon it as comparable in its transfer pricing study. This submission is not correct. Division Bench of this Court in case of Principal Commissioner of Income Tax Vs. J.P Morgan India (P) Ltd. 1 held that mere fact that assessee included entity in list of comparables, would not bar assessee from contending otherwise before TPO. entire exercise of determining ALP is not adversarial but collaborative process and TPO s endavour is to arrive at appropriate ALP. As TPO is authority to determine appropriate ALP. 11. next aspect is whether Tribunal was right in holding that M/s. Alphageo was not comparable for determination of Arms Length Price in respect of respondent assessee. authorities 1 (2019) 102 Taxmann.com 335 5 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc had rejected Dolphin Medical Services, Medinova Diagnostic Services and N.G. Industries as not comparables because they were functionally different than respondent. Therefore, TPO had adopted functional test. On basis of above text, respondent was right in making grievance that same test should have been applied to M/s. Alphageo to determine its comparability. 12. M/s. Alphageo is in business of oil exploration and production of oil. It carries out research activity in seismic data. respondent does research and chemical analysis for agro chemicals. On face of it functions of two entities is different. This being position, if Tribunal held that M/s. Alphageo was not comparable, it is possible view, on analysis of evidence. 13. Mr. Suresh Kumar, sought to place before us decision rendered by Income Tax Appellate Tribunal, Banglore in case of Basch Ltd. Vs. Assistant Commissioner of Income-tax (LTU), Banglore2 where Alphageo was held to be comparable to assessee therein. This decision was rendered in context of Tribunal on facts finding that Assessee therein and M/s. Alphageo are functionally comparable. In present case, Tribunal on facts found that M/s. Alphageo and respondent are not comprable. Thus, decision of Tribunal in case of M/s. Bosh (supra) does not assist appellant. Therefore, questions (a), (b) and (c) do not give rise to any substantial question of law and 2 (2015) 64 taxmann.com 456 6 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc thus they are not entertained. 14. As regards question (d) is concerned, Assessing Officer during scrutiny proceedings noted that respondent had sold its property in Tamil Nadu. It showed sale consideration at Rs.4.58 crores and claimed as cost of acquisition Rs.23.31 lakhs while computing capital gains. Assessing Officer added sum of Rs.1.86 crores to sale consideration being deposit respondent had made with State Industries Promotion Corporation of Tamil Nadu (SIPCOT) at time of obtaining lease and now returned to it. This amount was assessed by Assessing Officer as short term capital gains on relinquishment of its rights in property. 15. Tribunal has held that refundable deposit of Rs. 1,86,46,800/- made by respondent with SIPCOT, Tamil Nadu is allowable towards cost of acquisition of lease hold rights of property in Tamil Nadu, which is now sold. Assessing Officer as well as Commissioner of Income Tax (Appeals) included this amount as part of sale consideration while computing capital gains. Tribunal held that if it is considered as sale consideration then, respondent assessee was entitled to it as cost of acquisition for purpose of computing capital gains. 16. Thus, entire exercise would be Revenue neutral. In these 7 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Uday S. Jagtap 753-17-ITXA-38=.doc facts, there is no error in view taken by Tribunal. Thus, it does not give rise to any substantial question of law. Thus, not entertained. 17. In these circumstances, Appeal is dismissed. (NITIN JAMDAR, J.) (M.S. SANKLECHA, J.) 8 of 8 ::: Uploaded on - 01/10/2019 ::: Downloaded on - 03/10/2019 09:33:45 ::: Pr. Commissioner of Income-tax-1 v. Sygenta Bioscience Pvt. Ltd