| COURT: | ITAT Delhi |
| CORAM: | A. T. Varkey (JM), R. S. Syal (AM) |
| SECTION(S): | 92C(1) |
| GENRE: | Transfer Pricing |
| CATCH WORDS: | Comparables, Transfer Pricing |
| COUNSEL: | Pankaj Gupta |
| DATE: | December 4, 2014 (Date of pronouncement) |
| DATE: | December 5, 2014 (Date of publication) |
| AY: | 2007-08 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| Transfer Pricing: Companies which are functionally similar to the assessee cannot be excluded merely because of high or low turnover | |
When a company is functionally similar to that of the assessee company, the same cannot be excluded merely because of its turnover at a higher or lower level. Here it is important to mention that sec. 92C(1) of the Income-tax Act, 1961 provides for the computation of Arm’s Length Prices by one of the methods prescribed therein. First proviso to sec. 92C(2) clearly provides that when more than one price are determined by the most appropriate method, then the Arm’s Length Prices shall be taken to be the arithmetic mean of such prices. It does not talk of excluding the companies with high or low turnover or high or low profit rate. Recently the Delhi Tribunal in Nokia India Pvt. Ltd. Vs DCIT (ITA No. 242/D/2010 etc.), vide its order dated 31.10.2014, has held that a potentially comparable case cannot be excluded for the reason of high or low turnover or high or low profit margin. In reaching this conclusion, the Delhi bench also considered a Special Bench order passed in the case of Maersk Global Centres (India) (P.) Ltd. Vs ACIT (2014) 147 ITD 83 (Bom.) (SB). In view of the fact that the assessee has admitted the functional comparability of the relevant segment of this company and the only difference pointed out is about its higher turnover, we are satisfied that this case cannot be excluded from the list of comparable.
Ratio of any decision must be understood is the background of the facts or that case . It has been said long time ago that a case to authority for what it actually decides and not what logically follow from it observed hon SC inAmbica Quary works v st of Guj;
Again what Ld Denning MR observed: ‘the method of application of of precedent have become Locus Clausius – ‘Each case depends on its own fact and a close similarity between one case and another is not enough; because even a single significant detail may alter the entire aspect, in deciding such case one (Judge)should avoid the temptation to decide cases (as said Cardazo) by matching the color of one against the color of another . To decide therefore on which side of the lines a case falls, the broad resemblance to another case is not at all decisive;
Precedent should be followed only so far as it makes the path of justice but you must cut the dead wood and trim of the sides branches else you will find yourself in the thicket (forest) and branches.
My pace is to keep the path of justice clear of obstruction which could impede.
So one need to follow such an experienced best justice in Lord Denning.
if the tribunal members follow Ld Lord Denning they can make a mark if not these members would be just some run of the mill kind only.
Only Ld. Members follow Lord Denning they too can limb ladder via high courts to supreme court what i believe!