|CORAM:||N. Barathvaja Sankar (VP), N. V. Vasudevan (JM)|
|CATCH WORDS:||Comparables, Transfer Pricing, Turnover Filter|
|DATE:||November 23, 2012 (Date of pronouncement)|
|DATE:||October 20, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Transfer Pricing: Turnover filter is an important criteria in choosing comparables|
(i) The ICAI TP Guidelines note on this aspect lay down in para 15.4 that a transaction entered into by a Rs. 1,000 crore company cannot be compared with the transaction entered into by a Rs. 10 crore company. The two most obvious reasons are the size of the two companies and the relative economies of scale under which they operate. The fact that they operate in the same market may not make them comparable enterprises.
(ii) A reading of the provisions of Rule 10B(2) of the Rules shows that uncontrolled transaction has to be compared with international transaction having regard to the factors set out therein. Before us there is no dispute that the TNMM is the most appropriate method for determining the ALP of the international transaction. The disputes are with regard to the comparability of the comparable relied upon by the TPO.
(iii) In this regard we find that the provisions of law as the decisions clearly lay down the principle that the turnover filter is an important criteria in choosing the comparables. The assessee’s turnover is RS. 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores (as laid down in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010). Thus, companies having turnover of more than 200 crores have to be eliminated from the list of comparables as laid down in several decisions referred to by the ld. counsel for the assessee.
Law is not an end itself just because we think something is right and something is wrong just because of some statute , when statute is amended what happens to that old statute, so Jus. W.Benson US SC rightly felt Law is not an end itself but it is a perception of right and wrong derived in a specified period of time only since law makers are not great Gods themselves to create a perpetual law as no sensible doctrines are involved but some kind of group opinion prevails, So in USA, even due process of law is based on Natural justice, but in India seems something prevails when you see when sec 271(1)(C) is applied by government servants with their very poor understanding of what is a mens rea, so indian constitutional courts are baffled by the way these worthies work;
so law is just some transitory function as in india we saw so may constitutional amendments say more than 100 in just 65+ years of Indian constitution functioning, when very indian constitution is battered by law makers what would you call these laws,,,!
see SARFAESI Act, sec 138 of Negotiable instruments Act they are some regulations but we call as law statutes though they do not satisfy minimum standards of what a common should be, though India under British rule applying a lot of common law principles but today…?
India has a lot of Regulating Acts which fall flat only in judicial reviews under Afr 226 or 32 as ultra vires when judicious review takes place by constitutional benches, i personally feel that IT rules are misused by misdirected public servants like so called Revenue officers who tale things and act on things arbitrarily, is the grievance of many Indian tax payers if you seriously look at them.
you might of noted in a Madras HC case on Sriram…construction co ….how tax man went against very judge of Madras high court, you may know what it shows about the revenue man, do you think he he was obedient to some statute itself but he misused sec 271(1)(C). sad is it not!
Revenue man thinks he is some God and like Balaji he takes donation to redress the problems but Balaji does not so!