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2015 (5) TMI 936 - PUNJAB & HARYANA HIGH COURT

2015 (5) TMI 936 - PUNJAB & HARYANA HIGH COURT - TMI - Transfer pricing adjustment - selection of M/s Torrent Gujarat Biotech Limited and M/s Standard Pharmaceuticals Limited as comparables as directed by ITAT - Held that:- The issues that arise in this case do not raise a question of law much less a substantial question of law. The Tribunalís order is far from perverse or absurd. It was a possible view. It was in fact a view that the TPO himself took by selecting Standard Pharmaceuticals Limite .....

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d Mr. Sanjay Kumar, Advocates for the respondent JUDGEMENT S.J. VAZIFDAR, ACTING CHIEF JUSTICE: This is an appeal against the order of the Income Tax Appellate Tribunal dated 08.08.2013 in so far as it directs the Transfer Pricing Officer (TPO) to consider Torrent Gujarat Biotech Limited and Standard Pharmaceuticals Limited as comparables for the purpose of determining the arms length price (ALP) in respect of the international transaction entered into by the respondent in respect of the assessm .....

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filter. The question was re-framed and tendered across the bar. The only question before us is whether the Tribunal erred in directing the TPO to include the two companies as comparables. 3. During the assessment year 2005-06, the respondent/assessee entered into various international transactions with its associated enterprises inter alia for the purchase of raw material and finished goods, export of finished goods, purchase of capital goods, interest on loans, reimbursement of expenses and fo .....

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cing study on various grounds. With respect to Torrent Gujarat Biotech Limited, the TPO held that the proportion of the main ingredient, Penicillin-G (PEN-G), as a raw material was negligible. After going through a detailed selection process, the TPO selected as comparables three companies namely, Aurobindo Pharma Ltd., Nectar Life Sciences Ltd. and Standard Pharmaceuticals Ltd. It is sufficient at this stage only to note that the usage of PEN-G by Standard Pharmaceuticals Limited in proportion .....

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net worth were rejected. It may be noted at this stage that the first filter, namely, only companies using Penicillin-G as raw material, did not stipulate the extent of usage of Penicillin-G. 5. For the year 2005-06, the respondent chose the CIT route. Against the order of assessment based on the report of the TPO, the respondent filed an appeal before the Commissioner of Income Tax (Appeals). It did not take the matter before the Dispute Resolution Panel (DRP). It chose the DRP route in the sub .....

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th certain other appeals by the common order which is impugned in the present appeal. The appellant/department contended that the CIT (Appeals) had wrongly rejected Aurobindo Pharma Limited as a comparable and the respondent/assessee contended that the CIT (Appeals) had wrongly rejected Torrent Gujarat Biotech Limited as a comparable. 7. The Tribunal held as appropriate comparables four companies, namely, Torrent Gujarat Biotech Limited, Aurobindo Pharma Limited, Nectar Life Sciences Limited and .....

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applied by the TPO of selecting only companies using PEN-G as raw material did not specify the extent of use of PEN-G as compared to the total sales of the company. Indeed, the TPO himself had obviously not considered the extent of use of PEN-G as compared to the total sales of a company or as compared to the total use of ingredients by a company to be a determinative factor. This is evident from the fact that the TPO, as we noted earlier, considered Standard Pharmaceuticals Limited to be one o .....

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annot be said to be perverse or absurd. It is, to say the least, a possible view. 8. Indeed, the Tribunal went a step further and in fairness to the department also included Standard Pharmaceuticals Limited as a comparable. This was only logical in view of its finding that a company ought to be considered as an appropriate comparable irrespective of its percentage of use of PEN-G to the total raw material. 9. Faced with this, Mrs. Dhugga contended that the Tribunal has erred in including Standar .....

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to determine whether or not Torrent Gujarat Biotech Limited was an appropriate comparable. The Tribunal s conclusion was not based merely upon the department having initially considered Standard Pharmaceuticals Limited to be a comparable. It came to the conclusion also on the ground that the filters adopted by the TPO did not stipulate the percentage of use of PEN-G by a company of its total sales or use of raw material. 10. Mrs. Dhugga then contended that Torrent Gujarat Biotech Limited did no .....

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