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2017 (12) TMI 631

TPA - Computation of income from international transaction having regard to arm's length price - comparability selection of M/s.HMT Limited - Held that:- In the instant case, whether M/s.HMT Limited can be a comparable or not is a factual issue. The learned Tribunal has factually assessed the similarities between M/s.HMT Limited and the respondent assessee and the same, in our considered opinion, does not warrant interference of this Court under Section 260A of the Income Tax Act, 1961. - Tax Ca .....

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nts with M/s.Greaves Limited and set up two joint venture companies M/s.SAME Greaves Limited and M/s.SAME Greaves Tractors Limited. 4. In 2002, the SAME Group of companies acquired the stake of Greaves Ltd. in the two joint venture companies, after which the two Indian companies were renamed M/s.SAME India and M/s.SAME Deutz-Fahr India Private Limited. 5. To achieve operational and financial synergy and minimize operating costs, M/s.SAME Deutz-Fahr India Private Limited was amalgamated with SAME .....

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, 1961, as they stood at the material time are set out herein below for convenience: Section 92. Computation of income from international transaction having regard to arm's length price.- (1)Any income arising from an international transaction shall be computed having regard to the arm's length price. Explanation.- For the removal of doubts, it is hereby clarified that the allowance for any expense or interest arising from an international transaction shall also be determined having rega .....

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tax or increasing the loss, as the case may be, computed on the basis of entries made in the books of account in respect of the previous year in which the international transaction was entered into. Section 92C. Computation of arm's length price. (1) The arm's length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associa .....

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Transfer Pricing Officer (TPO) for determination of the Arm's Length Price of the international transaction. 9. The respondent assessee adopted Transactional Net Margin Method (TNMM) as the appropriate method to determine the ALP of its international transactions of purchase of raw materials and components. The assessee identified five comparables and it made adjustment on account of idle capacity on comparables in order to arrive at ALP of its purchase transaction. The respondent assessee a .....

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ing Officer undertook a fresh search and identified himself two comparable companies: i) Mahendra Gujarat Tractors ii) HMT Limited. Thereafter on his own, the Transfer Pricing Officer removed these two companies as comparable also and only considered the comparable company as given by the assessee, i.e. VST Tillers Ltd., and being the sole comparable and decided the issue of arms-length whereby made addition/adjustment of transfer pricing at ₹ 1,66,03,225/- and that too also on components .....

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as comparable merely because of the turnover. The turnover of the M/s.HMT Ltd., for the AY 2005-06 was ₹ 248.00 Cr. as against the assessee's company turnover of ₹ 120.00 Cr. It is impossible to find out comparable with all similarities inclusive of turnover. Even M/s.VST Tiller selected by TPO was with ₹ 130.00 Cr. The turnover filter with turnover 3-5 times is acceptable for selecting the comparable as per the decisions of the tribunals. In the Appellant's case, the .....

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same turnover. The learned Tribunal found, on facts, that both M/s.HMT Limited and the respondent assessee were in the segment of manufacture of tractors and power tillers and that all the functions of M/s.HMT Limited and the respondent assessee were the same. The TPO ought not to have rejected M/s.HMT Limited as a comparable only because of its higher turnover, as it would be impossible to find out comparables with all similarities, including similarity of turnover. 17. In the grounds of appeal .....

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(2) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or an Assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be- (a) filed within one hundred and twenty days from the date on which the order appealed against is received by the Assessee or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. (b) [***]; (c .....

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ormulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 19 .....

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levant paragraphs of the judgment of the Supreme Court in Hero Vinoth (supra) are set out herein below : 21. The phrase substantial question of law , as occurring in the amended Section 100 CPC is not defined in the Code. The word substantial, as qualifying question of law , means of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with technical, of no substance or consequence, or academic merely. However, it .....

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alapudi Subba Rao v. Noony Veeraju [AIR 1951 Mad 969 : (1951) 2 MLJ 222 (FB)] : (Sir Chunilal case [1962 Supp (3) SCR 549 : AIR 1962 SC 1314] , SCR p. 557) When a question of law is fairly arguable, where there is room for difference of opinion on it or where the Court thought it necessary to deal with that question at some length and discuss alternative views, then the question would be a substantial question of law. On the other hand if the question was practically covered by the decision of t .....

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e applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law. 22. In Dy. Commr. v. Rama Krishna Narain [1954 SCR 506 : AIR 1953 SC 521] also it was held that a question of law of importance to the parties was a substantial question of law entitling the appellant to a certificate under (the then) Section 100 CPC. 23. To be substantial a question of .....

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pelling necessity of avoiding prolongation in the life of any lis. (See Santosh Hazari v. Purushottam Tiwari [(2001) 3 SCC 179] .) 24.The principles relating to Section 100 CPC relevant for this case may be summarised thus : (i) An inference of fact from the recitals or contents of a document is a question of fact. But the legal effect of the terms of a document is a question of law. Construction of a document involving the application of any principle of law, is also a question of law. Therefor .....

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l debatable, but because the decision rendered on a material question, violates the settled position of law . (iii) The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have w .....

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