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2019 DIGILAW 630 (BOM)

Pr. Commissioner Of Income Tax v. Pfizer Limited

2019-03-04

AKIL KURESHI, M.S.SANKLECHA

body2019
JUDGMENT Akil Kureshi, J. - This appeal under section 260A of the Income Tax Act, 1961 (Act), challenges the order dated 6.11.2015 passed by the Income Tax Appellate Tribunal, Mumbai ("the Tribunal" for short). 2. This appeal relates to the Assessment Year 2003-04. 3. The Revenue urges following question for our consideration:- " Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct in upholding the order of CIT(A) directing to exclude the comparables of SIRO Clinpharm Pvt Ltd., Choksi Laboratories., M/s. Syngene International Pvt Ltd as a comparable for determining the Arm''s Length Price of the international transaction of the assessee company?" 4. Respondent assessee is a company engaged in manufacture and sale of pharmaceutical products. During the assessment year under consideration, the respondent had entered into number of international transactions with its Associated Enterprises ("AE" for short). Thus, leading to the issue of Arm''s Length Price (''ALP'' for short) of the transactions entered into by the respondent assessee with its AEs. 5. For the aforesaid purpose, the respondent assessee in its transfer pricing study had included SIRO Clinpham Pvt Ltd and Choksi Laboratories Ltd as comparable. However, thereafter it contended that both SIRO Clinpham Pvt Ltd and Choksi Laboratories Ltd are not comparable and sought exclusion of both from the list of comparables. This prayer for exclusion of SIRO Clinpham Pvt Ltd and Choksi Laboratories Ltd from the list of comparables was accepted by the impugned order of the Tribunal. 6. So far as Syngene International Pvt Ltd is concerned, the Transfer Pricing Officer ("TPO" for short) included this as comparable to determine the ALP of the respondent''s transaction with its AEs in spite of the respondent assessee''s objection. Eventually, the Tribunal by the impugned order held that M/s. Syngene International Pvt Ltd is not a comparable and exclusded it from the list of comparables. 7. The Revenu''s grievance is to the exclusion of the above three entities from the list of comparables to determine the ALP. We shall take up each of the entities which have been excluded as comparable for determining the ALP individually and examine the same in the context of challenge to the impugned order of the Tribunal. 8. SIRO Clinpham Pvt Ltd ("M/s. SIRO" for short) : 8.1 Mr. We shall take up each of the entities which have been excluded as comparable for determining the ALP individually and examine the same in the context of challenge to the impugned order of the Tribunal. 8. SIRO Clinpham Pvt Ltd ("M/s. SIRO" for short) : 8.1 Mr. Suresh Kumar, the learned counsel in support of the appeal submits that M/s. SIRO has to be taken as comparable to determine the ALP of the respondent''s transaction with its AE for following two reasons:- (a) It was included as comparable by the respondent itself in its transfer pricing study and therefore, bound by it; and (b) In the immediately preceding assessment years i.e assessment year 2002-03, M/s. SIRO had been included as comparable by the Tribunal by its order dated 8.3.2013. However, while including M/s. SIRO as a comparable, the Tribunal in the earlier order dated 8.3.2018 had restored the issue to the Assessing Officer to make certain adjustments on account of difference in the business model adopted by M/s. SIRO and the respondent. This inclusion not being challenged by the respondent, is not now open to challenge. 8.2 So far as the first objection is concerned, the same is not sustainable as this Court in case of Commissioner of Income Tax v. M/s. Tata Power Solar Systems Ltd (Income Tax Appeal No. 1120 of 2014 decided on 16.12.2016) which upheld the order of the Tribunal held that merely because an assessee had included a particular company as comparable, it would not by itself estop / prohibit a party from withdrawing it from the list of comparables. The entire object of transfer pricing study is an exercise to determine the ALP of the transaction entered into between the respondent assessee and its AE. Therefore, if an assessee in view of mistake or an incorrect advice does include and / or exclude a company from the list of comparables, it is not irrevocable / irreversible. Thus, if on facts, the assessee is able to establish that the company if sought to include is not comparable, it is not to be included in the list of comparable. Thus, there is no merit in the first objection on behalf of the Revenue. 8.3 So far as the second objection is concerned, Mr. Thus, if on facts, the assessee is able to establish that the company if sought to include is not comparable, it is not to be included in the list of comparable. Thus, there is no merit in the first objection on behalf of the Revenue. 8.3 So far as the second objection is concerned, Mr. Suresh Kumar for the Revenue invited our attention to the fact that the Tribunal by its order dated 8.3.2013 for assessment year 2002-03 had accepted M/s. SIRO in its list of comparables to determine the ALP of the respondent. However, in view of the difference between the business model between M/s. SIRO and the respondent, the Tribunal had restored the issue to the Assessing Officer for appropriate adjustment while determining the ALP. This was so because M/s. SIRO''s business model is based on inhouse activity while that of the respondent is based on outsourcing activity. This order of the Tribunal dated 8.3.2013 was challenged before this Court by the Revenue being Income Tax Appeal No. 2183 of 2013 for being restored to the Assessing Officer. However, the same was dismissed by this Court on 27.6.2016. However, the order dated 8.3.2013 in respect of assessment year 2002-03 was not challenged by the respondent assessee. Thus, there is no justification for the impugned order of the Tribunal to exclude M/s. SIRO from the list of comparables. The above submission on behalf of the Revenue ignores the fact that for subject assessment year, there was a change in law in view of the decision of this Court and the Delhi High Court. In fact, the impugned order noted in the case of Rampgreen Solutions P Ltd vs. Commissioner of Income Tax [2015] 377 ITR 533 (Delhi) (decided on 10.8.2015) that where a business model of the proposed comparable is different from the business model of the tested party, then the two entities ceased to be comparable for determination of ALP. It is to be noted that on 26.3.2018, this Court in the case of Commissioner of Income Tax vs. Aptara Technology P Ltd [2018] 92 taxmann.com 240 (Bombay) had held that the company which outsources it work is not comparable for ALP determination with a company that does the activity inhouse. Therefore, no fault can be found with the impugned order of the Tribunal in applying the binding decision of this Court. Therefore, no fault can be found with the impugned order of the Tribunal in applying the binding decision of this Court. Therefore, in view of the decisionof this Court in Aptara Technology P Ltd (supra), the question as proposed to the extent it seeks to include M/s. SIRO does not give rise to any substantial question of law. Thus, not entertained. 9. M/s. Choksi Laboratories Ltd : 9.1 It is an agreed position between the parties that M/s. Choksi Laboratories Ltd has a business model which is different from the business model adopted by the respondent assessee namely it carried out clinical trial activity, itself while the respondent outsourced the same. Therefore, they are not comparable. In view of the decision of the Delhi High Court in Rampgreen Solutions P Ltd (supra) and the decision of this Court in the case of Aptara Technology P. Ltd (supra), no fault can be found with the impugned order of the Tribunal holding that M/s. Choksi Laboratories Ltd is not a comparable to the respondent assessee for the purpose of benchmarking the ALP. Therefore, in view of the decision of this Court in Aptara Technology P Ltd (supra), the question as proposed to the extent of seeking to include M/s. Choksi Laboratories Ltd as comparable does not give rise to any substantial question of law. Thus, not entertained. 10. M/s. Syngene International Pvt Ltd: 10.1 The impugned order of the Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) excluding this entity from the list of comparable to benchmark the assessee''s ALP of transactions entered into with its A.Es. The impugned order of the Tribunal records the fact that this entity is wholly owned subsidiary of M/s. Bicon Ltd and is having substantial related party transactions. This fact has not been disputed by the Revenue before the Tribunal nor before us. Thus, the question of including M/s. Syngene International P Ltd would not arise in determining the ALP of the respondent assessee transactions with its A.Es. Therefore, the concurrent finding of facts by the Commissioner of Income Tax (Appeals) as well as the Tribunal in excluding this entity cannot be faulted with in the absence of the Revenue showing it to be perverse. Therefore, the concurrent finding of facts by the Commissioner of Income Tax (Appeals) as well as the Tribunal in excluding this entity cannot be faulted with in the absence of the Revenue showing it to be perverse. Thus, the question as proposed to the extent of seeking to include M/s. Syngene International P Ltd in the list of comparable, does not give rise to any substantial question of law. Thus, not entertained. 11. For the reasons stated herein above, the question as proposed does not give rise to any substantial question of law. Hence, not entertained. 12. Accordingly, the appeal is dismissed.