Appeal

 No substantial question of law arises in the appeal — The Tribunal, while entertaining the additional ground raised by the assessee for the exclusion of a comparable, remanded the matter to the AO allowing an opportunity to the assessee to produce material before the AO for determination of the ALP, and after the remand and consideration of the material produced by the assessee in terms of the order of the Tribunal, an order in favour of the assessee has been passed by the PHHC in CIT v Quark Systems India (P) Ltd — In favour of: The assessee; ITA No 594 of 2010.

CIT v Quark Systems India (P) Ltd.

High Court of Punjab and Haryana

ITA No. 594 of 2010

Adarsh Kumar Goel, Chief Justice and Ajay Kumar Mittal, J

Decided on: 16 May 2011

Counsel appeared:

Urvashi Dhugga for the appellant

Judgment

Ajay Kumar Mittal, J

1. This appeal has been preferred by the revenue under section 260A of the Income-tax Act, 1961 (in

short "the Act") against the order dated 22-10-2009 passed by the Income-tax Appellate Tribunal,

Chandigarh Special Bench, Chandigarh (hereinafter referred to as "the Tribunal") in ITA No.

115/Chd./2009, for the assessment year 2004-05, claiming the following substantial question of law:-

"Whether on facts and circumstances of the case and in law the ITAT's decision was justified

in accepting additional ground raised by the assessee to exclude the case of M/s. Datamatics

Technologies Ltd., which was chosen by the assessee itself and whether the ITAT was

justified in remanding the issue of exclusion of M/s. Datamatics Technologies Ltd., along

with its observation on the facts of the issue, which is likely to have a bearing on the decision

of the TPO?"

2. Briefly stated, the facts necessary for disposal as narrated in the appeal are that the assessee is an Indian company, fully owned subsidiary of a Switzerland based company known by the name of

Quark Systems SARL, Switzerland (QSSS). During the course of assessment proceedings, a reference

was made to the Transfer Pricing Officer (TPO) for determination of Arm Length Price qua the

international transactions which the assessee entered into with its parent company. The TPO noticed that the assessee had employed Transactions Net Margin Method for the purpose of computing Arm Length Price and did not dispute the same. He further noticed that one of the comparables, out of independent comparable selected by the assessee for the computation of Arm's Length Price was M/s. Imercius Technologies India (P.) Ltd. which showed a net loss at the rate of 73.48 per cent. The TPO rejected M/s. Imericus Technologies India (P.) Ltd. as comparable holding that the said company was incorporated in 2002 only and its networth was negative whereas turnover was also less than the turnover of the tested party. Accordingly, the TPO passed an order under section 92CA(3) of the Act on 23-11-2006 determining the Arm's Length Price of remuneration received by the assessee for software development services at Rs.15,56,82,397 as against Rs.13,06,27,301. Thus, an adjustment to the Arm's Length Price was made at Rs.2,50,55,096. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) [in short "the CIT(A)"] who vide order dated 28- 11-2008 partly allowed the appeal granting the benefit of 5 per cent to the assessee under section 92C(2) of the Act and dismissed the same with regard to use of multiple years data and the selection of M/s. Imercius Technologies India Pvt. Ltd. as comparable. Against the order of the CIT(A), the department as well as the assessee filed appeals before the Tribunal. The Tribunal vide order dated 22-10-2009 upheld the exclusion of M/s. Imercius Technologies India Pvt. Ltd. as comparable and remanded the issue of 5 per cent relaxation to the Assessing Officer to reconsider the same in view of the amendment in section 92C(2) of the Act. The Tribunal further accepted the additional ground taken by the assessee for exclusion of M/s. Datamatics Technologies from the list of comparables for the purpose of determination of Arm's Length Price. Hence, the present appeal by the revenue.

3. We have heard learned counsel for the revenue.

4. The issue involved in this case is whether the Tribunal was justified in entertaining the additional

ground for exclusion of M/s. Datamatics Technologies as comparable and remanding the case to the

Assessing Officer whereby it had directed that the assessee shall be entitled to produce all relevant

material for determination of proper Arm's Length Price and shall co-operate for expeditious disposal of the matter.

5. On a query being put to the learned counsel for the revenue as to what has happened before the

Assessing Officer after the remand, she candidly admitted that the order has been passed in favour of the assessee on 11-1-2010 and has produced a copy of the said order passed under section 92CA(3) of the Act.

6. In view of the observations of the Tribunal whereby an opportunity was provided to the assessee to produce material before the Assessing Officer and the fact that after the remand and consideration of the material produced by the assessee in terms of the order of the Tribunal, an order in favour of the assessee has been passed, no question of law much less a substantial question of law arises in this appeal for consideration of this Court. Accordingly, the present appeal is dismissed.