Principal Commissioner Of Income Tax Gandhinagar v. Tudor India Private Limited

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 106 of 2019 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX GANDHINAGAR VersusTUDOR INDIA PRIVATE LIMITED ========================================================== Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1MR MANISH J SHAH(1320) for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAandHONOURABLE MR.JUSTICE A.C. RAO Date : 27/08/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.This tax appeal under Section 260-A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad 'D' Bench, Ahmedabad dated 07.09.2018 in the ITA No.381/Ahd/2015 for the A.Y. 2010-11. 2.The Revenue has proposed the following two questions of law for the consideration of this Court; “(A) Whether the Appellate Tribunal has erred in law and on facts o the case in deleting the upward adjustment amounting to Rs.3,47,66,541/- made by Transfer Pricing Officer on account of Management fees? (B)Whether the Appellate Tribunal has erred in law and on facts in deleting the upward adjustment amounting to Rs.2,46,527/- made by Transfer Pricing Officer on account of Insurance Payment?” 3.It appears from the materials on record that the assessee filed its return of income on 29.10.2010, declaring the total income at Rs. NIL and showed the book profit of Rs.2,64,64,686/- under Section 115JB of the Act. The case was selected for scrutiny and, accordingly, notice under Section 143(2) of the Act was issued. The case was referred to the Transfer Pricing Officer as per Section 92CA of the Act. The Transfer Pricing Officer made the upward adjustment of Rs.3,50,13,068/- for the payment of management and allocation for both the AE's and insurance allocation, i.e. Rs.3,47,66,541/- plus Rs.2,46,527/-. The assessee was intimated regarding the order passed by the Transfer Pricing Officer and the proposed additions. The draft order was passed on 10.02.2014 considering the upward adjustment made by the Transfer Pricing Officer and the same was communicated to the assessee. 4.The assessee, being dissatisfied with the order passed by the Transfer Pricing Offiicer, approached the Dispute Resolution Panel, Ahmedabad. The Dispute Resolution Panel, Ahmedabad, vide order dated 28.11.2014, upheld the upward adjustment of Rs.3,50,13,068/- for the payment of management allocation for both the AEs and insurance allocation (i.e. Rs.3,47,66,541/- plus Rs.2,46,527/-) as proposed by the Transfer Pricing Officer. In view of Section 44(C)(10) of the Act, the upward adjustment was added to the total income of the assessee. 5.The assessee, being dissatisfied with the order of the Dispute Resolution Panel, preferred an appeal before the Appellate Tribunal. The Appellate Tribunal deleted the addition on account of the upward adjustment made by the Transfer Pricing Officer to the tune of Rs.3,50,13,068/- for the payment of management allocation as referred to above. 6.Being dissatisfied with the order passed by the Appellate Tribunal,the Revenue is here before this Court with the present appeal. 7.The substantial ground of challenge to the order passed by the Appellate Tribunal, as pleaded in the memo of the tax appeal, is as under: 5.The assessee, being dissatisfied with the order of the Dispute Resolution Panel, preferred an appeal before the Appellate Tribunal. The Appellate Tribunal deleted the addition on account of the upward adjustment made by the Transfer Pricing Officer to the tune of Rs.3,50,13,068/- for the payment of management allocation as referred to above. 6.Being dissatisfied with the order passed by the Appellate Tribunal,the Revenue is here before this Court with the present appeal. 7.The substantial ground of challenge to the order passed by the Appellate Tribunal, as pleaded in the memo of the tax appeal, is as under: “The decision of the Appellate Tribunal is erroneous. With respect to payment of management fee, the assessee failed to produce evidence in support for allocation of expenditure at 11.7% and also failed to provide the basis of the estimation of time spent by the President Asia Pacific for supervising the operations of the group entities. The assessee failed to demonstrate the claim of ALP of the management fee. No details were submitted to support of the estimation of time spent by the president-Asia Pacific and no basis was submitted for taking the figure of 11.72%. The assessee also failed to submit that how the experience of Mr.Lu was utilized for the benefit of the assessee company. In absence of any documentary evidences and concrete reply of the assessee to justify the receipt of benefit by the assessee from the payment of such management fees (through non submission of evidence to show that President -Asia Pacific had indeed devoted time for supervising the Operations) and in absence of any documentary evidence to justify the arm’s length nature of this payment, the management fee was considered at NIL by the A0 is justified. Regarding payment towards allocation of insurance cost, the assessee paid an amount of Rs.2,46,527/ on account of insurance premium on public liability. Since there was duplication, the assessee submitted that this payment does not cover any product liability which gets covered from the Master Policy taken by the parent. The assessee has not produced any evidence to substantiate this claim. The assessee neither submitted the actual policy document nor its copy to show that the AE had taken out the insurance covering the assessee’s risk and not only AEs risk though arising through the assessee. The assessee has not clarified as to whether insurance against public liability covers claims arising from defective or malfunctioning of products. Therefore the TPO had considered the payment to the AE as not required by the assessee’s business and duplicate in nature. Therefore the insurance payment to the AE is considered by AO as NIL is justified. The tax effect involved in this case is Rs.1,03,93,261/- which exceeds the limit as prescribed by the Board vide Circular No.03/2018 dated 11.07.2018” 8.The relevant observations made by the Dispute Resolution Panel, in its order dated 28.11.2014 is as follows; The tax effect involved in this case is Rs.1,03,93,261/- which exceeds the limit as prescribed by the Board vide Circular No.03/2018 dated 11.07.2018” 8.The relevant observations made by the Dispute Resolution Panel, in its order dated 28.11.2014 is as follows; “It is contended by the assessee that Mr. Lu was a very competent, experienced and highly knowledgeable person whose benefit was utilized by the assessee. However, how the said benefit was utilized was not submitted. Two types of email correspondences were submitted-one showing his involvement in the decision making about the expansion of project related to increase in capacity utilization and the other showing the supervision carried out by him in respect of procurement of lead plates and control of receivables. The fact that he was appointed by the group to oversee the working of the entities in Asia Pacific indicates towards the fact that he is making supervision on account of the parent and thus the activities are in nature of share holding activities. In the emails provided, almost all of them pertain to his approval for placing purchase orders or show the control he exercises in respect of smallest decision making. The fact that even purchase orders are being sent to him for approval signifies the control that the parent group is exercising over the subsidiaries. Therefore these activities are more in the nature of supervising activities being undertaken on behalf of the parent rather than any activity which could benefit the assessee. Therefore, it can be seen that the activities being undertaken by Mr. Lu are more in the nature of shareholding activities for the parent group and thus no charge for the same needs to be levied. iv. Further the assessee could not justify if such services were indeed required by it or called for by it from the Asia Pacific headquarters or they were simply piled upon it since it was a group entity. v.As per para 4.2 of the agreement, as reproduced below, all the expenses incurred by the office of Mr Lu are first required to be allocated to the “beneficiary” entities on the basis of time spent. “4.2 The APBA expenses referred to in clause 4.1 above shall be allocated to the Reporting entities on the basis of time spent, which is best estimated and determined by the PAP, on each of the reporting entities in accordance with the business volumes and complexity of operations. The APBA expenses so allocated among the reporting entities as provided in this clause 4.2 shall be shared in accordance with the following ratio (Cost sharing ratio”):- GNB-H:2.42%,Exide-China:13.86%,Exide-Singapoer:10.29%, GNB-Japan:2.40%, Exide Australia: 44.91%, Exide-New Zealand:10.46%, GNB-India-3.94%, Tudor-Indiazl1.72%” However this estimation of time is to be made by Mr. Lu himself. In respect of this allocation also no documentary evidence was submitted to justify the estimation of time spent by Mr. Lu on the activities of all the subsidiaries. As per the terms of agreement, it is this expenditure which is then shared by the reporting entities. Its further allocation at 11.72% was also could not be substantiated. It was accepted by the assessee that no reconciliation was made subsequently to align the arbitrary figure of 11.72% with the actual time spent by Mr Lu. Even though there was no requirement for such reconciliation, as per the agreement, for the purposes of finding the arms length price for such payment, it is necessarily required. However this estimation of time is to be made by Mr. Lu himself. In respect of this allocation also no documentary evidence was submitted to justify the estimation of time spent by Mr. Lu on the activities of all the subsidiaries. As per the terms of agreement, it is this expenditure which is then shared by the reporting entities. Its further allocation at 11.72% was also could not be substantiated. It was accepted by the assessee that no reconciliation was made subsequently to align the arbitrary figure of 11.72% with the actual time spent by Mr Lu. Even though there was no requirement for such reconciliation, as per the agreement, for the purposes of finding the arms length price for such payment, it is necessarily required. The figure was sought to be justified on the basis of proportion of Indian entity sales to the total sales of Asia pacific entities. By taking such a factor into account, the assessee is trying to imply that the entire sales of the Asia Pacific region is on account of the efforts of Mr Lu, which is contrary to the stand taken by them that the allocation was to be made on the basis of estimated time spent by him for supervising the administration of the entities implying thereby that his contribution is only limited to the time provided by him to the subsidiaries. Even if for assumption sake, this is taken into account, the assessee could not substantiate the difference which so remained. The above discussion clearly implies that there is no basis on which such management fees was sought to be allocated by the assessee. vi. The assessee has submitted transfer pricing report of Exide Technologies (Shanghai) Co. Ltd., China in Annexure-I to its second reply dated 08.01.2014 to show-cause notice stating that “it documents the related party Management service transactions for services provided by Exide China to group entities for F.Y. 2008 to 2013”. The said report does not substantiate the genuineness of the ‘Management Services’, since it is not clear whether the Transfer Pricing authorities of China had accepted this report or not. Even if it is assumed that the TP authorities of China accepted this report, this has no relevance in TP proceedings in India, since the requirement of Indian Income tax law nowhere provides any reliance of transfer pricing report of AE as an evidence for the determination of ALP of any transaction of Indian entity. The Indian entity has to prove the ALP of its transaction analyzing in detail in its own transfer pricing report; while the assessee has failed to analyze in detail the Management services in its report. Again this report only enumerates the nature of the services but doesn't provide any proof of actual services received by the various entities including the assessee. On perusal of above, it is clear that the cost sharing is not being made on the basis of time spent, it has been fixed alleged expenses occurred. It is to be noted that the date of signing the agreement is 3.12.2009 while the agreement is stated to be effective on April 1, 2009 (Clause 3.3 of the agreement). This means that the On perusal of above, it is clear that the cost sharing is not being made on the basis of time spent, it has been fixed alleged expenses occurred. It is to be noted that the date of signing the agreement is 3.12.2009 while the agreement is stated to be effective on April 1, 2009 (Clause 3.3 of the agreement). This means that the agreement is not made prior to rendering any service rather it shows that it is an arrangement after the alleged services have been rendered just to siphon the revenue in the form of cost sharing from the assessee to its AEs. It is interesting to note that in both the agreements, the cost allocation ratio between various countries did not change even by a fraction. It clearly reveals that, cost sharing is not happening on the basis of actual services availed by various entities, rather than it is distributed among them on a fixed ratio, irrespective of whether any services are rendered for them or not or whether any time is spent for them or not. It is also amazing to know that how it is possible for any entity to spend exactly equal amount of time and render equal amount of different services for different countries located in a vast part of the globe i.e. Asia Pacific. viii. It is also mentioned here that the assessee has not submitted the working of actual time spent on the basis of alleged cost sharing ratio (for Tudor India 11.72%) is arrived. The documents submitted by the assessee as various annexure to its submission dated 08.10.2013 are mere two agreements. The assessee enclosed some other documents annexed with it called as “Transfer Pricing Questionnaire in support of the service cost method.” for various cost centers. Even on perusal of these questionnaires, it is found that the name/nature of the services is only mentioned, what benefits were obtained by the entities/assessee are not depicted despite the fact that in the heading para, it is requested to describe the procedure and benefits; a sample of the same is reproduced below: “Please provide a brief description of the various specific projects you have taken part in during FY 2010 for the benefit of our affiliates in Europe and Asia-Pacific. Please describe the nature, target and benefits from such specific projects. Please also describe how the services provided in general directly benefit Europe and Asia Pacific.” In some of the questionnaire, it is also found that for a particular country no services provided are listed despised that it is awarded a share in expenses of management services. For example, for cost centre Finance of APAC, in the tabulated services, the services for China, India, Japan, Australasia (Australia & New Zealand) are mentioned but no services of any type for Singapore and Hong Kong are mentioned yet the percentage of time spent for providing management services to Singapore and Hong Kong are mentioned as 10.29% and 2.42% respectively, this further raises doubt on the genuineness of the services rendered and allocation of expenses. In some of the questionnaire, it is also found that for a particular country no services provided are listed despised that it is awarded a share in expenses of management services. For example, for cost centre Finance of APAC, in the tabulated services, the services for China, India, Japan, Australasia (Australia & New Zealand) are mentioned but no services of any type for Singapore and Hong Kong are mentioned yet the percentage of time spent for providing management services to Singapore and Hong Kong are mentioned as 10.29% and 2.42% respectively, this further raises doubt on the genuineness of the services rendered and allocation of expenses. Therefore, on the basis of the facts mentioned above, it is clear that since there was no requirement for such payment and the assessee somehow wanted to make such payment, it was made on an ad-hoc basis. Further, the assessee submitted Transfer Pricing Report of Exide Technologies (Shanghai) Co. Ltd., China. This document just gives a theoretical analysis of cost digestion which is not substantiated by ample documentary proofs supporting the methodology adopted in this report, in absence of detailed computations and other supporting documentation this report cannot be accepted as a justification of management fee to be at APL. Thus, the asessee fails on both the counts i.e. substantiation of the requirement for such payment with direct and substantial benefit arising out of the same and substantiation of the basis of payment. As a result of the above, the Arms length Price of the management fees paid by the assessee is taken as NIL. Similarly, Management fee charged by Exide Technologies Inc, USA is also not justifiable on the basis of reply of the show cause. i.During T.P. proceedings for this A.Y. 2010-11, the assessee had submitted ‘Expense Sharing Agreement’ made on 17[th] March 2010. In clause 4 of this agreement the terms & Payments were mentioned. The relevant portion is reproduced as below: It is to be noted that the date of signing the agreement is 17.03.2010 while the agreement is stated to be effective on April 1, 2009 (Clause 3.3 of the agreement). This means that the cement is not made prior to rendering any service rather it shows that it is an arrangement after the alleged services have been rendered just to siphon the revenue in the form of cost baring from the assessee to its AEs at the end of the year. On perusal of above clause of the agreement; it is also clear that the expenses shall be located on the basis of time spent the assessee has not given any documentary evidences for computation of this time spent apart from the questionnaire for transfer pricing which just mentioned the percentage for various countries but is not supported with the evidences that how these percentages have been arrived by various cost centres.” 9.The Appellate Tribunal, while allowing the appeal preferred by the assessee took into consideration the fact that the issue stood broadly covered by an order dated 28.12.2017 in the assessee's own case for the A.Y. 2008-09. The Appellate Tribunal incorporated the entire order passed by the Coordinate Bench for the A.Y.2008-09 and, ultimately, held as under: 9.The Appellate Tribunal, while allowing the appeal preferred by the assessee took into consideration the fact that the issue stood broadly covered by an order dated 28.12.2017 in the assessee's own case for the A.Y. 2008-09. The Appellate Tribunal incorporated the entire order passed by the Coordinate Bench for the A.Y.2008-09 and, ultimately, held as under: “11 We find that the issue is a covered issue by co-ordinate bench for assessment year 2008-09 though there is a difference on facts inasmuch as expenditure to the extent of 60% was held to be capitalized on the ground that during that year the expenses of Asia Pacific headquarters were also aimed at increasing the installed capacity from 6 lakhs units p.a. to 10 lakhs units p.a. That aspect of the matter, however, is no longer relevant, and that is not even revenue’s case before us. We have also noted that there is no dispute about the rendition of services, but, as in the last year, the dispute is about the services being in the nature of shareholder services. That plea, in our considered view, is wholly unsustainable in law. A core management support service, under a cost contribution arrangement, is inherently outside the limited scope of shareholder services. These services are required for effective administration and management of the assesses company on day to-day basis. Whether assesses needs these services or not or whether assesses derives "substantial benefit" from these services or not is not really relevant. That should be best left to the commercial wisdom of the assesses. What is material is whether the services were rendered or not. and whether or not the cost allocation was on a fair and reasonable, even if not wholly precise and accurate, basis and both of these tests are clearly satisfied on the facts of this case. it is also not a case in which benefits are so trivial or illusory that it can be said that the assesses did not derive any benefit from these services at all. The emails, correspondence and other corroborative details clearly show rendition of services, and the allocation being on approximate time basis show reasonableness in allocation of costs. As for the fact that the date of agreement is a date subsequent to commencement of work under the agreement, nothing really turns on it inasmuch as the existence of a formal agreement is not even a sine qua non for a cost contribution arrangement. it is not the case of the revenue that the agreement is not a sham agreement. The agreement may have been formally entered into on a later date but it covers the entire period and there is no dispute about rendition of services. In our considered view, in the light of these discussions and respectfully following the co-ordinate bench decision in assessee's own case for the assessment year 2008-09, we are unable to see any legally sustainable merits in the impugned arm's length price adjustments in respect of management fees. As regards the arm's length price adjustment in respect of insurance premium share, we find that this issue is also covered by the co-ordinate bench decision in assessee’s own case for the assessment year 2008-09 wherein the co-ordinate bench has, inter alia. observed as follows: "11. Ground No. 2 & 3 of Revenue's appeal challenges the order of Ld. CIT(A) deleting the upward adjustment of Rs. 5,04, 702/- in relation to payment of allocation of insurance expenditure. 12. Ld. D.R. supported the order of Ld. A.0. and Ld. counsel for the assessee relied on the fining of Ld. CIT as well as the submissions made before the First Appellate Authority. "11. Ground No. 2 & 3 of Revenue's appeal challenges the order of Ld. CIT(A) deleting the upward adjustment of Rs. 5,04, 702/- in relation to payment of allocation of insurance expenditure. 12. Ld. D.R. supported the order of Ld. A.0. and Ld. counsel for the assessee relied on the fining of Ld. CIT as well as the submissions made before the First Appellate Authority. We have heard the rival contentions and perused the record placed before us. We find that the assessee which is also dealing in sale of batteries manufactured by other companies needs to take insurance policy. There are two types of liability namely public liability and product liability and insurance needs to be taken to cover up both these liability. Public liability, gets covered by global Insurance policy. We further observe that during the course of proceedings before the lower authorities assessee has submitted the copy of sample insurance and also provided the basis of allocation which is the turnover of the respective subsidiaries. . 14. We further appreciate the finding of Ld. CIT(A) accepting the basis of turnover as a proper allocation key to proportionately allocate the insurance charges in relation to master insurance policy taken by Exide Technology which takes care of the product liability claim. 15.We therefore in the given facts and circumstance of the case are of the view that there was no error on the part of assessee claim the allocation of Insurance cost and further there was no duplication of insurance expenditure because they were meant to cover up two types of insurances namely public liability insurance and product liability insurance. We therefore uphold the finding of Ld. CIT (A) and dismiss ground No.2 & 3 raised by the Revenue.” 12.We see no reason to take any other view of the matter than the view so taken by the co-ordinate bench. Respectfully following the same, we are unable to see any legally sustainable merits in the impugned arm's length price adjustments in respect of insurance premium share as well.” 10.Mr. J.P. Shah, the learned senior counsel is on a caveat. Mr. Shah has vehemently opposed this tax appeal. He submitted that having regard to the findings of fact recorded by the Appellate Tribunal, the Revenue should not have preferred the present appeal, more particularly, having regard to the scope of Section 260-A of the Act. Mr. Shah laid much emphasis on the fact that there is no dispute about the rendition of services. According to Mr. Shah, if there is no dispute at the end of the Revenue as regards the rendition of services, then the other issues which were considered by the Dispute Resolution Panel would pale into insignificance. He submitted that none of the two questions proposed by the Revenue could be termed as questions of law much less substantial questions of law. 11.The Karnataka High Court, in the case ofPr. Commissioner of Income Tax, Bangalore & Ors. vs. Softbrands India P. Ltd., reported in (2018) 406 ITR 513 had the occasion to consider the special provisions relating to the Avoidance of Tax in Chapter-X of the Act comprising of Sections 92 to 94-B with regard to the assessment to be done for the computation of income from international transactions on the principles of “Arm's Length Price” (ALP) and the relevant Rules for computation of such income under the aforesaid provisions of Chapter-X in the form of Rule 10-A to 10-E in the Income Tax Rules, 1962. We may quote the relevant portion of the judgment; “Perspective of International Trade and Transactions: 11.The Karnataka High Court, in the case ofPr. Commissioner of Income Tax, Bangalore & Ors. vs. Softbrands India P. Ltd., reported in (2018) 406 ITR 513 had the occasion to consider the special provisions relating to the Avoidance of Tax in Chapter-X of the Act comprising of Sections 92 to 94-B with regard to the assessment to be done for the computation of income from international transactions on the principles of “Arm's Length Price” (ALP) and the relevant Rules for computation of such income under the aforesaid provisions of Chapter-X in the form of Rule 10-A to 10-E in the Income Tax Rules, 1962. We may quote the relevant portion of the judgment; “Perspective of International Trade and Transactions: 4. With the ever increasing international Trade and transactions, particularly, in the Software Industries and Bangalore, being the Silicon Valley of India where many big, small and medium size Software Industries have their Offices and Units in this Software Industry, and Bengaluru is a hub of this Service Industry and essentially the Indian Companies have business linkages with large Companies spread worldwide particularly in the Western Hemisphere of the Globe. 5. The implementation of the Tax laws in this field in a smooth, clear and quick manner is of utmost importance to build an image of an efficient Tax Administration both at Departmental level and in Judicial Courts so that the economic activity in such borderless trade thrives and enures to the benefit of the Indian economy at large and Software Industry in particular. While the special provisions have been made for computation of 'Arm's Length Price' to arrive at a fair assessment of income taxable in the hands of the Indian Resident Companies and these special provisions also provide for an elaborate and in-depth analysis of huge data of the comparable cases of other similarly situated Companies to arrive at a fair 'Arm's Length Price' and for that, Special Cells and designated Authorities have been created under the Income Tax Act, 1961, but still retaining the normal provisions for assessments of appeals in theIndian Income Tax Actabout the remedial Forums or the appeal mechanisms and the Income Tax Appellate Tribunal constituted under Section 253of the Act continues to be the final fact finding body under the Act even with regard to the assessments of the international transactions under the Special Chapter X as aforesaid and the appeal to the Constitutional Courts as -provided inSection 260Ato High Court andSection 261to the Hon'ble Supreme Court are applicable to these special assessments under Chapter X as well. “ 12.In para-11 of the judgment, the Hon'ble Court diluted upon the following three questions; “[I] The analysis of the provisions relating to the Transfer Pricing/ determination of the 'Arm's Length Price'; The Scheme of procedure of assessment and appeals to the Tribunal and High Court/Supreme Court. The scope of interference by High Court under -Section 260Aof the Act in these type of cases. “ 13.The Court, thereafter, expressed its prima facie opinion as regards the transfer pricing adjustments. “Prima Facie Opinion: 15.We are of the considered opinion that this entire exercise of making Transfer Pricing Adjustments on the basis of the comparables is nothing but a matter of estimate of a broad and fair guess-work of the Authorities based on relevant material brought before the Authorities including the Appellate Tribunal, but nonetheless the Tribunal being the final fact finding body remains so for this Special Chapter X also and therefore, The Scheme of procedure of assessment and appeals to the Tribunal and High Court/Supreme Court. The scope of interference by High Court under -Section 260Aof the Act in these type of cases. “ 13.The Court, thereafter, expressed its prima facie opinion as regards the transfer pricing adjustments. “Prima Facie Opinion: 15.We are of the considered opinion that this entire exercise of making Transfer Pricing Adjustments on the basis of the comparables is nothing but a matter of estimate of a broad and fair guess-work of the Authorities based on relevant material brought before the Authorities including the Appellate Tribunal, but nonetheless the Tribunal being the final fact finding body remains so for this Special Chapter X also and therefore, unless this Court is satisfied that a substantial question of law is arising from the order of the Tribunal, the appeal -under Section 260Acannot be entertained at the instance by either the Revenue or the Assessee and the exercise of fact finding or 'Arm's Length Price' determination or 'Transfer Pricing Adjustments' should be allowed to become final with a quietus at the hands of the final fact finding body, i.e. the Tribunal.” 14.The Court, thereafter, undertook a comparative analysis of Section 260-A of the Act, 1961, Section 100 and Section 103 of the CPC and proceeded to observe as under: -“16. We would analyze the provisions of Section 260Aof the Act in a little more detail but we are of the firm opinion that the entry into the High Court under Section-260Aof the Act is locked with the words "Substantial questions of law" and the key to open that lock to maintain such appeal can only be the perversity of the findings of the Tribunal in these type of cases and the perversity in the findings not only averred by the appellant before this Court but, established on the basis of cogent material which was available before the Authorities below including the Tribunal and the findings arrived at by the Tribunal can be so held to be perverse within the well settled parameters for determining the same as perverse. It is not allowed to either of the parties, i.e. the Assessee or the Revenue to invoke the -jurisdiction of this Court under Section 260A of the Act merely because the Tribunal comes to reverse or modify the findings given by the lower Authority, viz. Transfer Pricing Officer (TPO) or Dispute Resolution Panel (DRP) which comprises of three Commissioners and the Revenue or the assessee may feel dissatisfied, because of the reversal or modification of such findings by the Tribunal resulting in leaving out of certain comparables or adding on of certain comparables for determining the 'Arm's Length Price' in the hands of the Assessee Company. 17. Unless such perversity in the findings of the Tribunal is established we are of the opinion that the appeals -underSection 260Aof the Act cannot and should not be entertained at the instance of either of the parties and the present cases before us, we find that the Tribunal has given cogent reasons and detailed findings upon discussing each case of comparable corporate properly and therefore, we find ourselves unable to call such findings of the Tribunal perverse in any manner so as to -require our interference under Section 260Aof the Act. -18. We now take up the analysis of Section 260A of the Act which we have already said is in pari materia with Sections 100 and 103 of the Civil Procedure Code. 19. The said provisions are quoted below for ready reference and comparison. -Section 260Aof the Income Tax Act, 1961 reads as under: "260A - Appeal to High Court: (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involves a substantial question of law. -18. We now take up the analysis of Section 260A of the Act which we have already said is in pari materia with Sections 100 and 103 of the Civil Procedure Code. 19. The said provisions are quoted below for ready reference and comparison. -Section 260Aof the Income Tax Act, 1961 reads as under: "260A - Appeal to High Court: (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involves a substantial question of law. (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) in the form of a memorandum or appeal precisely stating therein the substantial question of law Involved. [(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in Clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.] (3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub- section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated 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 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this Section.] Sections 100 and 103 of the Code of Civil Procedure, 1908 read thus: "Section 100 - Second Appeal. (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law. (2) An appeal may lie under this section from an appellate decree passed ex- parte. (3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate the question. (5) The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: (2) An appeal may lie under this section from an appellate decree passed ex- parte. (3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate the question. (5) The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub- section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if it is satisfied that the case involves such question." Section 103- Power of High Court to determine issues of fact - In any second appeal, the High Court may, if the evidence on the record is sufficient, determine any issue necessary for the disposal of the appeal, - (a) which has not been determined by the lower Appellate Court or both by the Court of first instance and the lower Appellate Court, or (b) which has been wrongly determined by such Court or Courts by reason of a decision on such question of law as is referred to in section 100." What is a Substantial Question of Law? 20. From a bare comparison of the provisions quoted above and as discussed in various judgments of the Constitutional Courts, which we will refer in brief herein -below, it is clear that the Scheme of both Section 260AinIncome Tax Act, 1961 and Section 100r/w. Section 103 of the Code of Civil Procedure are in pari materia and in same terms. 21. The existence of a substantial question of law is sine qua non for maintaining an appeal before the High Court. -While the appeal to High Court under Section 260Aof the Act may be a First appeal in the sense from the order of final fact finding by the Tribunal under the Income TaxAct, whereas the Second Appeal on substantial question of law before High Court under Section 100would lie against the Judgment and Decree of the first Appellate Court disposing of an appeal against the Judgment and Decree of a Trial Court, but nonetheless it is the third round of consideration at the level of the High Court, where the facts and law both have been screened, discussed and analyzed by the Authorities or the Courts below and therefore the tenor and color of the words "substantial question of law" in both these enactments remains the same. 22. The High Court has power to not only formulate the substantial questions of law and rather it has the duty to do so and can also frame additional substantial questions of law at a later stage, if such a substantial question of law is involved in the appeal before it under these provisions and the appeal should be heard and decided only on such substantial questions of law after allowing the parties to address their arguments on the same. The extended power given to the High Courts to decide even -an issue under Sub- section (6) of Section 260Aof the Income Tax Act, which is in pari materia with Section 103 of the Civil Procedure Code and which says that the High Courts may determine any issue which (a)has not been determined by the Tribunal or (b) has been wrongly determined by the Tribunal, can be so determined by the High Court, only if the High Court comes to the conclusion that 'by reason of the decision on substantial question of law rendered by it', such a determination of issue of fact also would be necessary and incidental to the answer given by it to the substantial question of law arising and formulated by it. 23. The argument raised by the learned counsel for the Respondent Assessee before us by making a disjuncted reading of Clause (a) and Clause (b) of Sub- Section (6) of -Section 260Aof the Income Tax Act, 1961 to submit that the High Court can touch upon the issues of facts also in an appeal under this provision bereft of substantial question of law, is a misconceived argument. 24. In our opinion, both the Clause (a) and Clause -(b) of Sub-Section (6) of Section 260Aof the Act are circumscribed by the words 'by reason of the decision on such question of law as is referred to in Sub- section (1)'. Therefore, even if an issue which has not been determined by the Tribunal, which was required to be so determined in terms of the answer to the substantial question of law given by the High Court, such an issue not determined by the Tribunal could also be decided by the High Court with reference to Clause (a) and more so, if such an issue has been wrongly decided according to the answer given by the High Court to such a substantial question of law, then also the High Court can set it right to fall in line with the answer given by the High Court to such a substantial question of law raised before it and determined by it in terms of Clause (b) thereof. -25. Sub-section (6) of Section 260Aof the Act, therefore, does not give any extended power, beyond the parameters of the substantial question of law to the High Court to disturb the findings of fact given by the Tribunal below. -26. Sub-section (7) inserted in Section 260Aof the Act by the Finance Actof 1999 with effect from 01/06/1999 after a period of about 8 months of substituting the new -provisions ofSection 260Ato the Act as they now stand by Finance Actof 1998, with effect from 01/10/1998 was only to clarify and support that the parameters of Sections 100 & 103 of the Civil Procedure Code and other provisions of Civil Procedure Code relating to appeals of -High Court shall apply to the appeals under Section 260Aof the Income Tax Act also. -27. The insertion of Sub-section (7) in Section 260Aof the Act does not give any new or extended powers to the High Court and the pre-existing provisions from Sub--section (1) to Sub-section (6) in Section 260Aof the Act already had all the trappings of Sections 100 and 103 of the Civil Procedure Code. Case Laws on Substantial Question of Law: 28. In the leading and the first and foremost case on the interpretation of Section 100 of the Code of Civil Procedure Code, the Constitution Bench of the Hon'ble Supreme Court in the case of Sir Chunilal V. Mehta and Sons Limited Vs. Century Spinning and Manufacturing Co. Limited AIR 1962 SC 1314, held in para.6 as under: "6. We are in general agreement with the view taken by the Madras High Court and we think that while the view taken by the Bombay High Court is rather narrow the one taken by the former High Court of Nagpur is too wid