“No absolute proposition of law that in all cases where the Tribunal has determined the Arm’s Length Price the same is final,” says Supreme Court

While hearing the SAP Labs India Private Limited vs Income Tax Officer Circle 6 (1)(1) Bangalore case, the Supreme Court stated that “there cannot be any absolute proposition of law that in all cases where the Tribunal has determined the arm’s length price the same is final and cannot be the subject matter of scrutiny by the High Court in an appeal under Section 260A of the IT Act.” The bench further added that High Court can anytime examine whether the arm’s length price has been determined while taking into consideration the relevant guidelines under the Act and the Rules. In context with the case of Softbrands India (P) Ltd. the view taken by the Karnataka High Court that the determination of the arm’s length price by the Tribunal was final and could not be a subject matter of scrutiny under Section 260A of the IT Act could not be accepted.  

In this case, the batch of Civil Appeals, mostly by the Revenue and a few of the assessees arises out of judgments and orders passed by the various High Courts, dismissing the appeals challenging the findings of the Income Tax Appellate Tribunal on ‘Transfer Pricing’ issues. The High Court opined that the determination of arm’s length price by the Tribunal should be final against which an appeal under Section 260A of the IT Act was not required to be entertained. The matter was presented before the Supreme Court bench comprising Justice MM Sundresh and Justice MR Shah. The bench observed that “Any determination of the arm’s length price under Chapter X de hors the relevant provisions of the guidelines, can be considered as perverse and it may be considered as a substantial question of law as perversity itself can be said to be a substantial question of law.” 

The top Court further quashed and set aside the impugned judgments and orders passed by the High Court dismissing the Revenue’s appeals and even the appeals preferred by the assessees. The bench further added to remit back the matter to the concerned High Courts to decide and dispose of the respective appeals afresh. 

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