Supreme Court Remands Transfer Pricing Issue Back to High Court, Citing Observations from SAP Labs Ruling

Case Details: PCIT v. Subex Ltd. - [2023] 150 taxmann.com 216 (SC)

Judiciary and Counsel Details

• • M.R. Shah and C.T. Ravikumar, JJ.  
  • Arijit Prasad, Sr. Adv. N. Venkataraman, A.S.G. Ms. Shruti Agarawal, Akshit Pradhan, Annirudh Sharma II, Vijaynand Tripathi, Vivasvan Gautam, Advs. and Raj Bahadur Yadav, AOR for the Appellant. 
  • K.K. Chythanya, Sr. Adv. Tata Krishna, S. Sukumaran, Vipul Kamath, Bhupesh Kumar Pathak, Advs. and Anand Sukumar, AOR for the Respondent.

Facts of the Case

In the instant case, the High Court, relying on its earlier order in case of Pr. CIT v. Softbrands India (P.) Ltd. [2018] 94 taxmann.com 426 (Karnataka) held that in transfer pricing matters, the determination of arm’s length price by the Tribunal is final and cannot be the subject matter of scrutiny under section 260A.

Said decision of Karnataka High Court fell for consideration before Supreme Court in SAP Labs (P.) Ltd. v. ITO [2023] 149 taxmann.com 327 (SC) wherein the Supreme Court held that in an appeal the challenging determination of arm’s length price, it is always open for

High Court Held

High Court to examine in each case whether while determining arm’s length price, guidelines laid down under Act and Rules are followed or not and whether the determination of arm’s length price and findings recorded by Tribunal while determining arm’s length price is perverse or not

Therefore, the Supreme Court of India quashed the order of the High Court and remanded matter back to it to consider issues with respect to transfer pricing afresh in accordance with the law and in light of observations made by Supreme Court in Sap Labs India (P.) Ltd.