On 25 June 2018, the Karnataka High Court (HC) announced the decision in the case of Softbrands India Private Limited v. DCIT (TS-475-HC-2018(KAR)-TP). The ruling sets forth some significant principles relating to admissibility of appeals by HCs which involve transfer pricing (TP) issues.

The High Court ruled that the Tribunal is the final fact finding authority and the jurisdiction to consider the factual nature of issues is with the Tribunal. As long as there is a no unreasonableness in the order of the Tribunal in the findings of the fact, the same does not qualify to be a”substantial question of law.” The HC further held that it cannot be expected to undertake the “fact finding exercise” and lightly consider appeals against the findings of a Tribunal without putting it to a strict scrutiny of the existence of the substantial question of law.

The High Court also held that the ”substantial question of law” generally arises regarding issues such as interpretation of tax treaties, interplay between provisions of the ITL and tax treaties, issues involving Base Erosion and Profit Shifting (BEPS) principles, among others. On the other hand, issues pertaining to the selection of comparable data and criteria for comparability while undertaking an economic analysis in a TP study do not give rise to any substantial question of law.