PRINCIPAL COMMISSIONER OF INCOME TAX 7 vs. M/S VWR LAB PRODUCTS PVT LTD.

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ITA/100/2021HC KarnatakaKAHC01016220202024 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties. The assessee argued that the tax effect was below the threshold specified in CBDT Circular No. 09/2024, making the appeal not maintainable. The Revenue sought liberty to revive the appeal if exceptions under the circulars applied. Consequently, the Court granted the liberty as prayed for by the Revenue. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the questions of law raised in the appeal.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax-7 and the Assistant Commissioner of Income Tax, Circle-7(1)(2), has filed an appeal under Section 260-A of the Income Tax Act, 1961. The appeal challenges an order dated September 20, 2019, passed by the Income Tax Appellate Tribunal, Bengaluru Bench, in IT(TP)A No. 779/Bang/2017. This order pertains to the assessment year 2012-13. The High Court of Karnataka admitted the appeal on September 17, 2021, to consider specific substantial questions of law concerning the exclusion of comparable entities by the Tribunal. The assessee is M/s VWR Lab Products Pvt Ltd.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in excluding comparables based on the presence of intangibles without demonstrating how these factors fall within Rule 10B(2) of the Income Tax Act, 1961. 2. Whether the exclusion of a comparable entity is sustainable without determining specific transaction characteristics, functions performed, assets employed, risks assumed (FAR), contractual terms, and market conditions as prescribed in Rule 10B(2). 3. Whether the objection to the selection of comparable entities is legally sustainable. The assessee contended that the tax effect in the appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue, citing Circular No. 09/2024 dated September 17, 2024, issued by the Central Board of Direct Taxes, which binds the Revenue. The Revenue, through its counsel, sought liberty to revive the appeal if the matter falls within the exceptions mentioned in Circular No. 09/2024 and Circular No. 5/2024 dated March 15, 2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 10B(2)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39704-DB ITA No. 100 of 2021

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 100 OF 2021 BETWEEN:

1.

PRINCIPAL COMMISSIONER OF INCOME TAX – 7, BMTC COMPLEX, KORAMANGALA, BENGALURU.

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-7(1)(2), BMTC COMPLEX, KORAMANGALA BENGALURU. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE) AND:

1.

M/S VWR LAB PRODUCTS PVT LTD., NO.139, BDA INDUSTRIAL SUBURB, 6TH MAIN, TUMKUR ROAD, PEENYA POST, BANGALORE - 560 058, PAN NO AACCV3080E. …RESPONDENT (BY SMT TANMAYEE RAJKUMAR, ADVOCATE)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 20/09/2019 PASSED IN IT(TP)A NO.779/BANG/2017, FOR THE ASSESSMENT YEAR 2012-2013, PRAYING THIS HON’BLE COURT TO: (A) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND ETC.

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39704-DB ITA No. 100 of 2021

THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri.Sanmathi.E.I., for appellants/Revenue and learned counsel Smt.Tanmayee Rajkumar for respondent/assessee.

2.

The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 20.09.2019 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.779/Bang/2017 for the assessment year 2012-13.

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NC: 2024:KHC:39704-DB ITA No. 100 of 2021

3.

This

Court,

admitted the appeal on 17.09.2021 to consider the following substantial question of law: “1) Whether on the facts and circumstances of the case and in law, the Tribunal was right in law in excluding comparables on the basis of presence of intangibles without showing how these factors fall within the scope of factors specified in Rule 10B(2) of the Act?

2) Whether the exclusion of a comparable entity can be sustained without determining the specific characteristics of the transaction; FAR; contractual terms and market conditions as prescribed in Rule 10B(2) of the Act?

3) Whether the objection to the selection of comparable is legally sustainable?”

4.

Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct

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NC: 2024:KHC:39704-DB ITA No. 100 of 2021

Taxes. It is also submitted that the aforesaid Circular binds the revenue.

5.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

6.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

MPK CT:VN

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