PR COMMISSIONER OF INCOME TAX-2 vs. M/S SABRE TRAVEL TECHNOLOGIES PVT LTD

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ITA/171/2022HC KarnatakaKAHC01040325202124 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both parties. The Revenue's counsel sought liberty to revive the appeal if the matter fell within the exceptions of the cited CBDT Circulars. The Court granted this liberty. Consequently, the appeal was disposed of with this liberty. 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.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax-2 and the Income Tax Officer, Ward 6(1)(1), filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 31.08.2020 passed by the Income Tax Appellate Tribunal, 'B' Bench, Bengaluru. The appeal pertains to Assessment Year 2010-2011 and challenges the Tribunal's directions to the Transfer Pricing Officer (TPO). The assessee is M/s Sabre Travel Technologies Pvt Ltd. The High Court admitted the appeal to consider specific substantial questions of law concerning the Tribunal's directions on comparable selection, Related Party Transaction (RPT) filter, and risk adjustment.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether the Tribunal's order was perverse in directing the TPO to exclude Kals Informations Systems Ltd. as a comparable on grounds of functional dissimilarity, despite it satisfying Rule 10B criteria. 2. Whether the Tribunal's order was perverse in directing the TPO to adopt an RPT filter of 15% instead of 25% without objective reasoning, ignoring the purpose of the filter in distorting net profit margins. 3. Whether the Tribunal's order was perverse for failing to adjudicate the allowance of a 1% risk adjustment, holding that the Dispute Resolution Panel (DRP) had not directed it, despite the assessee's single customer risk being equivalent to comparable risks. Assessee's contention: The tax effect in the appeal is less than Rs. 2 Crores, making it non-entertainable by the Revenue due to CBDT Circular No. 09/2024 dated 17.09.2024, which binds the Revenue. Revenue's contention: The Revenue sought liberty to revive the appeal if the matter falls within the exceptions of Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39745-DB ITA No. 171 of 2022

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. 171 OF 2022 BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX-2, BMTC COMPLEX, KORAMANGALA,BANGALORE.

2.

INCOME TAX OFFICER, WARD 6(1)(1), BMTC COMPLEX, KORAMNGALA, BENGALURU. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE)

AND:

1.

M/S SABRE TRAVEL TECHNOLOGIES PVT LTD., UNIT 1 AND 2 LEVEL 2, NAVIGATOR BUILDING, ITPB, WHITEFILED MAIN ROAD, BANGLORE 560066, PAN AAICS5777P. …RESPONDENT (BY SRI K R VASUDEVAN, ADVOCATE ALONG WITH SRI ANKUR P.D, ADVOCATE)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31/08/2020 PASSED IN ITA NO.559/BANG/2015, FOR THE ASSESSMENT YEAR 2010-2011 PRAYING THIS HON’BLE COURT TO: (1) 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 MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39745-DB ITA No. 171 of 2022

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 K.R.Vasudevan along with learned counsel Sri.Ankur.P.D., 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 31.08.2020 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.559/Bang/2015 for the assessment year 2010-11.

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NC: 2024:KHC:39745-DB ITA No. 171 of 2022

3.

This

Court,

admitted the appeal on 20.07.2022 to consider the following substantial question of law: “a) Whether on facts and circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal has directed TPO to exclude Kals Informations Systems Ltd on the ground of functional dissimilarity when the said comparable satisfied all the required tests as prescribed in Rule 10B?

b) Whether on facts and circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal directed TPO to adopt RPT filter at 15% as against 25% without giving any objective reason for direction and ignoring the purpose of using limit for RPT is that the controlled transactions of the related party transactions (RPT) is that the controlled transactions or the related party transactions (RPT) may have bearing and would distort or influence the net profit margin?

c) Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal failed to not adjudicate the issue relating to allowance of risk

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NC: 2024:KHC:39745-DB ITA No. 171 of 2022

adjustment at 1% by holding that the DRP has not directed TPO allow the same when the fact that a single customer risk bone by the tax payer in its status of a captive service provider was equivalent to the marketing and technical risk attached to the comparable and the TPO was justified in not allowing adjustment on account risk?”

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 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.

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NC: 2024:KHC:39745-DB ITA No. 171 of 2022

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 List No.: 2 Sl No.: 0

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