THE PR COMMISSIONER OF INCOME TAX vs. M/S ARIBA TECHNOLOGIES INDIA PVT LTD

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ITA/181/2022HC KarnatakaKAHC01034129202123 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal without deciding the substantial questions of law on merits. The Court noted that the tax effect in the appeal was less than Rs. 2 Crores, which, in view of CBDT Circular No. 09/2024 dated 17.09.2024, would render the appeal not maintainable at the instance of the Revenue. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions under the said Circular and Circular No. 5/2024 dated 15.03.2024. The Court granted this liberty. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. Therefore, no finding was reached on the correctness of the ITAT's order regarding the exclusion of comparables or the perversity of its decision.

What were the facts?

The Pr. Commissioner of Income Tax and the Income Tax Officer (appellants/Revenue) filed an appeal under Section 260-A of the Income Tax Act, 1961, against the order dated 11.03.2021 passed by the Income Tax Appellate Tribunal (ITAT). The ITAT's order, in ITA No. 536/Bang/2017 for assessment year 2010-11, had confirmed the order of the Commissioner of Income Tax (Appeals) and the Deputy Commissioner of Income Tax. The dispute pertains to the exclusion of comparable companies by the Transfer Pricing Officer (TPO) in determining the arm's length price. The tax effect in this appeal was noted to be less than Rs. 2 Crores.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in confirming the order of the Commissioner of Income Tax (Appeals) directing the Assessing Officer to exclude comparables chosen by the Transfer Pricing Officer, ignoring the findings of the TPO? This question turns on the interpretation of transfer pricing provisions and the powers of the Assessing Officer and TPO. 2. Whether the Tribunal's order was perverse in excluding comparables such as Infosys Technologies Ltd., Kals Information Systems Ltd., Tata Elxsi Ltd., and Eclerx BPO Ltd. in SWD and ITES Segments, despite the TPO having excluded them based on Rule 10B and prescribed tests? This question involves the application of Rule 10B of the Income Tax Rules, 1962, and the principles of perversity in judicial review. Contentions: Assessee: No specific contentions for the assessee are recorded in the judgment. Revenue: The Revenue argued that the Tribunal's order was incorrect in excluding comparables chosen by the TPO and that the exclusion of specific companies was perverse. The Revenue also acknowledged that the tax effect was below the threshold stipulated in CBDT Circular No. 09/2024, making the appeal potentially non-maintainable.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 10B

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39391-DB ITA No. 181 of 2022

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD 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. 181 OF 2022 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560095

2.

THE INCOME TAX OFFICER WARD-1(1)(2), PRESENT ADDRESS DCIT, CIRCLE-1(1)(1), 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA BENGALURU - 560 095. …APPELLANTS (BY SRI. RAVI RAJ Y V.,ADVOCATE A/W SRI. DILIP M, ADVOCATE)

AND:

M/S ARIBA TECHNOLOGIES INDIA PVT LTD RMZ ICON NO. 51, PALACE ROAD, BENGALURU 560052. PAN AADCA0918P …RESPONDENT

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39391-DB ITA No. 181 of 2022

536/BANG/2017 DATED 11/03/2021 FOR ASSESSMENT YEAR 2010- 2011 ANNEXURE-D CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR FINAL 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 Raviraj Y.V along with learned counsel Sri M.Dilip, for appellants/Revenue.

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 11.3.2021 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.536/Bang/2017 for the assessment year 2010-11, raising the following substantial questions of law: “1. Whether on the facts and circumstances of the case, the Tribunal is correct in confirming the order of Commissioner of Income Tax (Appeals) directing the

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NC: 2024:KHC:39391-DB ITA No. 181 of 2022

Assessing Officer to exclude comparables chosen by Transfer pricing Officer ignoring the findings of the Transfer Pricing Officer? 2. Whether on the facts and in circumstances of the case, the Tribunal’s order can be said as perverse in nature in excluding comparables namely, Infosys Technologies Ltd., Kals Information Systems Ltd., Tata Elxsi Lt., Eclerx BPO Ltd., in SWD and ITES Segments without appreciating that Transfer Pricing Officer had excluded the said comparables on appellant of Rule 10B and prescribed tests?”

3.

It is noticed that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal would not be maintainable 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.

4.

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:39391-DB ITA No. 181 of 2022

5.

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

ND List No.: 3 Sl No.: 0

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