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

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ITA/183/2022HC KarnatakaKAHC01034128202123 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the tax effect in the appeal was less than Rs. 2 Crores, rendering the appeal not maintainable at the instance of the Revenue, in view of CBDT Circular No. 09/2024 dated 17.09.2024. The Court acknowledged that this circular binds the Revenue. The Revenue's counsel requested liberty to revive the appeal if the matter fell within the exceptions under the aforementioned Circulars. Consequently, the appeal was disposed of with the liberty as prayed for by the Revenue. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No finding was given on the merits of the issues raised.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax and the Income Tax Officer, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated March 11, 2021, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The ITAT's order was in relation to appeal proceedings for Assessment Year 2010-11. The appeal challenges the ITAT's decision to confirm the order of the Commissioner of Income Tax (Appeals), which directed the assessing officer to exclude certain comparables chosen by the Transfer Pricing Officer (TPO). The amount in dispute is not explicitly stated, but the appeal's maintainability is questioned based on tax effect thresholds mentioned in CBDT Circulars.

What were the issues?

1. Whether, on the facts and circumstances, 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 TPO's findings? (Question of law and fact, concerning the application of transfer pricing rules). 2. Whether, on the facts and circumstances, 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, without appreciating that the TPO had excluded them based on Rule 10B and prescribed tests? (Question of law and fact, concerning the exclusion of comparables). Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue argued that the Tribunal erred in excluding comparables chosen by the TPO and that the exclusion of specific companies was perverse, as it disregarded the TPO's application of Rule 10B and prescribed tests. The Revenue also sought liberty to revive the appeal if the matter falls within exceptions to CBDT Circulars No. 09/2024 and 5/2024.

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:39390-DB ITA No. 183 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. 183 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)(1), 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 ARBIA 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 ABOVE, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN C.O.NO.

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39390-DB ITA No. 183 of 2022

91/BANG/2017 IN ITA NO. 536/BANG/2017 DATED 11/03/2021 FOR ASSESSMENT YEAR 2010-2011 ANNEXURE-D AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING 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 C.O. No.91/Bang/2017 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

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NC: 2024:KHC:39390-DB ITA No. 183 of 2022

Commissioner of Income Tax (Appeals) directing the 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 Ltd, Eclerx BPO Ltd in SWD and ITES Segments without appreciating that Transfer Pricing Officer had excluded the said comparables on application of Rule 10B and prescribes 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

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NC: 2024:KHC:39390-DB ITA No. 183 of 2022

the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

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.: 2

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