THE PR COMMISSIONER OF INCOME TAX vs. M/S HEWLETT PACKARD(INDIA)

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ITA/219/2023HC KarnatakaKAHC01019422202301 October 2024Bench: S.G.PANDIT,C.M. POONACHA5 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 pointed out that the tax effect was below the threshold stipulated in CBDT Circular No. 09/2024, suggesting the appeal should not be entertained. The Revenue requested liberty to revive the appeal if it met the exceptions under the relevant circulars. 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 transfer pricing issues or the applicability of Rule 10B.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income-Tax and the Assistant Commissioner of Income-Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 10.03.2021 passed by the Income-Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2013-14 and challenges the ITAT's decision concerning transfer pricing adjustments made to M/s. Hewlett Packard (India) Software Operation Pvt. Ltd. The High Court admitted the appeal on 19.08.2024 to consider substantial questions of law.

What were the issues?

1. Whether the Tribunal was legally correct in disregarding the exhaustive parameters for analysis prescribed under Rule 10B of the Income Tax Rules, 1962, and whether it is permissible to bypass these parameters, partially or by implication? 2. Whether, on the facts and in law, the Tribunal correctly excluded comparable entities such as CG Vak Software & Exports Pvt. Ltd., Persistent Systems Ltd., and Larsen & Toubro Ltd., while including R Systems International Ltd., by ignoring the exhaustive parameters of analysis under Rule 10B, and if so, whether bypassing these parameters is legally permissible? Assessee's Contention: The assessee argued that the tax effect in this appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue in light of 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 provided under 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:41184-DB ITA No. 219 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF OCTOBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO.219 OF 2023

BETWEEN:

1.

THE PR COMMISSIONER OF INCOME-TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095

2.

THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE 3(1)(2) 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095 …APPELLANTS

(BY SRI. DILIP M., ADVOCATE ALONG WITH SRI RAVIRAJ Y.V., ADVOCATE)

AND:

M/S. HEWLETT PACKARD(INDIA) SOFTWARE OPERATION PVT. LTD.,

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41184-DB ITA No. 219 of 2023

SURVEY NO.192, WHITEFIELD ROAD, MAHADEVAPURA BENGALURU-560 048 PAN: AAACH 7164B …RESPONDENT

(BY SMT. TANMAYEE RAJKUMAR, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.2866/BANG/2017 DATED 10.03.2021 FOR ASSESSMENT YEAR 2013-2014 (ANNEXURE-D) AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-3(1)(2), BENGALURU AND ETC.

THIS APPEAL IS 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

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NC: 2024:KHC:41184-DB ITA No. 219 of 2023

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

Heard the learned counsel Sri.Dilip.M., along with Sri. Raviraj.Y.V., learned counsel 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 10.03.2021 passed by the Income Tax Appellate Tribunal, "C" Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.2866/Bang/2017 for the assessment year 2013-14.

3.

This Court, admitted the appeal on 19.08.2024 to consider the following substantial questions of law:

"1. Whether the Tribunal was right in law to ignore the parameters of analysis prescribed under Rule 10b, which are exhaustive and if so, whether it is legally permissible to bypass the same partially or by implication?

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NC: 2024:KHC:41184-DB ITA No. 219 of 2023

2.

Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in excluding comparable’s such CG VAk Software & Exports Pvt Ltd., Persistenant Systems Ltd, Larsen & Tourbo Ltd and inclusion of comparable namely, R Systems International Ltd by ignoring the parameters of analysis prescribed under Rule 10B, which are exhaustive and, if so, whether it is legally permissible to bypass the same partially or by implication?”

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:41184-DB ITA No. 219 of 2023

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

SMJ List No.: 2 Sl No.: 11

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