PR. COMMISSIONER OF INCOME TAX-4 vs. M/S L M WIND POWER BLADES (INDIA) PVT LTD

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ITA/220/2020HC KarnatakaKAHC01019084202024 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal with liberty granted to the Revenue to revive it, as prayed for by its counsel. The Court noted the submission by the assessee regarding the tax effect being less than Rs. 2 Crores and the applicability of CBDT Circular No. 09/2024. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions of the aforementioned circulars. 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.

What were the facts?

The Revenue, comprising the Pr. Commissioner of Income Tax-4 and the Assistant Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 29.11.2019 passed by the Income Tax Appellate Tribunal, Bengaluru Bench. The appeal pertains to Assessment Year 2012-2013 and challenges the Tribunal's decision in IT(TP)A No. 1692/Bang/2016. The High Court admitted the appeal on 10.02.2022 to consider substantial questions of law concerning the exclusion of comparable entities by the Transfer Pricing Officer/Assessing Authority.

What were the issues?

1. Whether the Tribunal's order is perverse for directing the exclusion of comparables based on functional dissimilarity and an onsite revenue filter, despite the Transfer Pricing Officer (TPO) selecting comparables based on FAR analysis and Rule 10B of the IT Rules? (Question of law/mixed law and fact, concerning Section 92C and Rule 10B of the IT Rules). 2. Whether the Tribunal was legally correct in directing the TPO to exclude M/s. Cades Digitech Pvt. Ltd., M/s. Holtech Consulting Pvt. Ltd., and M/s. Tractable Consulting Engineers Pvt. Ltd. as comparables based on functional dissimilarity and an onsite revenue filter, even though these entities satisfied the TPO's qualitative and quantitative filters? (Question of law/mixed law and fact, concerning Section 92C and Rule 10B of the IT Rules). 3. Whether the Tribunal was legally correct in directing the TPO to exclude M/s. Cades Digitech Pvt. Ltd. based on the onsite revenue filter, when this comparable was chosen in accordance with Rule 10B(2) of the IT Rules? (Question of law/mixed law and fact, concerning Section 92C and Rule 10B of the IT Rules). Assessee's Contention: The tax effect in the appeal is less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue in view 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 in 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,Section 92C

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39700-DB ITA No. 220 of 2020

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. 220 OF 2020 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX-4 BMTC COMPLEX, KORAMANGALA BANGALORE

2.

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4(1)(1) BENGALURU …APPELLANTS

(BY SRI.SANMATHI.E.I., ADVOCATE)

AND: 1. M/S LM WIND POWER BLADES (INDIA) PVT LTD (ERSTWHILE LM WINDPOWER TECHNOLOGIES (INDIA) PVT LTD RMZ INFINITY, NO.801 TOWER B, 8TH FLOOR, OLD MADRAS ROAD BENNIGANAHALLI, BANGALORE-560016 PAN AABCL3160C …RESPONDENT

(BY SRI.RAGHURAM CADAMBI., ADVOCATE)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 29/11/2019 PASSED IN IT(TP)A NO.1692/BANG/2016, FOR THE

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39700-DB ITA No. 220 of 2020

ASSESSMENT YEAR 2012-2013, PRAYING TO 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; SET ASIDE THE APPELLATE ORDER DATED 29/11/2019 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS NO. IT(TP)A NO.1692/BANG/2016 (ANNEXURE-A) FOR ASSESSMENT YEAR 2012-2013.

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.Sanmathi.E.I., for appellants/Revenue and learned counsel Sri.Raghuram Cadambi 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

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NC: 2024:KHC:39700-DB ITA No. 220 of 2020

29.11.2019 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.1692/Bang/2016 for the assessment year 2012-13.

3.

This

Court,

admitted the appeal on 10.02.2022 to consider the following substantial questions of law: “(1) Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature since Tribunal has directed the Transfer Pricing Officer/Assessing authority to exclude certain comparable's on basis of functional dissimilarity and onsite revenue filter even though the Transfer Pricing officer has chosen comparable's on basis of FAR analysis and in accordance with parameters set out Rule 10B of the I.T. Rules?

(2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to exclude comparable's namely, M/s.Cades Digitech Pvt. Ltd and M/s.Holtech Consulting Pvt. Ltd and Tractable Consulting Engineers Pvt. Ltd on basis of functional dissimilarity and onsite revenue filter

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NC: 2024:KHC:39700-DB ITA No. 220 of 2020

even though the said comparable's satisfied qualitative and quantitative filters applied by Transfer Pricing Officer?

(3) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to exclude M/s.Cades Digitech Pvt. Ltd as comparable on the basis of onsite revenue filter by even though the said comparable chosen by the Transfer Pricing Officer is in accordance with parameter set out in Rule 10B (2) of I.T.Rules?”

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

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NC: 2024:KHC:39700-DB ITA No. 220 of 2020

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 List No.: 2 Sl No.: 14

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