THE PR. COMMISSIONER OF INCOME TAX vs. M/S. ACI WORLDWIDE SOLUTIONS PVT LTD

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ITA/220/2021HC KarnatakaKAHC01013271202123 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court of Karnataka disposed of the appeal based on the submissions made by both parties. The assessee contended that the tax effect in the appeal was less than Rs. 2 Crores, making the appeal not maintainable at the instance of the Revenue, in view of CBDT Circular No. 09/2024. The Revenue sought liberty to revive the appeal if the matter fell within the exceptions provided in Circular No. 09/2024 and Circular No. 5/2024. The Court granted this liberty to the Revenue. Consequently, the appeal was disposed of with the liberty granted. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the substantial questions of law.

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, before the High Court of Karnataka. The appeal challenges an order dated April 27, 2020, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru, for the assessment year 2011-2012. The ITAT's order had set aside the orders passed by the Dispute Resolution Panel (DRP) and the Assessing Officer (AO). The dispute concerns the exclusion of certain companies as comparables by the ITAT in a transfer pricing assessment. The assessee is M/s. ACI Worldwide Solutions Pvt Ltd.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in law in excluding comparables, namely Persistent Systems & Solutions Ltd., Persistent Systems Ltd., E – Zest Solutions Ltd., Larsen & Tourbo Infotech Ltd., Tata Elxi Ltd., Acropetal Technologies Ltd., E-Infochips Ltd., ICRA Technologies Ltd., ICC International Agencies Ltd., and Asian Business Exhibition & Conference Ltd., on the ground of functional dissimilarity, despite them satisfying the qualitative and quantitative filters applied by the Transfer Pricing Officer (TPO) and being functionally similar to the assessee, rendering the Tribunal's order perverse. 2. Whether the Tribunal's order was perverse in directing the assessing authority to exclude comparables when the TPO had chosen proper comparables by applying all required tests. 3. Whether the Tribunal was correct in law in directing the assessing authority/TPO to re-consider the matter concerning comparables Sasken Communication Technologies Ltd., Evoke Technologies Ltd., and R.S. Software India Ltd., even though the AO/TPO had passed orders in accordance with Rule 10B of the Rules. The Revenue argued that the excluded companies were functionally similar and met the TPO's filters. The assessee argued that the appeal should not be entertained due to the tax effect being less than Rs. 2 Crores, citing CBDT Circular No. 09/2024. The Revenue sought liberty to revive the appeal if exceptions under Circulars 09/2024 and 05/2024 applied.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 10B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENGALURU IN IT(TP

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NC: 2024:KHC:39406-DB ITA No. 220 of 2021

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. 220 OF 2021 BETWEEN:

1.

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

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD,KORAMANGALA, BENGALURU-560 095. …APPELLANTS (BY SRI. RAVI RAJ Y V.,ADVOCATE A/W SRI. DILIP M, ADVOCATE)

AND:

M/S. ACI WORLDWIDE SOLUTIONS PVT LTD NO.9, SALARPURIA CAMBRIDGE MALL, CAMBRIDGE ROAD, ULSOOR, BENGALURU-560 008, PAN-AAACV7566R …RESPONDENT (BY SRI. NARENDRA KUMAR J JAIN.,ADVOCATE)

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 AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39406-DB ITA No. 220 of 2021

160/BANG/2016 DATED 27/04/2020 FOR ASSESSMENT YEAR 2011- 2012 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONR OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU AND ETC.

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 Raviraj Y.V, along with learned counsel Sri Dilip M, for appellants/Revenue and learned counsel Sri Narendra Kumar J Jain, for the 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 27.4.2020 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.160/Bang/2016 for the assessment year 2011-2012, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law excluding comparable’s

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NC: 2024:KHC:39406-DB ITA No. 220 of 2021

namely, Persistent Systems & Solutions Ltd., Persistent Systems Ltd., E – Zest Solutions Ltd., Larsen & Tourbo Infotech Ltd., Tata Elxi Ltd., Acropetal Technologies Ltd., E-Infochips Ltd., ICRA Technologies Ltd., ICC International Agencies Ltd and Asian Business Exhibition & Conference Ltd on the ground of functional dissimilarity when the said companies satisfied qualitative and quantitative filers applied by Transfer Pricing Officer and they are functionally similar to that of assessee. Therefore, the order passed by Tribunal is perverse in nature?

2.

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature as Tribunal has directed the assessing authority to exclude comparable even when the TPO has chosen proper comparable by application of all required tests?

3.

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the assessing authority/transfer pricing officer to re-consider the matter to file of transfer Pricing Officer/Assessing Officer in case of comparable’s namely Sasken Communication Technologies Ltd., Evoke Technologies Ltd and R.S. Software India Ltd even though the assessing authority/Transfer Pricing Officer had passed order in accordance with Rule 10B of the Rules?”

3.

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

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NC: 2024:KHC:39406-DB ITA No. 220 of 2021

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.

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 questions of law are 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.: 17

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