THE PR COMMISSIONER OF INCOME TAX -2 vs. M/S INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD.,

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ITA/220/2022HC KarnatakaKAHC01009667202124 September 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 concerning the tax effect and the applicability of CBDT Circulars. The Revenue was granted liberty to revive the appeal if the matter met the exceptions outlined in Circular No. 09/2024 and Circular No. 5/2024. Consequently, the substantial questions of law framed by the Court were kept open to be adjudicated in an appropriate proceeding. The Tribunal's order was not adjudicated on its merits. No specific finding was given on the perversity of the Tribunal's order or the validity of the exclusion/inclusion of comparable companies. The operative direction was to dispose of the appeal with liberty to revive, and the questions of law remain undecided.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income Tax-2 and the Income Tax Officer, has filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated September 9, 2020, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench. The appeal pertains to the assessment year 2009-2010 and challenges the ITAT's decision in M.P.No.57/Bang/2020. The High Court admitted the appeal on April 8, 2024, to consider specific substantial questions of law concerning the exclusion of comparable companies by the ITAT in its transfer pricing assessment. The dispute involves the selection and exclusion of comparable companies by the Transfer Pricing Officer (TPO) and the subsequent decision of the ITAT.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse since the Tribunal has excluded comparable companies M/s. Bodhtree Consulting Ltd., M/s. Tata Elxsi, M/s. Sasken Communication Technologies Ltd., M/s. Persistent Systems Ltd., without going into reasons assigned by the Transfer Pricing Officer? (Question of law and fact, concerning the selection of comparables under transfer pricing provisions). 2. Whether on the facts and circumstances of the case and in law, the Tribunal’s order can be said as perverse in nature as the Tribunal has directed the Transfer Pricing Officer to exclude M/s. Infosys Technology Ltd., and M/s. Larsen & Toubro Infotech Ltd., on the ground of Turnover filter without appreciating that there is no direct relationship between the turnover of comparable and the margin earned by the companies engaged in Software Development Services and as such, the exclusion of comparable companies on the ground of turnover filter is unwarranted? (Question of law and fact, concerning the application of turnover filter in selecting comparables under transfer pricing provisions). Assessee's Contention: The tax effect in this 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 seeks liberty to revive the appeal if the matter falls within the exceptions under Circular No. 09/2024 dated 17.09.2024 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:39733-DB ITA No. 220 of 2022

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 2022 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX -2, BMTC COMPLEX, KORAMANGALA, BENGALURU.

2.

THE INCOME TAX OFFICER, CIRCLE 11(4), BMTC COMPLEX, KORAMANGALA, BENGALURU. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE) AND:

1.

M/S INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., (FORMERLY MERITOR LVS INDIA PVT. LTD.,) No. 69, AI-AMEEN TOWERS, HOSUR ROAD, NEAR LALBAGH MAIN GATE, BENGALURU - 560 027, PAN AABCM9623K. …RESPONDENT (BY SRI K R VASUDEVAN, ADVOCATE AND SRI ANKUR P D, ADVOCATE)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 09/09/2020 PASSED IN M.P.NO.57/BANG/2020 IN IT(TP)A NO.205/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010. PRAYING THIS HON’BLE COURT TO:

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39733-DB ITA No. 220 of 2022

(1) 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.

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.Sanmathi.E.I., for appellants/Revenue and Sri.K.R.Vasudevan and Sri.Ankur P.D., learned counsel 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 09.09.2020 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in M.P.No.57/Bang/2020 for the assessment year 2009-10.

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NC: 2024:KHC:39733-DB ITA No. 220 of 2022

3.

This

Court,

admitted the appeal on 08.04.2024 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 since Tribunal has excluded comparable’s M/s.Bodhtree Consulting Ltd., M/s.Tata Elxsi, M/s.Sasken Communication Technologies Ltd., M/s.Persistent Systems Ltd., without going into reasons assigned by Transfer Pricing Officer?

2.

Whether on the facts and circumstances of the case and in law, Tribunal’s order can be said as perverse in nature as Tribunal has directed Transfer Pricing Officer to exclude M/s.Infosys Technology Ltd., and M/s.Larsen & Tourbo Infotech Ltd., on the ground of Turnover filter without appreciating that there is no direct relationship between turnover of comparable and the margin earned by the companies engage in Software

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NC: 2024:KHC:39733-DB ITA No. 220 of 2022

Development Services and as such excluding of comparable-companies on ground of turnover filter is unwarranted?”

4.

Learned counsels for the assessee submit 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.

6.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned

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NC: 2024:KHC:39733-DB ITA No. 220 of 2022

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.: 41

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