THE PR COMMISSIONER OF INCOME TAX vs. M/S WIPRO GE HEALTHCARE PVT LTD

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ITA/314/2023HC KarnatakaKAHC01021718202326 September 2024Bench: S.G.PANDIT,C.M. POONACHA6 pages
AI SummaryRemanded

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 explicitly stated that 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 raised by the Revenue. The operative direction was to dispose of the appeal with the liberty granted, and the questions of law remain undecided.

What were the facts?

The Revenue, represented by 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 August 5, 2022, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The ITAT's order pertained to Assessment Year 2005-06 and was in relation to an appeal filed by M/s. Wipro GE Healthcare Pvt. Ltd. The High Court admitted the appeal on June 19, 2023, to consider substantial questions of law. During the hearing, the assessee's counsel raised a preliminary objection regarding the tax effect of the appeal being below Rs. 2 Crores, citing CBDT Circular No. 09/2024 dated September 17, 2024. The Revenue sought liberty to revive the appeal if the matter fell within exceptions of the cited circulars.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether the Tribunal was correct in directing the assessing officer/Transfer Pricing Officer to consider Royalty as part of operating cost for the trading segment, even if the taxpayer received no economic value from the Associated Enterprise (AE) for the royalty payment, under Section 9 of the Act. 2. Whether the Tribunal was correct in directing the Transfer Pricing Officer to compare margins with a comparable company (M/s. Advance Micronic Devices Ltd.) by considering royalty payment as an operating cost, and to verify if the assessee's margin was higher, without considering the TPO's observations. 3. Whether the Tribunal was correct in setting aside the disallowance made under the relevant provisions, ignoring the nature of payments and without analyzing the contents of the agreement between the parties. 4. (Identical to question 3). 5. Whether the Tribunal's order was perverse in directing the TPO positively without re-investigation, concerning disallowances under Section 40(a)(ia) of the Act, despite the assessee making payments for training and knowledge import satisfying Section 9 conditions. Assessee's contention: The tax effect is less than Rs. 2 Crores, and the appeal should not be entertained as per CBDT Circular No. 09/2024. Revenue's contention: Liberty to revive the appeal if the matter falls within exceptions of CBDT Circulars No. 09/2024 and 05/2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 9,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:40545-DB ITA No. 314 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH 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. 314 OF 2023

BETWEEN:

1.

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

2.

THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE-7 (1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU - 560 095.

…APPELLANTS

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

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40545-DB ITA No. 314 of 2023

AND:

M/S.WIPRO GE HEALTHCARE PVT. LTD., NO.04, KADUGODI INDUSTRIAL AREA, WHITEFIELD, BENGALURU-560 067

PRESENTLY AT PRESTIGE SHANTHINIKETAN, 6TH FLOOR, CRESCENT 4, ITPL WHITEFIELD, BENGALURU - 560 048 PAN AAACW 1685J …RESPONDENT

(BY SRI. K.R.PRADEEP, ADVOCATE AND SMT.GIRIJA G.P. ADVOCATE)

THIS APPEAL IS FILED UNDER SECTION 260-A OF 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.701/BANG/2021 DATED 05.08.2022 FOR ASSESSMENT YEAR 2005-2006 (ANNEXURE-D) 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:40545-DB ITA No. 314 of 2023

ORAL ORDER (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 Sri. K.R.Pradeep and Smt. Girija.G.P., learned counsel for caveator/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 05.8.2022 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.701/Bang/2021 for the assessment year 2005-06.

3.

This Court, admitted the appeal on 19.6.2023 to consider the following substantial questions of law: 1. "Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in nature in directing the assessing officer/Transfer Pricing Officer to consider Royalty as part of operating cost with respect to trading segment even when if

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NC: 2024:KHC:40545-DB ITA No. 314 of 2023

taxpayer has not received any economic value from the AE for payment of Royalty"?

2.

"Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in nature in directing Transfer Pricing Officer for comparison of margins with the comparable Company with an opinion to consider the royalty payment as an operating cost and has to verify whether the margin of the assesse is higher than the margin declared by the comparable company i.e M/s.Advance Micronic Devices Ltd according without considering that TPO's observation made in TPO's order"?

3.

"Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in law in setting aside disallowance made under aforesaid provisions ignoring nature of payments and without analyzing contents of agreement entered into between parties"?

4.

"Whether on the facts and in the circumstances of the case, the Tribunal in law in setting aside disallowance made under aforesaid provisions ignoring nature of payments and without analyzing contents of agreement entered into between parties"?

5.

"Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature

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NC: 2024:KHC:40545-DB ITA No. 314 of 2023

in as Tribunal has given positive direction to TPO without being matter re-investigated by TPO de disallowances made under section 40(a)(ia) of the Act ignoring that assesse had made the payments relating to training, importing of knowledge of knowhow/management ability satisfying conditions set out in Section 9 of the Act"?

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:40545-DB ITA No. 314 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.: 3 Sl No.: 15

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