THE PR COMMISSIONER OF INCOME TAX vs. M/S.CSG SYSTEMS INTERNATIONAL PVT. LTD

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ITA/328/2019HC KarnatakaKAHC01039261201924 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions of both parties. The Court granted the revenue the liberty to revive the appeal as prayed for by its counsel. The Court explicitly kept the substantial questions of law open to be adjudicated in an appropriate proceeding. Therefore, no decision was made on the merits of the questions concerning the exclusion of comparables by the Tribunal based on functional dissimilarity or turnover filters, nor was the perversity of the order decided. 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 and the Deputy Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated November 16, 2018, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru. The appeal pertains to Assessment Year 2008-2009 and challenges the ITAT's decision in ITA No. 1086/Bang/2013. The ITAT had confirmed the order of the Appellate Commissioner, which in turn had upheld certain aspects of the Deputy Commissioner's order. The High Court admitted the appeal on July 5, 2019, to consider substantial questions of law. The amount in dispute is not explicitly stated, but the tax effect is mentioned as less than Rs. 2 Crores.

What were the issues?

The substantial questions of law before the High Court were: 1. Whether the Tribunal was correct in law in excluding certain comparable companies based on functional dissimilarity, especially when its prior judgment on this point had not reached finality and the Transfer Pricing Officer (TPO) had considered comparables based on qualitative and quantitative filters? 2. Whether the Tribunal was correct in law in directing the TPO to exclude comparables based on a turnover filter, even when the TPO had selected them in accordance with the Act and rules? 3. Whether the Tribunal's order was perverse, given that it allegedly did not consider the materials presented by the TPO for selecting comparables, leading to a perverse outcome? 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 dated September 17, 2024, which binds the revenue. The revenue requested liberty to revive the appeal if the matter fell within the exceptions of Circular No. 09/2024 and Circular No. 5/2024 dated March 15, 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:39751-DB ITA No. 328 of 2019

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. 328 OF 2019 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX CIT(A), 5TH FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA BENGALURU-560095.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2(1)(1) 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095. …APPELLANTS (BY SRI. SUSHAL TIWARI N., ADV.)

AND:

M/S. CSG SYSTEMS INTERNATIONAL PVT. LTD., (FORMERLY KNOWN AS M/S. INDEPENDENT TECHNOLOGY SYSTEMS (INDIA) PVT. LTD.,) DIVYASHREE TOWERS, 4TH FLOOR NO.55, GURUPPANNA PALYA MADIVALA RANGE BENGALURU-560029 PAN: AABCI 2954B. …RESPONDENT (BY SRI. K.R.VASUDEVAN, ADV. A/W SRI ANKUR P.D., ADV.)

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39751-DB ITA No. 328 of 2019

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 16/11/2018 PASSED IN IT(TP)A NO.1086/BANG/2013, FOR THE ASSESSMENT YEAR 2008-2009, PRAYING TO 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO. 1086/BANG/2013 DATED 16/11/2018 FOR ASSESSMENT YEAR 2008-2009 ANNEXURE-D CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR ORDERS, 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.Sushal Tiwari, for appellants/Revenue and learned counsel Sri.K.R.Vasudevan along with Sri.Ankur.P.D., learned counsel for respondent/assessee.

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NC: 2024:KHC:39751-DB ITA No. 328 of 2019

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 16.11.2018 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.1086/Bang/2013 for the assessment year 2008-09.

3.

This

Court,

admitted the appeal on 05.07.2019 to consider the following substantial question of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding certain comparables on thebasis of functional dissimilarity by following its earlier judgment which has not reached finality and even when the Transfer Pricing Officer has considered the comparables on the basis of qualitative and quantitative filters?

2.

Whether on the facts and in the circumstances of the case, Tribunal is right in law in directing Transfer Pricing Officer to exclude certain comparable’s on basis of turnover filter even when the TPO has rightly chosen the comparable’s in

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NC: 2024:KHC:39751-DB ITA No. 328 of 2019

accordance with provisions of the Act and rules prescribed thereunder?

3.

Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse Tribunal has not considered the materials brought on record by TPO to select comparable’s and ignoring the same has resulted in passing a perverse order?”

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:39751-DB ITA No. 328 of 2019

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 CT:bms List No.: 2 Sl No.: 0

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