PR COMMISSIONER OF INCOME TAX -7 vs. M/S TOSHIBA SOFTWARE INDIA PVT LTD

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ITA/334/2019HC KarnatakaKAHC01037922201921 October 2024Bench: V KAMESWAR RAO,S RACHAIAH4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal based on the submissions made by both the learned counsel for the respondent and the appellant. The respondent-assessee pointed out that the net tax effect was less than two crores and did not fall within the exceptions specified in the revenue's instructions. The appellant-revenue, while agreeing with the tax effect, requested liberty to seek revival of the appeal if the issue considered arose within the exceptions. Consequently, the appeal was disposed of with liberty granted to the appellant to seek revival as requested. The substantial questions of law were kept open to be adjudicated in appropriate proceedings. No decision was made on the merits of the substantial questions of law.

What were the facts?

The appeal was filed by the Pr. Commissioner of Income Tax - 7 and The Deputy Commissioner of Income Tax (appellants-revenue) against an order dated January 11, 2019, passed by the Income Tax Appellate Tribunal (ITAT), 'A' Bench, Bangalore. This order was in relation to cross-appeals filed by the parties for Assessment Year 2009-2010. The ITAT's order was challenged in IT(TP)A No.268/Bang/2014 and IT(TP)A No.198/Bang/2014. The respondent is M/s. Toshiba Software India Pvt. Ltd. The appeal was admitted on December 16, 2020.

What were the issues?

1. Whether on the facts and circumstances of the case, the Tribunal is right in law in excluding the comparables, namely, M/s. Bodhtree Consulting Limited, Infosys Technologies Ltd., Persistent Systems Ltd., and Tata Elxi Limited by following its earlier order passed in the case of M/s. TE Connectivity Global Shared Services Pvt Ltd, which has not reached finality, even though the said companies are functionally similar to that of the assessee, ignoring FAR analysis and materials brought on record by the Transfer Pricing Officer? (Question of law) 2. Whether on the facts and circumstances of the case, the order of the Tribunal can be held as perverse in nature since the Tribunal has erred in ignoring the annual reports, audited accounts, and TP study of the Transfer Pricing Officer relating to the excluded companies? (Question of law) Assessee's Contention: The respondent-assessee argued that the appeal should be dismissed as the net tax effect is less than two crores and does not fall within the exceptions carved out in the revenue's instructions. Revenue's Contention: The appellant-revenue, while agreeing that the tax effect is less than two crores, sought liberty to seek revival of the appeal if the issue falls within the exceptions in the revenue's instructions.

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:42147-DB ITA No. 334 of 2019

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF OCTOBER, 2024 PRESENT THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE S RACHAIAH INCOME TAX APPEAL NO.334 OF 2019 BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX -7 BMTC COMPLEX KORMANGALA BENGALURU.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(4) BENGALURU. …APPELLANTS (BY SRI. SANMATHI E.I., ADVOCATE) AND:

M/S. TOSHIBA SOFTWARE INDIA PVT. LTD. NO.3A, ‘ESSAE VAISHNAVI SOLITAIRE’ 3RD BLOCK, KORAMANGALA BENGALURU-560 034. …RESPONDENT (BY SRI. ANKUR P.D., ADVOCATE)

THIS ITA FILED UNDER SECTION 260-A OF THE INCOME TAX ACT 1961, PRAYING TO SET ASIDE THE APPELLATE ORDER DATED 11.01.2019 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO.268/BANG/2014 FOR THE ASSESSMENT YEAR 2009-2010 (ANNEXURE-A).

Digitally signed by NARAYANA UMA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:42147-DB ITA No. 334 of 2019

THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO and HON'BLE MR JUSTICE S RACHAIAH

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE V KAMESWAR RAO)

The challenge in this appeal is to an order dated 11.01.2019 passed by the Income Tax Appellate Tribunal, “A” Bench, Bangalore in two cross appeals i.e., IT(TP)A No.268/Bang/2014 2009-10 and IT(TP)A No.198/Bang/2014 2009-10 filed by the parties vide Annexue-A. 2. The appellant-revenue has raised the following substantial questions of law: 1. Whether on the facts and circumstances of the case, the Tribunal is right in law in excluding the comparables, namely, M/s. Bodhtree Consulting Limited, Infosys Technologies Ltd. Persistent Systems Ltd and Tata Elxi Limited by following its earlier order passed in the case of M/s. TE Connectivity Global Shared Services Pvt Ltd which has not reached finality even though the said companies are functionally similar to that of the

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NC: 2024:KHC:42147-DB ITA No. 334 of 2019

assessee ignoring FAR analysis and materials brought on record by the Transfer Pricing Officer? 2. Whether on the facts and circumstances of the case, the order of the Tribunal can be held as perverse in nature since the Tribunal has erred in ignoring the annual reports, audited accounts and TP study of Transfer Pricing Officer relating to the excluded companies?

3.

The appeal has been admitted on 16.12.2020. The learned counsel appearing for the respondent states that though the appeal has been admitted, the net tax effect is less than two cores. It is also his submission that the appeal does not fall in the exception carved out in terms of the instructions issued by the revenue and as such, this appeal needs to be dismissed. 4. The learned counsel Mr. E.I., Sanmathi, agreeing with the submission that the tax effect is less than two crores, states liberty be granted to the appellant to seek revival of the appeal, if the issue which arises for consideration falls within the exception carved out in the instructions issued by the revenue.

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NC: 2024:KHC:42147-DB ITA No. 334 of 2019

5.

In view of the submission made by the learned counsel for the respondent and also by Mr. E.I., Sanmathi, the appeal is disposed of reserving liberty as sought for by the learned counsel for the revenue. However, the questions of law are kept open to be adjudicated in appropriate proceedings.

Sd/- (V KAMESWAR RAO) JUDGE

Sd/- (S RACHAIAH) JUDGE

JS List No.: 1 Sl No.: 40

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