PR. COMMISSIONER OF INCOME TAX 5 vs. M/S MICROSEMI STORAGE SOLUTIONS INDIA PVT LTD

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ITA/42/2019HC KarnatakaKAHC01032548201924 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court of Karnataka, in view of the submissions made by both parties, disposed of the appeal. The Court noted the assessee's submission regarding the tax effect being less than Rs.2 Crores and the applicability of CBDT Circular No.09/2024. The Revenue sought liberty to revive the appeal if exceptions under the relevant circulars applied. Consequently, the appeal was disposed of with liberty granted to the Revenue as prayed. The substantial question of law was kept open to be adjudicated in an appropriate proceeding. No decision was made on the merits of the comparability of the companies or the alleged perversity of the Tribunal's order.

What were the facts?

The Revenue, comprising the Pr. Commissioner of Income Tax-5 and the Assistant Commissioner of Income Tax, Circle-5(1)(2), Bangalore, filed an appeal under Section 260-A of the Income Tax Act, 1961. The appeal challenges an order dated 24.08.2018 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru, in IT(TP)A No.2103/Bang/2016 for the Assessment Year 2012-13. The appeal was admitted by the High Court of Karnataka on 26.03.2021 to consider a substantial question of law. The assessee is M/s. Microsemi Storage Solutions India Pvt. Ltd. (formerly PMC Sierra India Pvt Ltd.).

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Tribunal is right in holding that Genesys International Corpn. Ltd., Infosys Ltd., Larsen and Toubro Infotech Ltd., and Persistent Systems Ltd., cannot be taken as comparable, holding that these companies are functionally dissimilar without appreciating the evidence brought on record by the TPO, and as such the Tribunal has passed a perverse order? (Question of law and mixed fact and law, concerning comparability of companies for transfer pricing assessment under Section 92CA of the Income Tax Act, 1961). 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 sought 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,Section 92CA

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39698-DB ITA No. 42 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. 42 OF 2019 BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX-5 BMTC COMPLEX, KORAMANGALA BANGALORE.

2.

THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -5(1) (2) BANGALORE. …APPELLANTS (BY SRI. SANMATHI E. I., ADV.)

AND:

M/S. MICROSEMI STORAGE SOLUTIONS INDIA PVT. LTD., (FORMERLY PMC SIERRA INDIA PVT LTD.,) 2ND FLOOR, 5A BLOCK, PRITECH PARK SEZ, ORR, BELLANDUR, BANGALORE - 560103 PAN NO: AADCP 6802F. …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR, ADV.)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 24.08.2018 PASSED IN IT(TP)A NO.2103/BANG/2016 FOR THE ASSESSMENT YEAR 2012-2013, PRAYING TO A. DECIDE THE

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39698-DB ITA No. 42 of 2019

FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS DEEMED FIT 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.Sanmathi.E.I., for appellants/Revenue and learned counsel Smt.Tanmayee Rajkumar 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 24.08.2018 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.2103/Bang/2016 for the assessment year 2012-13.

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NC: 2024:KHC:39698-DB ITA No. 42 of 2019

3.

This

Court,

admitted the appeal on 26.03.2021 to consider the following substantial question of law: “Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in holding that Genesys International Corpn. Ltd., Infosys Ltd., Larsen and Toubro Infotech Ltd., and Persistent Systems Ltd., cannot be taken as comparable holding that these companies are functionally dissimilar without appreciating the evidence brought on record by TPO and as such the Tribunal has passed 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

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NC: 2024:KHC:39698-DB ITA No. 42 of 2019

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 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.: 12

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