THE PR. COMMISSIONER OF INCOME TAX vs. TESCO BENGALURU PVT LTD

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ITA/433/2022HC KarnatakaKAHC01040733202224 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 made by both parties. The assessee's counsel highlighted the tax effect being below the threshold stipulated in CBDT Circular No. 09/2024, suggesting the appeal should not be entertained. The Revenue's counsel requested liberty to revive the appeal if the case met the exceptions outlined in the aforementioned circulars. In light of these submissions, the Court granted the liberty as prayed for by the Revenue. The substantial questions of law were kept open to be adjudicated in an appropriate future proceeding. No decision was made on the merits of the substantial questions of law.

What were the facts?

The Revenue, represented by 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, before the High Court of Karnataka. The appeal challenges an order dated 25.10.2021 passed by the Income Tax Appellate Tribunal (ITAT), 'B' Bench, Bengaluru, in IT(TP)A.No.262/Bang/2014 for the assessment year 2009-10. The ITAT's order was in favor of the assessee, Tesco Bengaluru Pvt Ltd. The High Court admitted the appeal on 01.04.2024 to consider substantial questions of law. During the hearing, the assessee's counsel pointed out that the tax effect was less than Rs. 2 Crores, citing CBDT Circular No. 09/2024, and argued the appeal should not be entertained. The Revenue's counsel sought liberty to revive the appeal if the matter fell within exceptions under Circulars 09/2024 and 05/2024.

What were the issues?

1. Whether, in the given facts and circumstances, the Tribunal erred in law by allowing the assessee's appeal and directing the Transfer Pricing Officer (TPO) to consider international transactions not covered under a Mutual Agreement Procedure (MAP) by adopting the same profit margin as agreed for UK transactions, despite no direct profit margin relationship between MAP-covered and non-MAP-covered transactions unless the cost bases are identical? (Question of law) 2. Whether the Tribunal's order directing the TPO to consider other jurisdictional international transactions not covered under MAP by adopting the same profit margin as agreed under MAP with UK transactions, while ignoring the exhaustive parameters prescribed under Rule 10B, is perverse and legally permissible to bypass these parameters? (Question of law) Assessee's contention: The tax effect in the 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, which binds the Revenue. Revenue's contention: The Revenue sought liberty to revive the appeal if the matter falls within the exceptions provided under CBDT Circular No. 09/2024 and Circular No. 05/2024.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 10B

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39737-DB ITA No. 433 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. 433 OF 2022 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX, KORAMANGALA, BANGALORE.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1)/12(4), BMTC COMPLEX, KORAMANGALA, BANGALORE …APPELLANTS

(BY SRI SANMATHI E I, ADVOCATE)

AND:

1.

TESCO BENGALURU PVT LTD., (FORMERLY KNOWN AS TESCO HINDUSTHAN SERVICE CENTRE PVT LTD)., NO.81 7 82 EPIP AREA, WHITEFIELD, BENGALURU-560006, PAN-AABCT8915B. …RESPONDENT

(BY SMT TANMAYEE RAJKUMAR, ADVOCATE)

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 25/10/2021 PASSED IN IT(TP)A NO.262/BANG/2014 FOR THE ASSESSMENT YEAR 2009-2010, PRAYING THAT THIS HON’BLE COURT MAY

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39737-DB ITA No. 433 of 2022

BE PLEASED TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HONBLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 25/10/2021 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT- ASSESSEES CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO. 262/BANG/2014 FOR ASSESSMENT YEAR 2009-2010 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

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 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’)

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NC: 2024:KHC:39737-DB ITA No. 433 of 2022

questioning the correctness and legality of order dated 25.10.2021 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.262/Bang/2014 for the assessment year 2009-10.

3.

This

Court,

admitted the appeal on 01.04.2024 to consider the following substantial questions of law: “1. Whether in the present facts and circumstances of the case, the Tribunal is correct in law allowing appeal of the assessee by directing Transfer Pricing Officer to consider other jurisdictional international transactions which are not covered under MAP by adopting same profit margin as agreed by taxpayer under MAP with UK transactions ignoring that there is no direct relationship of profit margin between the transaction covered under MAP with specific country and the country's whose transaction are not covered under MAP unless the cost base of both countries would be same?

2.

Whether in the present facts and circumstances of the case, the order passed by

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NC: 2024:KHC:39737-DB ITA No. 433 of 2022

Tribunal can be said as perverse law in setting directing Transfer Pricing Officer to consider other jurisdictional international transactions which are not covered under MAP by adopting same profit margin as agreed by taxpayer under MAP with UK transactions ignoring the parameters of analysis prescribed under Rule 10B, which are exhaustive and if so, whether it is legally permissible to bypass the same partially or by implication?”

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:39737-DB ITA No. 433 of 2022

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 List No.: 2 Sl No.: 46

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