THE PR COMMISSIONER OF INCOME TAX vs. M/S INFORMATICA BUSINESS PVT LTD

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ITA/673/2019HC KarnatakaKAHC01043714201927 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 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 substantial questions of law were kept open to be adjudicated in an appropriate proceeding. The Court noted the assessee's submission regarding the tax effect being below the threshold stipulated in CBDT Circular No. 09/2024 and the Revenue's request for liberty to revive the appeal based on exceptions in the circulars. Consequently, no decision was made on the merits of the substantial questions of law regarding the exclusion of comparables by the ITAT. The operative direction was to dispose of the appeal with liberty to revive, leaving the questions of law 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 March 17, 2017, passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench. The appeal pertains to Assessment Year 2009-10 and challenges the ITAT's decision in IT(TP)A No. 1294/Bang/2014. The High Court admitted the appeal on December 18, 2019, to consider specific substantial questions of law concerning the exclusion of comparables by the ITAT. The dispute involves transfer pricing adjustments.

What were the issues?

The High Court was asked to decide the following substantial questions of law: 1. Whether the Tribunal was correct in law in excluding certain comparables based on functional dissimilarity, despite the Transfer Pricing Officer (TPO) considering them similar and without performing a Functions, Assets, and Risks (FAR) analysis of the assessee against those comparables. 2. Whether the Tribunal was correct in law in directing the TPO/AO to exclude four comparables in the ITES segment by relying on its earlier decision in M/s. Target Corporation of India Ltd., which had not reached finality, and by disregarding material provided by the TPO. The assessee contended that the tax effect in the appeal was less than Rs. 2 Crores, and therefore, the appeal should not be entertained by the Revenue in light of CBDT Circular No. 09/2024 dated September 17, 2024, which binds the Revenue. The Revenue sought 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:40400-DB ITA No. 673 of 2019

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH 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. 673 OF 2019

BETWEEN:

1.

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

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(4), PRESENT ADDRESS, JCIT, SPECIAL RANGE-3, 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560 095. …APPELLANTS (BY SRI. DILIP M., A/W SRI. RAVIRAJ Y.V., ADVOCATES)

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40400-DB ITA No. 673 of 2019

AND:

M/S. INFORMATICA BUSINESS PVT. LTD., NO.66/1, BAGMANE COMMERZ 02, BAGMANE TECH PARK, C.V. RAMAN NAGAR, BENGALURU 560 093, PAN AABCI0762M …RESPONDENT

(RESPONDENT SERVED)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17.03.2017 PASSED IN IT(TP)A NO. 1294/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ETC.

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

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NC: 2024:KHC:40400-DB ITA No. 673 of 2019

ORAL JUDGMENT (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.

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 17.03.2017 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.1294/Bang/2014 for the assessment year 2009-10.

3.

This Court, admitted the appeal on 18.12.2019 to consider the following substantial questions of law: i) Whether tribunal is right in law in excluding certain comparables on the ground of functional dissimilarity even when Transfer Pricing Officer - TPO had rightly chosen the same considering its functions which are said to be similar to assessee's business and had satisfied all the required tests and without doing an FAR analysis of the taxpayer with those of other cases?

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NC: 2024:KHC:40400-DB ITA No. 673 of 2019

ii) Whether the Tribunal is right in law in directing TPO/AO to exclude four comparable's in ITES segment by following its earlier decision in the case of M/s.Target Corporation of India Ltd., which has not reached finality and by discarding the available material brought by TPO?

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:40400-DB ITA No. 673 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

SMJ List No.: 4 Sl No.: 11

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