THE PR. COMMISSIONER OF INCOME TAX vs. M/S. NUANCE TRANSCRIPTION SERVICES INDIA PVT LTD

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ITA/70/2023HC KarnatakaKAHC01009240202327 September 2024Bench: S.G.PANDIT,C.M. POONACHA6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal with liberty granted to the Revenue to revive it if the matter falls within the exceptions of the cited CBDT Circulars. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. The Court did not decide the merits of the questions of law raised by the Revenue. The decision was based on the tax effect and the applicability of the CBDT circulars, as argued by the assessee and conceded by the revenue. No specific finding was made on the correctness of the Tribunal's order or the TPO's actions regarding the comparable companies.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax and the Assistant 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 August 10, 2022, passed by the Income Tax Appellate Tribunal, Bengaluru. The assessment year in question is 2012-13. The dispute pertains to the exclusion of certain comparable companies by the Tribunal in its transfer pricing assessment. The High Court admitted the appeal to consider substantial questions of law.

What were the issues?

1. Whether the Tribunal's exclusion of comparable companies, despite the Transfer Pricing Officer (TPO) satisfying qualitative and quantitative tests, resulted in a perverse order? 2. Whether the Tribunal was correct in deleting comparable companies (Infosys BPO Ltd, Microland Ltd, and Crossdomains Solutions Pvt Ltd) without acknowledging that they were chosen by the TPO based on available material and prescribed tests, rendering the Tribunal's order perverse? 3. Whether the Tribunal was correct in excluding companies on grounds of functional dissimilarity, ignoring that transfer pricing is not an exact science and no two entities are identical? 4. Whether the Tribunal's order is perverse for ignoring the TPO's findings and the materials on record that established the exclusion of comparables in accordance with Rule 10B parameters? 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 provided under Circular No. 09/2024 and Circular No. 5/2024 dated 15.03.2024.

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:40427-DB ITA No. 70 of 2023

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.70 OF 2023

BETWEEN:

1.

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

2.

THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-5(1)(1), PRESENT ADDRESS DCIT, CIRCLE-2(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095.

…APPELLANTS (BY SRI. DILIP M.,ADVOCATE)

AND:

M/S. NUANCE TRANSCRIPTION SERVICES INDIA PVT LTD

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40427-DB ITA No. 70 of 2023

FIRST FLOOR, BLOCK B, SALARPURIA AURA, KHATA NO. 434/170, MARATHAHALLI-SARJAPURA OUTER RING ROAD, KAVERAPPA LAYOUT, BENGALURU-560 103. PAN: AAACF 3465 F

…RESPONDENT

(BY SRI. PAI DHUNGAT ANKUR DEEPAK.,ADVOCATE)

THIS ITA/INCOME TAX APPEAL IS FILED UNDER SEC.260- A OF THE INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENAGALURU IN IT(TP)A NO. 173/BANG/2017 DATED 10.08.2022 FOR ASSESSMENT YEAR 2012-2013 ANNEXURE D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2 (1) (1), BENGALURU 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:40427-DB ITA No. 70 of 2023

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 the appellants/Revenue and learned counsel Sri. K.R.Vasudevan along with Sri. Ankur.P.D., learned counsel for the 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 10.08.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.173/Bang/2017 for the assessment year 2012-13.

3.

This

Court,

admitted the appeal on 22.08.2023 to consider the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal excluding comparable's

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NC: 2024:KHC:40427-DB ITA No. 70 of 2023

without considering that companies are similar to that of assessee and TPO had satisfied qualitative and quantitative tests to consider them as comparable's, the same has resulted in passing a perverse order in nature?

2.

Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in deleting comparable's Infosys BPO Ltd, Microland Ltd and Crossdomains Solutions Pvt Ltd without acknowledging the fact that the said comparable's were chosen by TPO on the basis of materials on record and after applying the requires testes prescribed under the Rules and as such order passed by Tribunal is perverse in nature?

3.

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding companies in excluding comparable Directing Transfer Pricing Officer to exclude comparables namely, as comparable's on ground of functional dissimilarity ignoring that transfer pricing is not an

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NC: 2024:KHC:40427-DB ITA No. 70 of 2023

exact science and no two entities can be exact replicas?

4.

Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal has ignored the findings rendered by Transfer Pricing Officer and also materials brought on record by said officer which establishes that exclusion of comparable was in accordance with parameters of Rule 10B?"

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

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NC: 2024:KHC:40427-DB ITA No. 70 of 2023

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

SMJ List No.: 4 Sl No.: 43

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