THE PR. COMMISSIONER OF INCOME TAX-3 vs. M/S FINASTRA SOFTWARE SOLUTIONS (INDIA)PVT LTD

PDF · subscribers
ITA/714/2023HC KarnatakaKAHC01067756202325 September 2024Bench: S.G.PANDIT,C.M. POONACHA4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal as per the submissions made by both parties. The Revenue was granted liberty to revive the appeal in case the matter falls within the exceptions under CBDT Circular No. 09/2024 and Circular No. 5/2024. The substantial question of law was kept open to be adjudicated in an appropriate proceeding. No finding was given on the merits of the substantial question of law regarding the perversity of the Tribunal's order or the appropriate interest rate to be applied. The operative direction was to dispose of the appeal with liberty to revive, keeping the question of law open.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax-3 and the Deputy Commissioner of Income Tax Circle 3(1)(1), has filed an appeal under Section 260-A of the Income Tax Act, 1961. The appeal challenges an order dated May 31, 2023, passed by the Income Tax Appellate Tribunal (ITAT), 'C' Bench, Bengaluru. The assessment year in question is 2017-18. The appeal arises from IT(TP)A No. 189/Bang/2022. The dispute concerns the rate of interest applied to foreign currency invoices in a transfer pricing matter. The assessee is M/s Finastra Software Solutions (India) Pvt. Ltd.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in law in directing the Transfer Pricing Officer to consider the LIBOR+200 basis as the interest rate, ignoring that in the Section 92CA order, the Transfer Pricing Officer had considered the 6 months LIBOR+400 basis points for foreign currency invoices, which was also upheld by the Dispute Resolution Panel (DRP)? (Question of law/mixed law and fact, turning on Section 92CA of the Income Tax Act, 1961). Assessee's contentions: The assessee argued that 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 September 17, 2024, which binds the Revenue. Revenue's contentions: The Revenue requested liberty to revive the appeal if the matter falls within the exceptions provided under 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,Section 92CA

AI-generated summary — verify with the full judgment below

- 1 -

NC: 2024:KHC:39906-DB ITA No. 714 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH 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. 714 OF 2023

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX-3, KORMANGALA, BANGALORE.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1)(1), BMTC COMPLEX, KORAMANGALA, BANGALORE …APPELLANTS

(BY SRI. SANMATHI E.I., ADVOCATE)

AND:

M/S FINASTRA SOFTWARE SOLUTIONS (INDIA) PVT. LTD., 4TH TO 6TH FLOOR, VIRGO BUILDING, BAGMANE CONSTELLATION BUSINESS PARK OUTER RING ROAD, DODANEKUNDI BANGALORE

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

- 2 -

NC: 2024:KHC:39906-DB ITA No. 714 of 2023

PAN: AAACK9067G …RESPONDENT

THIS ITA / INCOME TAX APPEAL IS FIELD UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31/05/2023 PASSED IN IT(TP)A NO. 189/BANG/2022, FOR THE ASSESSMENT YEAR 2017-18. PRAYING TO 1 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 31/05/2023 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT- ASSESSEES CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO. 189/BANG/2022 FOR A.Y 2017-2018 (ANNEXURE A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

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

- 3 -

NC: 2024:KHC:39906-DB ITA No. 714 of 2023

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri. E.I.Sanmathi 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 31.5.2023 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short ‘Appellate Authority’) in IT(TP)A.No.189/Bang/2022 for the assessment year 2017-18, raising the following substantial question of law:

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in law in directing Transfer Pricing Officer to consider the LIBOR+200 basis as the interest rate ignoring that in 92CA order, the Transfer Pricing Officer has considered the 6 months LIBOR+400 basis points in case of foreign currency invoices and same has also been rightly upheld by DRP"?

3.

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

- 4 -

NC: 2024:KHC:39906-DB ITA No. 714 of 2023

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.

4.

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.

5.

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

SMJList No.: 2 Sl No.: 3

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →