THE PR. COMMISSIONER OF INCOME TAX vs. M/S TEJAS NETWORKS LTD

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ITA/405/2022HC KarnatakaKAHC01037938202227 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court disposed of the appeal with liberty to the revenue to revive it if exceptions under CBDT circulars apply. The substantial questions of law were kept open for future adjudication.

What were the facts?

The Revenue appealed a Tribunal order regarding the adoption of a 0.5% corporate guarantee rate for the assessment year 2011-12. The assessee argued that the appeal should not be entertained due to a low tax effect, citing CBDT circulars.

What were the issues?

Whether the Tribunal was justified in directing the Transfer Pricing Officer to adopt a specific corporate guarantee rate, and if the Tribunal's order was perverse. The applicability of CBDT circulars regarding tax effect was also a key consideration.

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:40451-DB ITA No. 405 of 2022

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.405 OF 2022

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, C.R. BUILDING, QUEENS ROAD, BENGALURU-560 001.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, LTU, PRESENT ADDRESS, DCIT, CENTRAL CIRCLE-2(1), C.R. BUILDING, QUEENS ROAD, BENGALURU-560 001. …APPELLANTS

(BY SRI. DILIP M., ADVOCATE A/W SRI. RAVIRAJ Y.V., ADVOCATE)

Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:40451-DB ITA No. 405 of 2022

AND:

M/S TEJAS NETWORKS LTD., PLOT NO.25, 5TH FLOOR, JP SOFTWARE PARK, ELECTRONIC CITY, PHASE I, BENGALURU-560 100 PAN-AABCT1670M …RESPONDENT

(BY SRI. ANNAMALAI.S., ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 09/02/2022 PASSED IN IT(TP)A NO.694/BANG/ 2016, FOR THE ASSESSMENT YEAR 2011-2012. PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN 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:40451-DB ITA No. 405 of 2022

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 and learned counsel Sri. Annamalai.S., 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 09.02.2022 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.694/Bang/2016 for the assessment year 2011-12.

3.

This Court, admitted the appeal on 05.12.2022 to consider the following substantial questions of law: 1. "Whether on the facts and in the circumstances of the case, the Tribunal is justified in directing Transfer Pricing Officer to adopt 0.5% as Corporate guarantee by relying on the decision rendered by co-ordinate bench in case of Medrich

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NC: 2024:KHC:40451-DB ITA No. 405 of 2022

Ltd, Manipal Global Education Services and Xchanging Solutions ignoring the facts of the case and TP study put up by Transfer Pricing Officer analyzing the risk assessment, credit rating, debt to equity ratio of Associated Enterprises and viability of AE getting the loan without corporate guarantee"?

2.

"Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature in directing Transfer Pricing Officer to adopt 0.5% as Corporate guarantee ignoring the findings of DRP and TPO which were well supported with materials establishing the need for variation from claim made by assessee"?

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:40451-DB ITA No. 405 of 2022

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

SMJ List No.: 4 Sl No.: 0

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