PR COMMISSONER OF INCOME TAX-2 vs. M/S EMC SOFTWARE AND SERVICES INDIA PVT LTD

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NC: 2024:KHC:39763-DB ITA No. 224 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. 224 OF 2022 BETWEEN:

(BY SRI SANMATHI E I, ADVOCATE)

AND:

THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 24/11/2020 PASSED IN ITA NO.603/PUNE/2016, FOR THE ASSESSMENT YEAR 2011-2012 PRAYING THIS HON’BLE COURT TO: (A) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND ETC.

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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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.

Court,

admitted the appeal on 28.08.2023 to consider the following substantial question of law:

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“(1) Whether on the facts and circumstances of the case and in law, the ITAT was right in excluding comparables namely Acropetal Technologies, Persistent Systems Ltd. and Infosys Ltd. holding that it cannot be taken as comparables, even when it satisfies all the qualitative and quantitative filters applied by the TPO?.

(ii) Whether on the facts and circumstances of the case and in law, the ITAT was right in seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of law and international jurisprudence require seeking comparable companies?

(iii) Whether on the facts and circumstances of the case and in law, the ITAT was right in disregarding the position of law that there could be difference between the enterprises compared under the TNMM method that are not likely to materially affect the price or cost charged or the profits accruing to such enterprises?.

(iv) Whether on the facts and circumstances of the case and in law, the ITAT was right in imposing the decisions of its co-ordinate benches rendered in

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other cases to the facts of the taxpayer without doing any FAR analysis of the taxpayer with those other cases?

(v) Whether on the facts and circumstances of the case and in law, the ITAT was right in holding that M/s Accropetal Technologies Ltd. fails service revenue filter when the TPO has considered only software segment of the company and wherein service revenue is 100% of segmental sales and thereby the company qualifies the said revenue filter?

(vi) Whether on the facts and circumstances of the case and in law, the ITAT was right in not acknowledging that determination of ALP by carrying out comparability analysis of the companies is an art and not exact science as no two companies are exactly same?

vii) Whether on the facts and circumstances of the case and in law, the ITAT was right in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the income tax Act?

viii) Whether the order passed by Tribunal is perverse in nature as Tribunal has excluded

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Persistent Systems Ltd, Acropetal Technologies Ltd, E-Infochips Ltd, Infosys Ltd by ignoring the findings and materials brought on record by Transfer Pricing officer and parameters of Rule 10B of I.T. Rules?”

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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.: 42