THE PR. COMMISSIONER OF INCOME TAX vs. M/S. SONUS NETWORKS INDIA PVT LTD

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ITA/228/2021HC KarnatakaKAHC01020259202123 September 2024Bench: S.G.PANDIT,C.M. POONACHA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court disposed of the appeal based on a CBDT circular regarding tax effect thresholds. The court granted the revenue liberty to revive the appeal if exceptions under the circular applied, keeping the substantial questions of law open.

What were the facts?

The Revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) concerning the assessment year 2009-10. The appeal questioned the ITAT's decision to exclude certain comparable companies used for transfer pricing analysis.

What were the issues?

Whether the ITAT's exclusion of comparable companies was perverse, considering the qualitative and quantitative tests applied by the TPO and the grounds of functional dissimilarity and RPT filter.

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:39407-DB ITA No. 228 of 2021

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD 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. 228 OF 2021 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6(1) (2), PRESENT ADDRESS, DCIT, CIRCLE 1(1) (1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095 …APPELLANTS (BY SRI. RAVI RAJ Y V, ADVOCATE A/W SRI. DILIP M .,ADVOCATE)

AND:

M/S. SONUS NETWORKS INDIA PVT LTD SWARNA LATHA P V, 2ND FLOOR, DELTA BLOCK, EMBASSY TECH SQUARE, KADUBEESENAHALLI VILLAGE, OUTER RING ROAD,VARTHUR HOBLI, BENGALURU-560103 PAN AALCS5706P …RESPONDENT (BY SRI. K R VASUDEVAN.,ADVOCATE)

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39407-DB ITA No. 228 of 2021

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO. 396/BANG/2019 DATED 14/10/2020 FOR ASSESSMENT YEAR 2009- 2010 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU AND ETC.

THIS APPEAL, COMING ON FOR FINAL 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 Raviraj Y.V, along with learned counsel Sri Dilip M, for appellants/Revenue and learned counsel Sri K.R.Vasudevan, 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 14.10.2020 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in

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NC: 2024:KHC:39407-DB ITA No. 228 of 2021

IT(TP)A.No.396/Bang/2019 for the assessment year 2009- 10, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal excluding six comparable’s without considering that said companies are dissimilar 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 in the circumstances of the case and in law, the Tribunal is right in law in deleting comparable’s 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 tests 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 on the ground of RPT filter even when they were chosen in accordance with parameters of Rule 10B?

4.

Whether on the facts and in the circumstances of the case, the Tribunal erred in directing the Assessing Officer/Transfer Pricing Officer to exclude

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NC: 2024:KHC:39407-DB ITA No. 228 of 2021

six comparables on the ground of functional dissimilarity and RPT filter even when TPO had chosen comparable’s as per parameters set out in Rule 10B and as such order passed by Tribunal is perverse in nature?”

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 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

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NC: 2024:KHC:39407-DB ITA No. 228 of 2021

counsel for the revenue. However, the questions of law are kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

ND List No.: 3 Sl No.: 18

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