PR. COMMISISONER OF INCOME TAX - 3, vs. M/S INFINEON TECHNOLOGIES INDIA PVT. LTD.,

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ITA/478/2023HC KarnatakaKAHC01037490202325 September 2024Bench: S.G.PANDIT,C.M. POONACHA6 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 relevant circulars apply, keeping the questions of law open for future adjudication.

What were the facts?

The Revenue is appealing a decision of the Income Tax Appellate Tribunal concerning the assessment year 2013-14. The appeal raises several substantial questions of law related to transfer pricing, disallowance of provisions, and treatment of interest paid under Section 201(1A).

What were the issues?

The appeal involves disputes over the Tribunal's interpretation of transfer pricing rules, exclusion of comparables, working capital adjustments, and disallowances related to provisions and interest payments.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40(a)(ia),Section 201(1A)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39905-DB ITA No. 478 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.478 OF 2023 BETWEEN:

1.

PR. COMMISSIONER OF INCOME TAX - 3, BMTC COMPLEX, KORAMANGALA, BANGALORE.

2.

THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BMTC COMPLEX, KORAMANGALA, BENGALURU. …APPELLANTS (BY SRI. SANMATHI E I., ADVOCATE)

AND:

M/S INFINEON TECHNOLOGIES INDIA PVT. LTD., 9TH FLOOR, PRESTIGE THIRULAKSHMI, NO.11, M.G. ROAD,

Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39905-DB ITA No. 478 of 2023

BANGALORE-560 001, PAN-AABCS6967N …RESPONDENT

(BY SRI. TANMAYEE RAJKUMAR, ADVOCATE)

THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31/03/2022 PASSED IN IT(TP)A NO.2870/BANG/2017, FOR THE ASSESSMENT YEAR 2013- 2014. PRAYING TO 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 ETC.

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

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NC: 2024:KHC:39905-DB ITA No. 478 of 2023

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

Heard the learned counsel Sri. E.I.Sanmathi for appellants/Revenue and Smt. Tanmayee Rajkumar, 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 31.3.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short ‘Appellate Authority’) in IT[TP]A.No.2870/Bang/2017 for the assessment year 2013-14, raising the following substantial questions of law:

1.

"Whether the Tribunal was right in law to ignore the parameters of analysis prescribed under Rule 10b, which are exhaustive and if so, whether it is legally permissible to bypass the same partially or by implication"?

2.

"Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in excluding M/s.L & T Infotech Ltd, M/s.Persistent

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NC: 2024:KHC:39905-DB ITA No. 478 of 2023

Systems Ltd, M/s.CG VAk Software & Exports Ltd, Tech Mahindra on the ground of functional dissimilarity and turnover filer by ignoring the parameters of analysis prescribed under Rule 1013, which are exhaustive and, if so, whether it is legally permissible to bypass the same partially or by implication?"

3.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse since Tribunal has excluded certain comparable's without going into reasons assigned by Transfer Pricing Officer?"

4.

"Whether on the facts and in the circumstances of the case, the Tribunal is right in allowing working capital adjustment without an upper limit would result into abnormal adjustment and would make the profit earned within the permitted range even when if no operating profit is earned and the upper limit of working capital adjustment should be the average of the cost of capital of the comparable companies"?

5.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in holding that assessing authority is not correct in making disallowance of excess provision amounting to Rs.1,09,79,733/- made under section 40(a)(ia) of the Act when assesse had not made TDS as required under law on said amount"?

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NC: 2024:KHC:39905-DB ITA No. 478 of 2023

6.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in holding that interest paid under section 201(1A) is compensatory in nature and not considered to be penal character ignoring that there is no bar under Act to disallow the said amount for delayed remittances"?

7.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in setting aside disallowance of capital expenses debited to P & L A/c in return of income ignoring the findings of assessing authority which has been confirmed by DRP"?

8.

"Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in allowing working capital adjustment without an upper limit would result into abnormal adjustment and would make the profit earned within the permitted range even when if no operating profit is earned and the upper limit of working capital adjustment should be the average of the cost of capital of the comparable-companies"?

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

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NC: 2024:KHC:39905-DB ITA No. 478 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

SMJ, List No.: 2 Sl No.: 2

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