THE PR. COMMISSIONER OF INCOME TAX vs. MARLABS INNOVATIONS PVT LTD

THE PR. COMMISSIONER OF INCOME-TAX, 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.

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 27.02.2023 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.963/Bang/2022 for the assessment year 2018-19.

This Court, admitted the appeal on 03.10.2023 to consider the following substantial questions of law: 1. "Whether on the facts and in the circumstances of the case, the Tribunal is right in law to directing Transfer Pricing Officer to exclude comparable's on basis of turnover filter in SWD and ITES segment by

"Whether under the facts and circumstances of the case, the Tribunal's order can be said as perverse in directing Transfer Pricing Officer to exclude comparable namely, Domex E Data P Ltd based on functional dissimilarity in nature since Tribunal has directed Transfer Pricing Officer to exclude without considering findings of Transfer Pricing Officer in TPO order whereby the said authority has categorically held that functions of said comparable companies are similar to that of assessee in respect of nature of filed they are involved"?

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in taking different stands on adjustments to comparables margins to make them comparable to tested party, just so that assessee benefits both ways and revenue

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in seeking exact comparability under TNMM and whether the objection to the selection of comparable is legally sustainable?"

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in ignoring 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?

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding comparable cannot be taken as a comparable as the company is a giant company in the area of software and it assumed all risks leading to higher profits, without acknowledging that there is no direct relationship between brand value and the margin

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in law in setting aside issue relating to Interest on outstanding receivables without appreciating that the interest on outstanding receivables is pertaining to financial activates of the taxpayer and is an international transaction as per amendment to explanation (1)(C) to Section 92B which has been inserted by Finance Act, 2012 which needs to be benchmarked separately and should not be subsumed in Working Capital Adjustment"?

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

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.

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.