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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 19TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.538/2015
BETWEEN:
PR. COMMISSIONER OF INCOME-TAX, C.R.BUILDING, QUEENS ROAD, BANGALORE - 560 001.
THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -12(2), BANGALORE.
…APPELLANTS
(By Mr. E.I. SANMATHI, ADV.)
AND:
M/S. LAM RESEARCH (INDIA) PRIVATE LTD., ‘A’ BLOCK, 11/1 & 12/1, AMARJYOTHI LAYOUT, INTERMEDIATE RING ROAD, BANGALORE-560 071. PAN: AABCB 2063Q.
…RESPONDENT
(RESPONDENT SERVED)
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO 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 SET ASIDE THE APPELLATE ORDER DATED 30/04/2015 PASSED BY THE ITAT, ‘C’ BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO.IT (TP)A NO. 1437/BANG/2014 FOR ASSEMENT YEAR 2009-10 ANNEXURE A.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. E.I.Sanmathi, Adv. for Appellants-Revenue
The appellants-Revenue have filed this appeal u/s. 260A of the Income Tax Act, 1961 (for short ‘Act’) raising purportedly certain substantial questions of law arising from the order of the Income Tax Appellate Tribunal, ‘C’ Bench, Bangalore (for short ‘Tribunal’) dated 30.04.2015 passed in I.T(TP)A No.1437/Bang/2014 for the A.Y.2009-10.
This appeal has been ADMITTED on 11.03.2016 to consider the substantial question of law Nos.2 to 4 framed by the learned counsel for the Appellants-Revenue.
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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“(1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in confirming the order of Commissioner relating to computation of deduction under section 10A by relying up on the decision of this Hon’ble Court in the case of Tata Elxsi Ltd., to exclude the foreign travel both from the total turnover and the export turnover even when the same is not permissible in law and the decision relied upon by Tribunal has not reached finality?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in super-imposing the decisions of other benches of the Tribunal in the case of the assessee to reject these comparables when selection of comparables in a case depends on pricing on assessee specific FAR analysis?
(3) Whether the Tribunal erred in holding that the comparables used by the Transfer Pricing Officer were functionally different even though they satisfied all the qualitative and quantitative filters adopted by the Transfer Pricing Officer?
(4) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding comparables such as (i) Accentia
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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Technologies Ltd (ii) Cosmis Global Ltd., (iii) Eclerx Services Ltd (iv) Infosys BPO Ltd and (i) Tata Elxsi Ltd (ii) Infosys Technologies Ltd (iii) Bodhtree Consulting Ltd (iv) Persistent System Ltd (v) Sasken Communication Technologies (vi) Zylog System (vii) Mindtree Ltd (viii) L&T Infotech Ltd eve when the TPO has rightly chosen them as comparables considering the functions and applicability of the same in respect of facts of present case?””
The substantial question of law No.1 was not pressed by the learned counsel for the appellants- Revenue and the same has been recorded by this Court on 11.03.2016.
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: Regarding substantial question of law Nos.2, 3 and 4: “13. We have heard the rival contentions and perused the material on record. In the case of Yodlee Infotech Pvt. Ltd., (supra), it was held as under:
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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xxxx
xxxx
No doubt, we find that some of the companies for which exclusion is now sought by the assessee, namely, Tata Elxsi Ltd (seg), Sasken Communication Technologies Ltd., and Mindtree Ltd (seg), were there in assessee’s own list of comparables. However, we find that assessee had sought exclusion of these before the CIT (A), based on upper band turnover limit of Rs.200 crores, which was not accepted. In view of the various decisions of this Tribunal referred at para 13 above we are of the opinion, that assessee is justified in seeking the exclusion of companies having turnover in excess of Rs.200 crores, from the comparables.
We, therefore, direct the AO to exclude Tata Elxsi Ltd (seg), Sasken Communication Technologies Ltd., Persistent Systems Ltd., Zylog Systems Ltd., Mindtree Ltd (seg), L & T infotech and Infosys Ltd., from the list of comparables, considered for the software development segment.
With regard to Bodhtree Consulting Ltd., Ld. AR submitted that in the above referred decision of Yodlee Infotech Pvt. Ltd., (supra), where also
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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Bodhtree Consulting was considered as a comparable by the TPO, this Tribunal had directed exclusion of the same on a finding that the said company was functionally different and not a software development company.
Per contra, learned DR supported the orders of lower authorities.
We have perused the orders and considered the rival contentions. It is not disputed that Yodlee Infotech Pvt Ltd., (supra) was also a software development company. Assessment year involved there was also A.Y.2009-10. With respect to Bodhtree Consulting Ltd., it was held by the Tribunal as under:
xxxx
xxxx Accordingly, we direct that Bodhtree Consulting Ltd., be excluded from the list of comparables, here also.”
The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 [Prl. Commissioner of Income Tax &
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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Anr. V/s. M/s.Softbrands India Pvt. Ltd.,] wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the Judgment is quoted below for ready reference: “ Conclusion: 55. A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answering such substantial question of law. On
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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the other hand, the appeals of the present tenor as to whether the comparables have been rightly picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law. 56. We are therefore of the considered opinion that the present appeals filed by the Revenue do not give rise to any substantial question of law and the suggested substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are found to be devoid of merit and the same are liable to be dismissed.
We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an ‘Arm’s Length Price’ in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not
Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited.,
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at all a sufficient reason to invoke Section 260-A of the Act before this Court. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs.” 6. In the circumstances, having heard the learned Counsel appearing for the appellants-Revenue, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs. Copy of this order be sent to the Respondent-assessee forthwith.
Sd/- JUDGE
Sd/-
JUDGE