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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 31ST DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.138/2018
BETWEEN : 1. THE PR. COMMISSIONER OF INCOME-TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(2), PRESENT ADDRESS CIRCLE0 2(1) (1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.
...APPELLANTS
(BY SRI DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.)
AND : M/s. CELSTREAM TECHNOLOGIES PVT. LTD., BLOCK-II, No.09, PRESTIGE BLUE CHIP, HOSUR ROAD, BENGALURU-560029, PAN: AABCC 3210G.
…RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 27/09/2017 PASSED IN IT(TP)A No.167/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010 VIDE ANNEXURE-D,
Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd.,
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PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A No.167/BANG/2014 DATED:27/09/2017 VIDE ANNEXURE-D, CONFIRMING THE ORDER OF THE DRP AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BENGALURU.
THIS APPEAL COMING ON FOR ORDERS, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. Dilip, Adv. for Mr. K.V.Aravind, Adv. for Appellants – Revenue.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore, in IT[TP]A No.167/Bang/2014 dated 27.09.2017, relating to the Assessment Year 2009-10.
The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and circumstances of the case and in law, the Tribunal was right in excluding certain comparables are similar to
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assessee-company on account of functional dissimilarity?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: “8. Bodhtree Consulting Ltd., ['Bodhtree’] “xxxxx” 8.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. We find that a coordinate bench of this Tribunal in its order in the case of Broadcom India Pvt. Ltd., in IT[TP]A No.95/Bang/2017 dated 17.03.2017 also for asst. year 2009-10, has considered the comparability of this company and excluded ‘Bodhtree’ from the list of comparables on the ground that it cannot be considered comparable to a company merely rendering software development services; as is the assessee in the case on hand. At para 15 thereof, the co-ordinate bench, followed the decision of another co- ordinate bench in the case of Infirera India Pvt.
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Ltd., in IT[TP]A No.977 & 1008/Bang/2014 also for asst. year 2009-10 [the year under consideration in the case on hand also] and observed that:
“xxxxx”
At para 22 thereof, the co-ordinate bench rendered the finding that the DRP had erred in including M/s. Bodhtree Consulting Ltd., as a comparable and directed the TPO to exclude this company as it is functionally dissimilar to the assessee.
8.3.2 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of Broadcom India Pvt. Ltd., for asst. year 2009- 10 [Supra], i.e., the year under consideration in the case on hand also and the factual matrix being quite the same, we direct the TPO to exclude M/s. Bodhtree Consulting Ltd., from the list of comparables as it is functionally dissimilar and not comparable to a company merely rendering software development services; as is the assessee in the case on hand.
Infosys Ltd:
“xxxxx” 9.3.1 We have heard the rival contentions and perused and carefully considered the
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material on record; including the judicial pronouncements cited. We find that a co-ordinate bench of this Tribunal in its order in the case of Broadcom India Pvt. Ltd., in IT[TP]A No.95/Bang/2014 dated 17.03.2017 for asst. year 2009-10; the same asst. year as the year under consideration in the case on hand also; has considered the comparability of this company, Infosys Ltd., and excluded it from the list of comparables on the ground that it cannot be considered comparable to a company merely rendering software development services; as is the assessee in the case on hand. At para 21 and 22 thereof, the co-ordinate bench followed the decision of another co-ordinate bench of this Tribunal in the case of Infinera India Pvt. Ltd., in IT[TP]A No.977 & 1008/Bang/2014 also for asst. year 2009-10 as under:-
“xxxxx”
9.3.2 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of Broadcom India Pvt. Ltd., for asst. year 2009- 10 [Supra], i.e,; the year under consideration in the case on hand also, facts being/remaining the same, we direct the TPO to exclude M/s. Infosys Ltd., from the list of comparables as it is
Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd.,
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functionally dissimilar and not comparable to a company merely rendering software development services; as is the assessee in the case on hand.
9.4 Consequently, ground No.4.7 of assessee’s appeal is allowed only to the extent of excluding the two companies i.e., [i] Bodhtree Consulting Ltd., and [ii] Infosys Ltd., from the list of comparables, on grounds of being functionally dissimilar to the assessee in the case on hand.”
However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. –v- M/s Softbrands India Pvt. Ltd.,) has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable.
The relevant portion of the said judgment is quoted below for ready reference:
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“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 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
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considered opinion, give rise to any substantial question of law.
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 at all
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a sufficient reason to invoke Section 260-A of the Act before this Court.
The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellants- Revenue is liable to be dismissed and it is dismissed accordingly. No costs.
Copy of this Order be sent to the Respondent- Assessee forthwith.
Sd/- JUDGE
Sd/- JUDGE
NC.