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1/11 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.145/2018
BETWEEN :
THE PR. COMMISSIONER OF INCOME-TAX, 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560 095.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1(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. AMD INDIA PVT. LTD., NO.102 & 103, EXPORT PROMOTIONAL INDUSTRIAL PARK WHITEFILED ROAD BENGALURU-560 066 PAN: AAECA 6756C. ... RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:24/08/2017 PASSED IN IT(TP)A NO. 204/BANG/2015, FOR THE ASSESSMENT YEAR 2010-2011, VIDE ANNEXURE-D
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN
IT(TP)A NO.204/BANG/2015 DATED:24/08/2017 VIDE ANNEXURE-‘D’ CONFIRMING THE ORDER OF THE DRP AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(1)(1) BENGALURU AND ETC.
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.
The Appellants - Revenue have filed this appeal u/s 260A of the Income TAs Act, 1961, raising purported certain substantial questions of law arising from the Order of the ITAT, “A” Bench, Bangalore, dated 24.08.2017 passed in IT(TP)A.No.204/ Bang/2015 ( M/s AMD India Pvt. Ltd., Vs. The Dy. Commissioner of Income-Tax) for AY 2010-11.
The proposed substantial questions of law framed in the Memorandum of Appeal by the
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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Appellant/s Revenue are quoted below for ready reference: “1. Whether on the facts and circumstances of the case, the Tribunal was right in excluding certain comparable’s on the grounds of functional dissimilarity and RPT filter by following its earlier orders?”
“Whether on the facts and circumstances of the case, the Tribunal is right in law in setting
aside the recomputation of 10A deduction made by assessing authority by following the judgment of this Hon’ble High Court in the case of CIT v/s. Tata Elxi?”
Whether on the facts and circumstances of the case, the Tribunal is right in law in directing the TPO to consider foreign exchange gain/loss as operating in nature by following its earlier order”?
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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The learned counsel appearing for the Appellants – Revenue, Mr.K.V. Aravind submitted that he does not press the second Substantial Question of Law raised by him in the present appeal. Same is taken on record.
The learned Tribunal, after discussing the rival contentions of both the Appellants/Revenue and the Respondent-Assessee, has given the following findings:
Regarding Substantial Question of law No.1: “7.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited(Supra). We find that a coordinate bench of this Tribunal in the case of Electronics for Imaging India Pvt. Ltd., in IT(TP)A No.212/Bang/2015 for asst. year 2010-11( which is the eyar under consideration in the case on hand also), has considered this company, “ICRA” and held that apart from having RPT at 20.94% of revenue, it is functionally not comparable with
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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provider of software development services. As para 14 to 16 of the aforesaid order, the coordinate bench held as under:
xxxxxx xxxxxx xxxxxxx
7.3.2 Following the finding of fact rendered by the coordinate bench in the case of Electronics for Imaging India Pvt. Ltd., for asst. year 2010-11(Supra), we uphold the findings of the DRP and accordingly direct the AO/TPO to exclude ICRA Techno Analytics Ltd.,(Seg) from the list of comparable companies to the assessee as it is functionally not comparable to the assessee in the case on hand who is purely a captive service provider of software development services”
Infosys Ltd.,
Xxxxxxx
8.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial
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pronouncement cited. We find that the co- ordinate bench of this Tribunal in the case of Electronics for Imaging India Pvt. Ltd., for asst. year 2010-11(Supra) has considered this company, Infosys Ltd., and held that it cannot be a good comparable to a company who is only providing software development services to its AE’s. At para 17 to 20 of its order(Supra), the co-ordinate bench held as under:
xxxx
xxxx
xxxx
8.4.2 Following the finding of facts rendered by the co-ordinate bench in the case of Electronics for Imaging India Pvt. Ltd., for asst. year 2010-11(Supra), we uphold the findings of the DRP in directing the AO/TPO to exclude Infosys Ltd., from the list of comparable companies as it has huge brand value and owns substantial intangible assets, as well as has bargaining power and therefore cannot be compared to the assesse in the case on hand whop is providing only captive software development services to its AE.
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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Regarding Substantial Question of Law No.3:
“16.2.1 “ We have heard the rival contentions and perused and carefully considered the material on record. The co- ordinate bench of this Tribunal in the case of Electronics for Imaging India Pvt. Ltd., in IT(TP)A No.212/Bang/2015 had occasion to consider this issue and held that the foreign exchange loss/gain is to be treated as part of operating profit margin at para 35 thereof, as under:
xxx
xxxx
xxxx
16.2.2 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of Electronics for Imaging India Pvt. Ltd., (Supra), we direct the AO/TPO to verify the actual source of foreign exchange gain/loss in the case of the assessee as well as that of the comparable companies and if the foreign exchange gain/loss arises on account of realization of sale, payment to suppliers or revaluation of the other trade assets, then
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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the same is to be considered as part of operating profit margin. It is accordingly ordered. “
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: “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
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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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 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
Date of Judgment 31-08-2018, ITA No.145/2018 The Pr. Commissioner of Income -Tax & Another Vs. M/s. AMD India Pvt. Ltd.,
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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 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.”
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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.
The copy of this judgment be sent to the Respondent – Assessee forthwith.
Sd/- JUDGE
Sd/- JUDGE
Psg*