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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 30TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.308/2015 AND I.T.A.No.90/2016
BETWEEN : 1. THE COMMISSIONER OF INCOME-TAX
C.R. BUILDING, QUEENS ROAD
BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE-11(4)
RASHTROTHANA BHAVAN
NRUPATHUNGA ROAD
BANGALORE-560 001.
...APPELLANTS
(BY SRI. DILIP, ADV., FOR SRI. K.V. ARAVIND, ADV.)
AND : M/S i2 TECHNOLOGIES (INDIA) P. LTD., No.132/133, DIVYASHREE TECHNOPOLIS YAMALUR POST, OFF AIRPORT ROAD BANGALORE-560 037 PAN: AAACI7334Q. …RESPONDENT
(BY SRI. SANDEEP HUILGOL, ADV.)
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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THESE INCOME TAX APPEALS ARE FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 22.01.2015 PASSED IN IT(TP)A No.1189/BANG/2011 & S.P.NO.87/BANG/2013, FOR THE ASSESSMENT YEAR 2007-2008, ANNEXURE-D, PRAYING TO I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(TP)A No.1189/BANG/2011 & S.P.NO.87/BANG/2013 DATED 22.01.2015, ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(4), BANGALORE.
THESE APPEALS 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. Mr. Sandeep Huilgol, Adv. for Respondent – Assessee.
These Appeals are 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.1189/Bang/2011 and S.P.No.87/Bang/2013 dated 22.01.2015, relating to the Assessment Year 2007-08.
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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These appeals have been admitted on 25.01.2016 to consider the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the functions of the assessee are not comparable to the functions of M/s. Avani Cimcon Technologies Ltd., M/s. KALS Information Systems Ltd., M/s. Accel Transmatics Ltd., M/s. Celestial Labs Ltd., M/s. Luid Software Ltd., M/s Megasoft Ltd., M/s. Infosys Technologies Ltd., M/s Tata Elxsi Ltd., M/s Wipro Ltd., M/s. E-zest Solutions Ltd., M/s Persistent Systems Ltd., and M/s Quintegra Systems Ltd., by super imposing decisions of other benches of Tribunal, without doing any FAR analysis in the instant cases even though these comparable satisfies all the qualitative and quantitative filters applied by the TPO and the Tribunal ought to have decided comparability of this company on the basis of specific facts brought on record by the TPO in the case of the assessee and 2. Whether on the facts and in the circumstances of the case, the Tribunal in the case of M/s. Irish Software Ltd., instead of relying on decision of other benches of Tribunal
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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ought to have decided comparability of this company on the basis of specific facts brought on record by the TPO? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the functions of the assessee are not comparable to the functions of M/s. Thirdware Solutions Ltd., and M/s. Helios & Matheson Information Technologies Ltd., by super imposing decisions of other benches of Tribunal, without doing any FAR analysis and the Tribunal in respect of the above two companies ought to have decided comparability of this company on the basis of specific facts brought on record by this TPO? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that whether acquisition is per se an extraordinary event to eliminate a comparable without establishing its effect on the profit margin of M/s. Quintegra Solutions Ltd.,?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law Nos.1 to 4: “10. We have perused the orders and heard the rival contentions. Since the argument of the assessee’s counsel is limited to exclusion of certain comparable companies from the list considered by the TPO, we are confining our adjudication to this. We find that the assessee’s profile clearly show it to be a software development company and the profile of M/s NXP Semiconductors India Pvt. Ltd., whose case has been referred by learned AR was also similar. In the said case also assessee concerned was providing software development service to its associated enterprises abroad. The turnover of M/s NXP Semiconductors India Pvt. Ltd., favourably compares with that of the assessee. Since functional profile and the turnover of the assessee and that of M/s NXP Semiconductors India Pvt. Ltd., are similar and also since the order of the Tribunal in the case of M/s NXP Semiconductors India Pvt. Ltd., relied on by the earned AR was also for the very same assessment year, we are of the opinion that such order of the Tribunal can be considered as a good
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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precedent for adjudicating on the selection of comparables in the case of assessee also. 11. M/s Accel Transmatic Ltd., M/s Avani Cimcon Tech. Ltd., M/s Celestial Labs Ltd. and M/s KALS Information Systems Ltd., were 4 of the companies among the comparables considered in the case of M/s NXP Semiconductors India Pvt. Ltd., (Supra). Co- ordinate Bench at para-18 to 19 of its order dated 14-11-2014 held as under:
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Therefore, we direct the exclusion of the above 4 companies from the list of comparables.”
Similarly, learned Tribunal has considered other comparables and excluded the same.
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
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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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 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
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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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 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
Date of Judgment 30-08-2018, ITA Nos.308/2015 & 90/2016 The Commissioner of Income Tax & Another Vs. M/s i2 Technologies (India) P. Ltd.,
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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.”
Having heard the learned counsels appearing for the parties, we are therefore of the opinion that no substantial question of law arises in the present cases also. These Appeals filed by the Appellants- Revenue are liable to be dismissed and they are dismissed accordingly. No costs.
Sd/- JUDGE
Sd/- JUDGE
PMR