THE PR COMMISSIONER OF INCOME TAX, vs. M/S CABLE & WIRELESS NETWORKS INDIA PVT LTD

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ITA/1082/2017HC KarnatakaKAHC01043304201730 August 2018Bench: S.SUJATHA,VINEET KOTHARI7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that appeals under Section 260-A of the IT Act are not maintainable in cases where there is no substantial question of law. Mere dissatisfaction with the Tribunal's findings of fact is insufficient to invoke this section.

What were the facts?

The Revenue appealed against an ITAT order that directed the TPO to determine the Arm's Length Price (ALP) using the Comparable Uncontrolled Price (CUP) method. The ITAT had noted that a direct CUP was available, but also that the assessee and TPO had accepted TNMM as the Most Appropriate Method (MAM).

What were the issues?

Whether the appeal filed by the Revenue raises a substantial question of law, and if the ITAT was correct in directing the use of the CUP method for ALP computation when it was not the subject matter of appeal.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

1/7 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.1082/2017 BETWEEN:

1.

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

2.

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 11(2), PRESENT ADDRESS CIRCLE - 2(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD KORMANGALA, BENGALURU-560 095. …APPELLANTS

(By Mr. DILIP, ADV., FOR Mr. K.V.ARAVIND, ADV.,)

AND:

M/S. CABLE & WIRELESS NETWORKS INDIA PVT LTD UNIT (2) B CREATOR, 2ND FLOOR, INTERNATIONAL TECH PARK WHITEFIELD ROAD, BENGALURU-560 066. PAN:AADCC 1079M …RESPONDENT

THIS I.T.A. IS FILED UNDER SECTION 260-A OF THE IT ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE

Date of Judgment 30-08-2018 I.T.A.No.1082/2017 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. Cable & Wireless Networks India Pvt Ltd.,

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TRIBUNAL, BENGALURU IN IT(TP)A NO. 1549/BANG/2014 DATED: 12/07/2017 VIDE ANNEXURE D AND CONFIRM THE ORDER OF THE APPELLATE COMMISSSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BENGALURU.

THIS I.T.A. COMING ON FOR ORDERS THIS DAY, S. SUJATHA J. DELIVERED THE FOLLOWING:-

JUDGMENT

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 Tax Act, 1961, raising purportedly one substantial question of law arising from the order of the ITAT, ‘A’ Bench, Bangalore, dated 12.07.2017 passed in IT(TP)A No.1549/Bang/2014 for the A.Y.2009-10.

2.

The proposed substantial question of law framed in the Memorandum of appeal by the Appellants-Revenue is quoted below for ready reference:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in ruling

Date of Judgment 30-08-2018 I.T.A.No.1082/2017 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. Cable & Wireless Networks India Pvt Ltd.,

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that CUP was the most appropriate method in computing Arms Length Price in the instant case when the question of Most Appropriate Method was not the subject matter of appeal before it or before the authorities below?”.

3.

The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:-

“8. Accordingly, in the facts and circumstances of the case, when direct CUP between the AE and Tata Communications from whom the assessee has taken the network on lease is available then the ALP has to be computed under CUP. We further note that it is the stand of the assessee that the assessee as well as the TPO has accepted the TNMM as MAM. However when the assessee has expressed its helplessness to compute the margins separately in respect of the international transactions then the direct CUP available in case of the assessee would be an appropriate method of determination of ALP. We further note that the assessee claimed to have taken the network on lease from Tata

Date of Judgment 30-08-2018 I.T.A.No.1082/2017 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. Cable & Wireless Networks India Pvt Ltd.,

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Communications however the agreement filed before us by the assessee is with Tata Teleservices Ltd. (TTL)/Tata Teleservices (Maharashtra) Limited (TTML) and not Tata Communications Limited. Therefore this aspect is required to be verified properly. Hence when the assessee has substituted the Tata Communications Ltd. in providing the services to the AE then the CUP would be the MAM. Accordingly, we set aside the matter to the record of the TPO for determination of the ALP on the basis of CUP. The assessee has to provide all the relevant material, record and details including the agreement between the Tata Communications Ltd. and AE. Even otherwise, the TPO can requisition the information under Section 133(6) of the Act and then determine the ALP in the light of above findings”.

4.

However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. Vs. 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

Date of Judgment 30-08-2018 I.T.A.No.1082/2017 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. Cable & Wireless Networks India Pvt Ltd.,

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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 answering such substantial question of law. On the other hand, the appeals of the present tenor as to whether the comparables have been rightly

Date of Judgment 30-08-2018 I.T.A.No.1082/2017 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. Cable & Wireless Networks India Pvt Ltd.,

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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.

57.

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.

Date of Judgment 30-08-2018 I.T.A.No.1082/2017 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. Cable & Wireless Networks India Pvt Ltd.,

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58.

The appeals filed by the Revenue are therefore dismissed with no order as to costs.”

5.

Having heard the learned counsel 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.

Sd/- JUDGE

Sd/-

JUDGE

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