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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 29TH DAY OF AUGUST 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.131/2018
BETWEEN : 1. PR. COMMISSIONER OF INCOME TAX-5
BMTC COMPLEX,
KORAMANGALA, BANGALORE – 560 095
THE INCOME-TAX OFFICER
WARD -12 (1), BANGALORE
...APPELLANTS
(BY SRI.E.I.SANMATHI, ADV.)
AND :
M/S.RADISYS INDIA PVT. LTD., FORMERLY CONTINUOUS COMPUTING INDIA P. LTD., 6TH FLOOR, ELECTRA, B-WING, EXORA BUSINESS PARK, PRESTIGE TECH PARK, MARATHAHALLI, SARJAPUR OUTER RING ROAD, BENGALURU – 560 103 PAN:AAACC3169M
…RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 24/08/2017 PASSED IN C O NO.151/BANG/2013 IN IT (TP)A
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 2/9
NO.615/BANG/2013, FOR THE ASSESSMENT YEAR:2008-09 VIDE ANNEXURE - A, PRAYING TO: (1) 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:24/08/2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'B' BENCH, BENGALURU, IN CO NO.151/BANG/2013 IN IT(TP)A NO.615/BANG/2013 FOR ASSESSMENT YEAR 2008-09 VIDE ANNEXURE - A.
THIS I.T.A. COMING ON FOR ADMISSION THIS DAY, S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Sanmathi E.I. Adv. for Appellants- Revenue
The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly certain substantial questions of law arising from the order of the ITAT, ‘B’ Bench, Bangalore, dated 24.08.2017 passed in IT (TP)A No.615 /Bang/2013 (Income Tax Officer, Ward-12(1), Bengaluru Vs. M/s. Radisys India P Ltd.,) for A.Y.2008-09.
The proposed substantial questions of law framed in the Memorandum of appeal by the Appellants-Revenue are quoted below for ready reference:-
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 3/9
“1.Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in seeking exact comparability, which searching for comparable companies of the assessee under TNMM whereas the requirement of law and international jurisprudence require seeking similar comparable companies? 2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in seeking comparability in imposing condition beyond law whereas the requirement of law is to acknowledge only those differences that are likely to materially affect the margin? 3. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in not acknowledging that determination of ALP by carrying out comparability analysis of the comparable companies is an art and not exact science as no two companies are exactly same?
Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in demanding comparability standards that may itself defeat
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 4/9
the purpose of law relating to determination of ALP under the Act? 5. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in deciding certain comparables as functionally not comparable by demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the ACT? 6. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in setting aside the 10A recomputation made by the assessing authority by following the decision of this Hon’ble High Court in the case of CIT v/s. Tata Elxi which has not reached finality?”
The learned counsel appearing for the Appellants-Revenue, Mr. E.I. Sanmathi, submitted that he does not press the sixth substantial question of law raised by him in the present appeal. The same is placed on record.
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 5/9
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 1 to 5:
“08. In ground no.4, the Revenue is aggrieved with the action of the CIT(A0 in deleting M/s. Celestial Biolabs Ltd, as a comparable, on the ground that it is functionally different.
The Ld. DR has submitted that it was held by the CIT (A) that Celestial Biolabs Ltd, is not comparable with that of the assessee. The Ld. DR has drawn our attention to paras 83 and 84 of the CIT (A)’s order, which read as under: xxxxxxxxxx
On the other hand, the Ld. AR has drawn our attention to pages 494 to 497 of the paper book where this comparable has been excluded by the Tribunal vide its order passed in assessee’s own case for the earlier assessment year 2007-08 to the following effect:
xxxxxxxxxx 11. Following the order of the coordinate bench of the Tribunal (supra), we were of the
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 6/9
opinion that this company M/s.Celestial Biolabs Ltd, should not have been deleted from the list of comparables. There is no change in fact and circumstance of the case for the present year and therefore we’re bound to follow the order of the coordinate bench passed for the earlier year. Accordingly the ground of the revenue is required to be dismissed.
In ground nos.5 and 6, the Revenue is aggrieved against the inclusion of M/s. Saksoft Ltd and exclusion of M/s. Avani Cimcon Technologies Ltd from the list of comparables.
Relying on the earlier order of the Tribunal at paras 87, 88 for M/s.Saksoft Ltd and paras 96 and 97 for M/s.Avani Cimcon Technologies, of CIT(A), the Ld. DR has submitted that these companies are to be excluded as the CIT(A) has wrongly included M/s.Saksoft Ltd, and wrongly excluded M/s.Avani Cimcon Technologies Ltd, on the basis that these companies are not functionally comparable ”
However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015 delivered on
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 7/9
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 Tribunal is established by the appellants, 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
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 8/9
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. 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
Date of Judgment: 29-08-2018 I.T.A.No.131/2018 Pr. Commissioner of Income Tax-5 & Anr. Vs. M/s.Radisys India Pvt. Ltd. 9/9
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. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
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 forthwith.
Sd/- JUDGE
Sd/- JUDGE
Psg*