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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.110/2018
BETWEEN:
PR. COMMISSIONER OF INCOME TAX - 5 BMTC COMPLEX, KORAMANGALA, BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(2), BANGALORE.
... APPELLANTS
(BY SRI.SANMATHI E I, ADV.)
AND:
M/S NI SYSTEMS (INDIA) PVT. LTD., 81/1, & 82/1, SALARPURIA SOFTZONE, WING B, 5TH FLOOR, BLOCK A, BELLANDUR, VARTHUR HOBLI, BANGALORE. PN-AABCN1159K
... RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 13.09.2017 PASSED IN ITA NO.1049/BANG/2016, FOR THE ASSESSMENT YEAR:2010-2011 VIDE ANNEXURE - A, PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR
Date of Judgment 29-08-2018, ITA No.110/2018 The Pr. Commissioner of Income Tax - 5 & Another Vs. M/s.NI Systems (India) Pvt. Ltd.
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SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED: 13.09.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH, BENGALURU, AS SOUGHT FOR, IN APPEAL PROCEEDINGS IN ITA NO.1049/BANG/2016 FOR A.Y 2010-11 VIDE ANNEXURE – A.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.I. Sanmathi, 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 ‘C’, Bangalore, in IT[TP]A No.1049/Bang/2016 dated 13.09.2017, (N.I.Systems (India) Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax) for Assessment Year 2010-11.
The proposed substantial question of law framed in the Memorandum of appeal by the Appellants-Revenue is quoted below for ready reference:
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“Whether, on the facts and circumstances of the case, the Tribunal has erred in holding that the functions of taxpayer is not comparable to the functions of certain comparable’s by following the decision’s which has not reached finality and without considering the materials available on record and FAR analysis?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:-
“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 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 dated 24.02.2016 for asst year 2010-11 has considered the comparability of this company and upheld the order excluding this company as being functionally dissimilar to an assessee engaged in business of providing marketing support services
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and in this context at paras 44- 49 of its order held as under:-
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8.3.2 Considering the facts of the matter as laid out above and following the aforesaid decision of the co-ordinate bench in the case of Electronics for Imaging India Pvt. Ltd., for asst. year 2010- 11(Supra) we direct the AO/TPO to exclude this company form the list of comparables on grounds of it being functionally different from the assessee in the case on hand who was only providing sales and marketing support services. Consequently, the assessee’s ground in respect of this company is allowed.
8.4 Consequently, ground No.4 raised by the assessee is partly allowed.
11.3 We have heard the rival contentions and perused and carefully considered the material on record. From an appraisal of the facts on record, it is seen that this company, ‘Salora’ was selected as a comparable by the assessee in its TP study. The authorities below, TPO/CIT(A), have excluded this company from the list of
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comparables for the reason that it is functionally different from the assessee in the case on had. As contended by the ld DR, a perusal of the Annual Report of the company, ‘Salora’, for the year under consideration shows that this company was engaged in the sale of mobiles, computers and computer peripherals and other telecom products of various companies all over India and in this regard provided after sales services. In our considered view we find that the assessee has failed to establish that this company, ‘Salora’ provides market support services to its AE’s, as does the assessee in the case on had and has failed to controvert the findings of the authorities below that it is to be excluded from the list of comparables as it is functionally different from the assessee. In these factual circumstances, as narrated above, we are of the considered view that this company, Salora International Ltd., is functionally different from the assessee in the case on hand and has therefore been correctly excluded from the list of comparables by the authorities below.”
However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on
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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 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
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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 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.
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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.”
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
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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.