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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.68/2013
BETWEEN :
COMMISSIONER OF INCOME TAX,
BANGALORE
ASST. COMMISSIONER OF INCOME TAX,
CIRCLE 12(1),
BANGALORE
...APPELLANTS
(BY SRI.JEEVAN J NEERALGI , ADV.)
AND : M/S. MERITOR LVS INDIA PVT. LTD. (PRESENTLY KNOWN AS INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD.), CAD TECHNICAL CENTRE DIVISION, NO.69, AL-AMEEN TOWERS, 3RD FLOOR, NEAR LALBAGH MAIN ROAD, BANGALORE – 560 027
…RESPONDENT
(BY SRI.NAGESWAR RAO , ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 21/09/2012 PASSED IN ITA NO.405/BANG/2011, FOR
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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THE ASSESSMENT YEAR 2005-06, PRAYING TO SET ASUDE THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE BEARING I.T.A.NO.405/BANG/2011 DATED 21.09.2012 AND ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- III, BANGALORE DATED 23.02.2011 IN APPEAL NO.ITA 56-AC-12(1)/ CIT(A)-IV/2005-06.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. Sri Jeevan J Neeralgi, Adv. for Appellants – Revenue. Mr. ,Nageswar Rao, Adv. for Respondent – Assessee.
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 ‘A, Bangalore, in ITA No.405/Bang/2011 dated 21.09.2012, ( M/s Meriotor LVS India (P) Ltd., Vs. The Asst. Commissioner of Income-tax, Circle-12(1))relating to the Assessment Year 2005-06.
The appeal has been admitted on 24.06.2013 to consider the following substantial question of law raised by the Appellant/Revenue :
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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“1. Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in relying on the decision of Hon’ble High Court of Karnataka in the case of CIT Vs. M/s.Yokogawa Ltd. On the issue of allowing set off of brought forward losses/ unabsorbed depreciation before computing deduction under section 10A, which is contrary to the provisions of section 70, 32(2) and 72 of the Income tax Act?”
However, at the request of the Appellants-Revenue, the substantial question of law no.2 is also taken for consideration: “2.
Whether on the facts and in the circumstances of the case, the ITAT is correct in law in affirming the decision of the CIT (Appeals) to exclude M/s. Infosys Technologies Ltd. From the set of comparables on the basis of turnover achieved?”
Regarding Substantial question of Law No.1:
Learned counsel for the appellants-Revenue Mr.Jeevan J. Neeralgi has submitted that the Hon'ble
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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Supreme Court has settled the controversy in the case of Commissioner of Income-tax V/s. Yokogawa India Ltd., [(2017) 77 taxmann.com 41 (SC)] and therefore the said controversy is covered by the decision of the Hon'ble Supreme Court. The question is accordingly answered in the same terms.
Regarding Substantial Question of law No.2:
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: “ 14. Having heard both the parties and having considered their rival contentions, we find that the grievance of both the parties are against exclusion of the super profit making comparables and the low profit making comparables from the list of comparables adopted by the TPO. We find that the CIT(A) has not given any reasoning for such exclusion. We find that various Benches of the Tribunal have held that super profit making companies have to be excluded from the list of
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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comparables while determining the arms length price. But however for arriving at the conclusion that these companies are to be excluded, the CIT (A) is bound to give the reasoning. As far as Infosys is concerned, we find that it satisfies the turnover filter, as its turnover is 6,850 crores as against the assessee’s turnover of 8.29 crores. So the said company is rightly excluded from the list of comparables. But however, as regards other comparables with both high margin and low margin companies, we are of the opinion that the CIT(A) ought to give reasoning before excluding the same. As the order of the CIT(A) is silent as regards the reason for their exclusion, we deem it fit and proper to remit the issue back to the file of the CIT(A) for reconsideration in the light of the judicial precedents on the issue and also for passing a detailed order. Needless to mention that the assessee shall be give a fair opportunity of hearing.”
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
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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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 in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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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.
We make it clear that the same yardsticks and parameters will have to be
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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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 counsels appearing for the parties, 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
Date of Judgment 29-08-2018, ITA No.68/2013 Commissioner of Income Tax & Another Vs. M/s. Meritor LVS India Pvt. Ltd.
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liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/- JUDGE
Psg*.