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1/8 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.259/2016
BETWEEN : 1. PR. COMMISSIONER OF INCOME TAX -6,
BMTC COMPLEX,
KORAMANGALA, BANGALORE
INCOME TAX OFFICER,
WARD – 12(2), BANGALORE
… APPELLANTS
(BY SRI.E.I.SANMATHI, ADV.)
AND :
M/S. SUPPORT.COM INDIA PRIVATE LTD., (FORMERLY KNOWN AS SUPPORTSOFT INDIA PVT. LTD.,) 3RD FLOOR, SALARPURIA SENATE, 4TH CROSS, 5TH BLOCK, KORAMANGALA INDUSTRIAL LAYOUT, BANGALORE – 560 095 PAN:AAHCS 3902 R
…RESPONDENT
(BY SRI.S.SHARATH, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 04/11/2015 PASSED IN ITA NO.1340/BANG/2010, FOR THE ASSESSMENT YEAR:2006-07, PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. 2. SET ASIDE THE APPELLATE ORDER DATED: 04/11/2015 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO.IT(TP)A NO.1340/BANG/2010 FOR ASSESSMENT YEAR 2006-07..
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.Y. Sanmathi, Adv. for Appellants – Revenue. Mr. S Sharath, 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 IT[TP]A No.1340 /Bang/2010 dated 04.11.2015, (M/s. Support.com India Private Ltd., Vs. The Income Tax Officer) relating to the Assessment Year 2006-07.
The appeal has been admitted on 03.10.2017 to consider the following substantial questions of law raised in the Memorandum of appeal
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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by the Appellants-Revenue is quoted below for ready reference: “1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that few companies are functionally different from the assessee when it satisfied all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than the TPO, but has not tested other comparables against the narrower functionality filter applied by it?
2) Whether on the facts and circumstances of the case, the Tribunal is right in law in directing the exclusion of comparable companies having RPT transactions more than 25% without asking the TPO to make a fresh study since a qualitative filter, viz RPT filter has been changed which results in changing filter criteria altogether and mandates a fresh TP study using updated filters?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law No.1:
“14. With respect to KALS Information Systems Ltd., and Accel Transmatics Ltd. (Seg), it was contended that they have to be rejected as functionally different, following the decision of ITAT Bangalore Bench in the case of M/s. Huawei Technologies India Pvt. Ltd.(surpa) where it was held as follows:-
xxxxxxxxxxxx 15. Respectfully following the decision of the coordinate Bench of this Tribunal in the case of M/s. Huawei Technologies India Pvt. Ltd. (Supra), we direct that KALS Information Systems Ltd., and Accel Transmatics Ltd. (Seg) be excluded from the list of comparables.”
Regarding Substantial Question of Law No.2:
“10. Ground No.9 is with respect to the TP analysis of the TPO. The ld. Counsel for the assessee pointed out that the comparables viz., Aztech Software Ltd., Geometric Software Ltd.
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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(Seg) and Megasoft Ltd. chosen by the TPO and submitted that undisputedly the related party transactions of these comparables was more than 15%. He relied on the decision of this Tribunal in the case of M/s. Huawei Technolgies India Pvt. Ltd. V. ITO in IT (TP)A No.1338/Bang/2010 dated 30.04.2013, wherein it was held as under:
xxxxxxxxxxx
Respectfully following the decision of the coordinate Bench of this Tribunal in M/s. Huawei Technologies India Pvt. Ltd. (Supra), we hold that the companies viz., Aztech Software Ltd., Geometric Software Ltd. (Seg) and Megasoft Ltd. are to be excluded from the list of comparables chosen by the TPO.”
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 findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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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.
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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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
Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd.
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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 liable to be dismissed and it is dismissed accordingly. No costs. Sd/- JUDGE
Sd/- JUDGE Psg*.