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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.607/2017
BETWEEN :
PRINCIPAL COMMISSIONER OF INCOME TAX-4 BMTC COMPLEX, KORAMANGALA, BENGALURU.
THE DEPUTY COMMISISONER OF INCOME TAX, CIRCLE 4 (1) (1), BMTC COMPLEX, KORAMANGALA, BENGALURU.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND :
M/s LOGITECH ENGINEERING AND DESIGN INDIA PVT. LTD., (ERSTWHILE M/s LIFESIZE COMMUNICATION PVT. LTD.), PLOT NO.TS140, BLOCK 2 AND 9, ELNET SOFTWARE CITY, RAJIV GANDHI SALAI, TARAMANI, CHENNAI-600010, PAN: AABCM2081A
…RESPONDENT
Date of Judgment 29-08-2018, ITA No.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. Ltd.
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THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 03.03.2017 PASSED IN IT[TP]A NO.287/BANG/2015, FOR THE ASSESSMENT YEAR - 2010-11 VIDE ANNEXURE-A PRAYING TO (A) 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. (B) SET ASIDE THE APPELLATE ORDER DATED 03.03.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BANGALORE, IN APPEAL PROCEEDINGS IT[TP]A NO.287/BANG/2015 FOR THE ASSESSMENT YEAR 2010-11 VIDE ANNEXURE-A AS SOUGHT FOR IN THIS APPEAL; AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT.
THIS APPEAL COMING ON FOR ORDERS, 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 ‘A’, Bangalore, in IT[TP]A No.287/Bang/2015 dated 03.03.2017, relating to the Assessment Year 2010-11.
The substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under:
Date of Judgment 29-08-2018, ITA No.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. Ltd.
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“1. Whether in the facts and circumstances of the case and in law, the Tribunal was justified in removing certain comparable from the list of comparables on the basis of functional dissimilarity which satisfied all filters applied by the Transfer Pricing and without doing any FAR analysis of the tax payer with those other cases? 2. Whether in the facts and circumstances of the case and in law, the Tribunal was justified in imposing facts in imposing a turnover filter for selection of comparable, when turnover does not impact the profits margin of the companies? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the transfer pricing officer/assessing authority to allow actual working capital adjustment towards the differences in the working capital position between the assessee and the entrepreneurial companies selected as comparable by following its earlier order in case of M/s Moong Controls India Pvt. Ltd. which has not reached finality and moreover the assessee had failed to establish that the claim regarding working capital adjustment.?”
Date of Judgment 29-08-2018, ITA No.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. Ltd.
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The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law No.1:
“We heard the rival submissions. As submitted by the assessee, the DRP rejected them not on turnover filter but on account of absence of segmental information. We do not find any infirmity in the DRP order and hence on these grounds the Revenue’s appeal fail.””
Regarding Substantial Question of Law No.2:
“08. On the following comparables, the AR submitted that the appellant’s turnover is just 13.23 crores, while the turn over of each of the comparable is multiple times higher (say from 28 times to 1601 times higher) than its turnover and hence the DRP correctly excluded them. The summary of AR’s contentions on each of the comparable is extracted as under:
xxxxxx
Date of Judgment 29-08-2018, ITA No.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. Ltd.
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However, against the application of the turnover filter, the DR relied on the decision of this Tribunal in LSI Technologies India Private Ltd & LSI Research & Development P. Ltd in IT (TP) A No.1380 & 1381/Bang/2010 for ay 2006-07 dt. 13.5.2016. We heard the rival submissions. It is seen that the DRP rejected the above comparables based on the turnover filter, size etc. relying on various Tribunal decisions Viz Bangalore, Delhi, Hyderabad, Mumbai and Pune. This Tribunal in the case of Obopay Mobile Technology India P Ltd in IT(TP) A Nos.388 & 469/Bang/2015 dt 08.01.2016, after considering the Delhi and Bombay High Court decisions in Chryscapital Investment Advisors India P Ltd 376 ITR 183(Del), CIT vs Pentair Water India P Ltd (Mumb) in tax appeal No. 18 of 2015 and Agnity India Technologies P Ltd (Del) 36 taxmann.com 289/219 taxman 26, the principle of judicial discipline etc., following the Bombay High Court decision upheld the DRP order in excluding 6 companies, from the list of comparables chosen by the TPO, on the basis of turnover and size. Following it, we uphold the DRP order in excluding the above 6 companies, from the list of comparables chosen by the TPO, on the basis of
Date of Judgment 29-08-2018, ITA No.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. Ltd.
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turnover and size. Thus, the corresponding grounds of the Revenue fail.”
Regarding Substantial Question of Law No.3:
“12. The next issue is that the DRP did not grant the working Capital adjustment. This Tribunal in Moong Controls India P Ltd ITA 551/Bang/2015 ay 2010 dt 27.11.2015, has directed the TPO to allow actual adjustment towards the differences in the working capital position between the assessee and the entrepreneurial companies selected as comparable. We direct the TPO to follow this decision. To this extent, the assessee’s appeal ground is allowed.”
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.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. 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. On the other hand, the appeals of the present tenor as to whether the comparables have been rightly
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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.
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 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 29-08-2018, ITA No.607/2017 Principal Commissioner of Income Tax-4 & Another Vs. M/s Logitech Engineering and Design India Pvt. Ltd.
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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 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
PMR