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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.929/2017
BETWEEN : 1. PR. COMMISSIONER OF INCOME TAX-4 BMTC COMPLEX KORAMANGALA BANGALORE.
DY. COMMISSIONER OF INCOME TAX CIRCLE-4[1][2] BANGALORE.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND : M/s. MISYS SOFTWARE SOLUTIONS [INDIA] PVT. LTD., BAGMANE CONSTELLATION BUSINESS PARK, 4 TO 6TH FLOORS VIRGO BUILDING, OBR DODDANEKUNDI, MARATHAHALLI BANGALORE-560037.
…RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 19.05.2017 PASSED IN IT[TP]A No.174/BANG/2015, FOR THE ASSESSMENT YEAR 2010-2011, PRAYING TO [a] DECIDE
Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd.,
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THE FOREOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT & SET ASIDE THE APPELLATE ORDER DATED 19.05.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BANGALORE, IN APPEAL PROCEEDINGS No.IT[TP]A No.174/BANG/2015 FOR ASSESSMENT YEAR 2010-2011 AS SOUGHT FOR IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
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 ‘B’, Bangalore, in IT[TP]A No.174/Bang/2015 dated 19.05.2017, relating to the Assessment Year 2010-11.
The substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under: “1. Whether on the facts and in the circumstances of the case, the Tribunal was
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justified in holding that the functions of taxpayer are not comparable to the functions of certain comparable’s even when qualitative and qualitative tests are satisfied in case of all comparable’s?
Whether on the facts and in the circumstances of the case, the Tribunal was justified in directing the exclusion of comparables companies having RPT transactions more than 15% ignoring the TPO’s observation that the basis for determining the threshold limit for eliminating companies having RPT transactions more than 25% was through the determination of Indian companies with foreign shareholding greater that 26% and therefore had its basis in the provisions of the Act and accounting standards AS-18?”
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: “17. We have considered the rival submissions as well as the relevant material on
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record. We find that for the Assessment Year 2006-07, the Tribunal in assessee's own case vide order dt.23.9.2015 in IT(TP)A No.1425/Bang/2010 has held that this company is not a good comparable and directed to be excluded from the list of comparables. Further the co-ordinate bench of this Tribunal in the case of DCIT Vs. Electronics for Imaging (India) Pvt. Ltd.(supra) has held in paras 30 to 33 as under :
“xxxxx”
In view of the earlier order of this Tribunal in assessee's own case as well as the decision in the case of DCIT Vs. Electronics for Imaging (India) Pvt. Ltd. (supra), we hold that this company is functionally not comparable with the assessee and accordingly we direct the TPO/A.O. to exclude this company from the set of comparables.”
Regarding Substantial Question of Law No.2: “25. Having considered the rival submissions as well as the relevant material on record on this issue, we find that the Tribunal has taken a consistent view that in normal circumstances 15% RPT tolerance is a proper criteria for selection of comparable companies.
Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd.,
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Accordingly, by applying the said criteria of 15% RPT as a tolerance range, this company ICRA Online Ltd. having 16% RPT is required to be excluded from the set of comparables. We further note that the Tribunal in the case of Goldman Sachs Services Pvt. Ltd. Vs. DCIT (supra) in paras 6 & 7 held that this company is not a good comparable of ITES captive service provider. In view of the above facts when this company is having RPT of more than 15% as well as by following the decision of this Tribunal, we direct the TPO/A.O. to exclude this company from the set of comparables.”
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 of an assessee or the Revenue under Section 260-A of the Act is not maintainable.
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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 picked up or not, Filters for arriving at the correct list of
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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
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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 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
NC.