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1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 27TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.1011/2017
BETWEEN : 1. THE PR. COMMISSIONER
OF INCOME-TAX
5TH FLOOR, BMTC BUILDING
80 FEET ROAD, KORMANGALA
BENGALURU-560095.
THE INCOME-TAX OFFICER
WARD-11[1], PRESENT ADDRESS
WARD-2[1][1], 2ND FLOOR
BMTC BUILDING, 80 FEET ROAD, KORMANGALA
BENGALURU-560095.
...APPELLANTS
(BY SRI DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.)
AND : M/s. CSR INDIA PVT. LTD., No.4/1, 11TH FLOOR, TOWER-C IBC KNOWLEDGE PARK BANNERGHATTA ROAD BENGALURU PAN: AABCU 4714E.
…RESPONDENT
(BY SRI ANKUR PAI, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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DATED 06.04.2017 PASSED IN IT[TP]A No.241/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010 VIDE ANNEXURE-D, PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT[TP]A No.241/BANG/2014 DATED 06.04.2017 VIDE ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-2[1][1], BENGALURU AND ETC.
THIS APPEAL COMING ON FOR ORDERS, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. Dilip, Adv. for Mr. K.V.Aravind, Adv. for Appellants – Revenue. Mr. Ankur Pai, 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 ‘B’, Bangalore, in IT[TP]A No.241/Bang/2014 dated 06.04.2017, relating to the Assessment Year 2009-10.
The substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under:
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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“1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding certain comparable on the ground of functional dissimilarity even when the qualitative and quantitative filters are satisfied in case of assessee?
Whether on the facts and in the circumstances of the case, the Tribunal has erred in not following its own decision in the case of M/s. Societe General Global Solution Centre [P] Ltd., Vs. DCIT, Circle-12[3], Bangalore vide IT[TP]A No. [Bang] the jurisdictional Tribunal Bangalore has opined that the turnover cannot be relevant criteria in a service sector where fixed overheads are nominal and the cost of service is in direct proportion to the services rendered?
Whether on the facts and in the circumstances of the case, the Tribunal is right in confirming the directions of DRP with regard to inclusion of comparable namely FCS Software Solutions and Think Soft Global Services Ltd., as comparables by following its earlier order which has not reached finality and even when the transfer pricing officer had rightly rejected the said comparable’s on the basis of working capital
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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adjustment in those cases exceeded 4% and the DRP had erroneously held that there should not be capping and WCA should be on actual? ”
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 Nos.1 & 2: “08. Now let us take up the assessee’s appeal. The assessee placed reliance on the decision of the Bengaluru Tribunal, in the case of Airbus India Operations P. Ltd., [ITA.35/Bang/2014] and McAfee Software India P. Ltd., [ITA.04/Bang/2012, wherein 9 out of the 11 comparables selected by the TPO were rejected. The AR’s submissions are extracted as under:
Bodhtree Consulting Limited [“Bodhtree” or “the Company”]
“xxxxx”
The Appellant wishes to submit that in case of Bodhtree, extraordinary variations in
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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profitability are indicators of the extra edge the Company has received on introduction of the SaaS. Hence, Bodhtree should not be considered as a comparable.
Therefore, as the company was engaged in providing ITeS services in FY 2008-09, the company cannot be taken as comparable to the appellant.
The appellant relies on the case of Airbus India Operations, wherein this company has been rejected on functional dissimilarity. The relevant extract is annexed herewith:-
“xxxxx”
Respectfully following the decision of the Tribunal referred to above and taking note of the fact that the facts and circumstances under which the aforesaid company was considered by the TPO as comparable with a software development service provider such as the assessee for identical reasons, we direct the TPO to exclude the aforesaid company from the list. Hence, Bodhtree should be rejected.
Tata Elxsi Limited [“Tata Elxsi”]
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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“xxxxx”
The Appellant also wishes to submit that the Hon’ble Tribunal has rejected this company as comparable in the case of 3DPLM Software Solutions Limited for the same AY 2008-09.
Based on the above, Tata Elxsi ought to be rejected as a comparable. ”
Similarly, the learned Tribunal has considered the other comparables and excluded the same. Regarding Substantial Question of Law No.3: “It is seen that the TPO excluded them on the basis that the working capital adjustment in those cases exceed 4%. The DRP held there should not be capping and the working capital adjustment should be on actual and accordingly directed to include these comparable. Since, the DRP directions are in accordance with this Tribunal’s decision in the case of Moog Controls [India] Private Limited [IT[TP]A No.551/Bang/2015] it needs to be upheld. Further, this Tribunal found them to be
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comparables, supra, and hence we reject the Revenue’s appeal.”
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.
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
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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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 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
Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd.,
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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.
The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
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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
NC.