PR COMMISSIONER vs. M/S SCANCAFE

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ITA/886/2017HC KarnatakaKAHC01050690201727 August 2018Bench: S.SUJATHA,VINEET KOTHARI8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that appeals under Section 260-A are not maintainable unless ex-facie perversity in the ITAT's findings is established. Disputes regarding the selection of comparables do not typically raise substantial questions of law.

What were the facts?

The Revenue appealed against an ITAT order that excluded certain comparable companies based on functional dissimilarity. The Revenue argued that the ITAT's decision was inconsistent with its own previous rulings and that the filters applied were not uniformly tested.

What were the issues?

Whether the selection of comparable companies by the ITAT raises a substantial question of law. Whether an appeal under Section 260-A is maintainable for disputes concerning comparable selection without establishing perversity.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

1/8 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.886/2017

BETWEEN :

1.

PR. COMMISSIONER OF INCOME TAX-6 BMTC COMPLEX KORMANGALA BANGALORE. 2. INCOME TAX OFFICER WARD-6(1)(1), BANGALORE.

...APPELLANTS (BY SRI. SANMATHI.E.I, ADV.)

AND: M/S. SCANCAFE DIGITAL SOLUTIONS PVT. LTD., GROUND FLOOR, NELL RAO TOWERS, PLOT NO.118, ROAD NO.03 EPIP PHASE-1 WHITEFIELD MAIN ROAD BENGALURU - 560 066 PAN: AAKCS5398E.

…RESPONDENT

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12.04.2017 PASSED IN IT(TP)A NO.502/BANG/2015, FOR

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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THE ASSESSMENT YEAR 2010-2011 VIDE ANNEXURE - A PRAYING TO 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 AND SET ASIDE THE APPELLATE ORDER DATED:12.04.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. IT(TP)A NO.502/BANG/2015 FOR ASSESSMENT YEAR 2010-11 VIDE ANNEXURE - A, 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 ADMISSION, 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.502/Bang/2015 dated 12.04.2017, relating to the Assessment Year 2010-11.

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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2.

The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in excluding certain comparable on the basis of functional dissimilarity by not acknowledging its own decision in Narus Network Pvt. Ltd., where it has held that comparable can’t be excluded the basis of functional different and when it satisfies all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than TPO, but has not tested other comparables against the narrower functionality filter applied by it? ”

3.

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: “10. As regards exclusion of the comparables, learned AR of the assessee submitted that these companies had come up for consideration before the co-ordinate bench of this Tribunal in Tesco

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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Hindustan Service Centre Pvt. Ltd. (IT(TP)A.569/Bang/2015 and 191/Bang/2015 wherein it was held as follows:

xxxxxxxxxx

11.

Further in the case of M/s.Siemens Technology & Services Pvt. Ltd. vs. ACIT (IT(TP)A No.1601/Bang/2012 dated 16/12/2016, the comparability of Accentia Technologies Ltd., Acropetal Tech. Ltd. (Seg.) E-Clerx Services Ltd., and Infosys BPO was considered by the co- ordinate bench of this Tribunal. The relevant para. is extracted below:

xxxxxxxxxxxx 12. Learned DR has not brought any evidence on record controverting the above submission. 13. Therefore, respectfully following the decision of the co- ordinate bench, we hold that the above companies may be excluded for the reasons given by the Tribunal in the aforesaid decision.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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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 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

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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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.

56.

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.

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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57.

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.

58.

The appeals filed by the Revenue are therefore dismissed with no order as to costs.”

5.

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-

Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd.,

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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

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