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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 16TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.241/2017
BETWEEN:
THE PR. COMMISSIONER OF INCOME TAX-7 BMTC COMPLEX, KORAMANGALA, BANGALORE.
THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 12(1), BANGALORE
... APPELLANTS
(BY SRI.SANMATHI E I, ADV.)
AND:
M/S MICROCHIP TECHNOLOGY (INDIA) PVT. LTD., NO.149-B, 1ST PHASE, INDL. AREA, WHITEFIELD, BANGALORE PAN:AABCM9868J
... RESPONDENT
(BY SMT.MANASA ANANTHAN, ADV. SRI.T.SURYANARAYANA, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:31/10/2016 PASSED IN IT(TP)A NO.34/BANG/2012, FOR THE ASSESSMENT YEAR 2007-2008. PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. 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:31/10/2016 PASSED IN IT(TP)A NO.34/BANG/2012 FOR A.Y.2007-08, BY THE ITAT, 'B' BENCH, BENGALURU.
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. Mrs. Manasa Ananthan, Adv., for Mr. T. Suryanarayana, Adv., for Respondent-Assessee
This Appeal is filed by the Revenue purportedly raising the substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, in IT [TP]A No.34/Bang/2012 dated 31.10.2016, relating to the Assessment Year 2007-08.
The substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under: “1. Whether, the Tribunal, on the facts and in the circumstances of the case, the Tribunal is right in law in rejecting the comparables such as Accel Transmatic Ltd, Avani Cimcom Technologies Ltd,
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. Ltd.,
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Celestial Labs, E-Zest solutions Ltd, Ishir Infotech Ltd, Kals Information Systems Ltd, Thirdware Solutions Ltd and other comparables on the ground of functional dissimilarity by relying on its earlier orders which has been challenged before this Hon’ble Court and even when the TPO had rightly chosen the said comparison after applying all the required tests in accordance with the provisions of the Act?
2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law admitting additional ground of assessee with regard to claim of ESOP expenses whereby the Tribunal has allowed the claim by following the decision in case of M/s.Biocon Ltd even when no such claim is made before assessing authority and as well as in return of income filed for the year in question.”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. Ltd.,
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Regarding Substantial Question of law No.1:
“18. Having considered the rival submissions as well as relevant material on record, we note that an identical set of 26 comparables was considered by the co-ordinate bench of this Tribunal in the case of Meritor LVS India Ltd. (supra). The Tribunal has considered the comparability of these companies in para 12 to 14 as under:
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Accordingly, following the order of the co- ordinate bench of this Tribunal, we direct the A.O./TPO to exclude the following companies from the set of comparables:
Sl. No. Name of Company 1. Accel Transmatic Ltd. (Seg.) 2. Avani Cincom Technologies Ltd. 3. Celestial Labs Ltd. 4. E-Zest Solutions Ltd. 5. Ishir Infotech Ltd. 6. KALS Information Systems Ltd. (Seg.) 7. Thirdware Solutions Ltd.
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. Ltd.,
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As regards the Mega Soft Ltd., the TPO is directed to consider the segmental results and correct amount of margin as directed by the co- ordinate bench.
After exclusion of the comparables as directed by us, the A.O./TPO is directed to recomputed the ALP by considering the remaining 8 comparables and correct margin in respect of Mega Soft Ltd. Needless to say the benefit under proviso to section 92 C shall be considered.”
Regarding Substantial Question of law No.2:
“23. We have considered the rival submissions as well as the relevant material on record. There is not dispute that for the year under consideration the assessee did not claim the deduction in respect of the payment made to the parent company on account of Employees Stock Option and compensation. However we find that an identical issue has been considered in assessee’s own case for the Assessment Year 2008-09 and it was held that it is an allowable deduction. Therefore, so far as the issue of allowability of the deduction is concerned it has been decided in favour of the assessee by this tribunal by following the decision of the Special
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. Ltd.,
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Bench in the case of Biocon Ltd. 115 TTJ 649. However since the relevant to details of the claim has not been examined by the Assessing Officer and further the apportionment of the expenditure between 10A and non-10A units is also required to be examined and verified. Therefore that claim of the assessee has to be apportioned between units eligible under Section 10A and the units which is not eligible for the deduction under Section 10A and then it has to be allowed against the respective income of the separate units. In view of the above facts and circumstances of the case, we set aside this issue to the record of the Assessing Officer for a limited purpose of verification and examination of the relevant record regarding apportionment of the amount between the 10A unit and non-10A unit.”
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 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (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
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. Ltd.,
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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.
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
Date of Judgment 16-8-2018, ITA No.241/2017 The Pr. Commissioner of Income Tax – 7 & Anr.Vs. M/s. Microchip Technology (India) Pvt. Ltd.,
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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.”
Having heard the learned Counsel 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 AN/-