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1/7 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 21ST DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.936/2017
BETWEEN:
THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU – 560 095.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE - 3(1)(2), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU – 560 095.
...APPELLANTS
(BY SRI.ARAVIND K V, ADV.)
AND
M/S.FLEXTRONICS TECHNOLOGIES INDIA PVT. LTD., PLOT NO.3, PHASE-II, SIPCOT INDUSTRIAL PARK, SANDAVELLURE C VILLAGE, SRIPEMBUDUR TALUK, KANCHEEPURAM DISTRICT, TAMIL NADU – 602 106 PAN:AAACF 5248E
... RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd.
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DATED:21.06.2017 PASSED IN IT(TP)A NO.649/BANG/2015, FOR THE ASSESSMENT YEAR-2010-2011 VIDE ANNEXURE - E, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.649/BANG/2015 DATED:21.06.2017 VIDE ANNEXURE – E AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr.K.V.Aravind, 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, ‘A’ Bench, Bangalore, in IT [TP] A No.649/Bang/2015 dated 21.06.2017 relating to the Assessment Year 2010-11.
The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under:
Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd.
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“ Whether on the facts and in the circumstances of the case, the Tribunal is right in law directing the TPO/AO to exclude certain comparable’s on the ground of functional dissimilarity when the TPO has rightly chosen the same as the qualitative and quantitative filters/tests are satisfied and functions of the said company are similar to that of assessee?”
The learned Tribunal, after discussing the rival contentions of both the Appellant-Revenue and Respondent-Assessee, has returned the findings as under: “21. We heard rival submissions and perused the material on record. The comparability of the companies viz., Accentia Technologies Ltd., and Infosys BPO Ltd., had come up for discussion before co-ordinate bench in the case of M/s.Scancafe Digital Solutions Pvt. Ltd. (supra) which is also ITeS company wherein the Tribunal, after referring to earlier decision in the case of Tesco Hindustan Service Centre Pvt. ltd. in IT(TP)A No.569/Bang/2015 and 191/Bang/2015 held that these companies are not comparable with ITeS company. The relevant observation of the Tribunal are as under:
Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd.
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Respectfully following the decision of the co- ordinate bench, to which one of us viz., the Hon’ble AM is the author, we direct the AO to exclude these companies from the list 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. The relevant portion of the said judgment is quoted below for ready reference: “Conclusion:
Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd.
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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 comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law.
Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd.
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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 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies 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 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
ln.