THE PR COMMISSIONER OF INCOME TAX vs. M/S DHANYA AGROINDUSTRIAL PVT LTD

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ITA/689/2017HC KarnatakaKAHC01050617201721 August 2018Bench: S.SUJATHA,VINEET KOTHARI7 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. Mere dissatisfaction with factual findings is insufficient.

What were the facts?

The Revenue appealed against an ITAT order directing the re-computation of operating profit/cost for ALP determination, considering foreign exchange gain/loss as operating in nature. The High Court referred to its previous judgment in a similar case.

What were the issues?

Whether the High Court should entertain an appeal under Section 260-A when no substantial question of law arises and the ITAT's findings are based on facts.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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.689/2017

BETWEEN : 1. THE PR. COMMISSIONER

OF INCOME-TAX

5TH FLOOR, BMTC BUILDING

80 FEET ROAD, KORMANGALA

BENGALURU-560095.

2.

THE DEPUTY COMMISSIONER

OF INCOME-TAX, CIRCLE-2[1][2]

2ND FLOOR, BMTC BUILDING

80 FEET ROAD, KORMANGALA

BENGALURU-560095.

...APPELLANTS

(BY SRI ARAVIND.K.V., ADV.)

AND : M/s. DHANYA AGROINDUSTRIAL PVT. LTD., No.489/11, ECOM HOUSE BOREWELL ROAD, WHITEFIELD BENGALURU-560066 PAN: AACCD 8919J.

…RESPONDENT

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 08.03.2017, PASSED IN IT[TP]A No.240/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012, VIDE ANNEXURE-D, PRAYING TO: i] FORMULATE THE SUBSTANTIAL QUESTIONS OF

Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd.,

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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.240/BANG/2016 DATED 08.03.2017, VIDE ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2[1][2], BENGALURU.

THIS APPEAL COMING ON FOR ORDERS, 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, Bangalore Bench ‘C’, Bangalore, in IT[TP]A No.240/Bang/2016 dated 08.03.2017, relating to the Assessment Year 2011-12.

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 directing the assessing authority to re- compute operating profit/cost of the assessee for determination of ALP by treating foreign exchange

Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd.,

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loss/gain as operating in nature without appreciating that foreign exchange fluctuations is nothing to do with the business operations of the tax payers and foreign exchange gain/loss is not dependent upon the operations carried out by the company but is a result of various extraneous factors on the international transactions?”

3.

The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: “17. We have heard the learned Authorised representative as well as learned Departmental Representative and considered the relevant material on record. There is no quarrel on the issue that if the foreign exchange fluctuation gain or loss is arising from the sales realization then it will be operating in nature. However, it would be considered as part of the operating revenue or cost only when such gain or loss is arising from the realization of the sale made during the year. Accordingly, the TPO/A.O. is directed to verify the relevant details and then treat the foreign exchange gain/loss as operating in nature and

Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd.,

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recomputed operating profit/cost of the assessee for the purpose of determining the ALP. ”

4.

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 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial 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.

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

Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial 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.

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.”

Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd.,

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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- 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.

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