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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 13TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.1012/2017 BETWEEN:
THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU – 560 095
THE INCOME-TAX OFFICER WARD-11(1) PRESENT ADDRESS WARD -1(1)(2) 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU – 560 095
... APPELLANTS
(BY SRI. ARAVIND K V, ADV.)
AND:
M/s ARCOT R & D SOFTWARE PVT. LTD., RMZ TITANIUM BUILDING 135, OLD AIRPORT ROAD KODIHALLI BENGALURU – 560 017 PAN:AADCA 4367L
... RESPONDENT
THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:17.03.2017 PASSED IN ITA NO. 134/BANG/2014, FOR THE ASSESSMENT YEAR- 2009-2010 ANNEXURE -D, PRAYING TO: I. FORMULATE THE
Date of Judgment 13-8-2018, ITA No.1012 /2017 The Pr. Commissioner of Income Tax & Another vs. M/s Arcot R & D Software Pvt. Ltd.,
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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. 134/BANG/2014 DATED: 17.03.2017 VIDE ANNEXURE – D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-1(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 the substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, in IT [TP]A No.134/Bang/2014 dated 17.03.2017, relating to the Assessment Year 2009-10.
The substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under: “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding certain comparables on the basis of
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functional dissimilarity by following its earlier judgments which has not reached finality and even when the Transfer Pricing Officer has considered the comparables on the basis of qualitative and quantitative filters?
Whether on the facts and circumstances of the case, the Tribunal erred in directing the assessing authority/transfer pricing officer to exclude Sasken Communication Tech Ltd as comparable by following its earlier order passed in case of assessee which has not reached finality?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: “8. We have considered the rival submissions as well as relevant material on record. At the outset, we note that the functional comparability of four companies namely M/s.Bodhtree Consulting Ltd., Tata Elxsi Ltd., Persistent systems Ltd. and Infosys Technology Ltd. has been considered by the coordinate bench of this Tribunal in the case of Infinera India Pvt. Ltd. Vs. ITO (supra) in paras 12 to 17 as under: xxxxxxxxxxx
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Following the earlier order of this Tribunal, we direct the A.O./TPO to exclude these four companies from the set of comparables.
As regards Sasken Communication Technology Ltd., we find that this Tribunal in assessee’s own case for the A.Y. 2010-11 has considered in para as under: xxxxxxxxx
Since no material or significant difference has been pointed out in the facts as well as nature of business of the assessee and the business activity of the Sasken Communication Technology Ltd. in comparison to the A.Y. 2011-12 therefore by following the earlier order of this Tribunal in assessee’s own case, we direct the A.O./TPO to exclude this company from the set of comparables. 10. As regards L & Tribunal Infotech Ltd., the functional comparability of this company has been considered by the co-ordinate bench of this Tribunal in the case of Broadcom India Pvt. Ltd. Vs. DCIT (supra) in paras 19 & 22 as under: xxxxxxxxxxxx
Following the order of the co-ordinate bench of this Tribunal we direct the A.O./TPO to exclude
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this company from the set of comparables. Accordingly the AO/TPO is directed to recompurte the arm’s length by considering the remaining comparable companies. Needless to say the benefit of 2nd proviso to section 92C(2) be considered.”
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
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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.
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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.
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The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
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
AN/-