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1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 9TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.720/2017
BETWEEN:
THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BENGALURU – 560 095
THE ASST COMMISSIONER OF INCOME TAX CIRCLE -2(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BENGALURU – 560 095
... APPELLANTS
(BY SRI.ARAVIND K V, ADV.)
AND:
M/S. CURAM SOFTWARE INTERNATIONAL PVT. LTD., C/O IBM INDIA PVT. LTD., SUBRAMANYA ARCADE, 12, BANNERGHATTA MAIN ROAD, BENGALURU – 560 029 PAN:AACCC5472F
... RESPONDENT
(BY SRI.MALLAHARAO K , ADV. FOR SRI.NAGESWAR RAO, ADV.)
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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THE INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 21.03.2017, PASSED IN C.O. NO.136/BANG/2015, FOR THE ASSESSMENT YEAR 2010-2011 ANNEXURE - D, 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 C.O. NO. 136/BANG/2015 DATED: 21.03.2017 ANNEXURE -D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1)(1), 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. Mr. Mallaharao K., Adv. for Mr. Nageswar Rao, Adv., for Respondent – Assessee.
This Appeal is filed by the Revenue purportedly raising the following substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore in C.O. No.136/Bang/2015 in IT [TP]A No.499/Bang/2015 dated 21.03.2017, relating to the Assessment Year 2010-11.
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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“1. Whether on the facts and in the circumstances of the case, the tribunal erred in holding that the assign authority is not right in including expenditure incurred in foreign currency from export turnover and from total turnover by relying upon the decision of this Hon’ble Court in case of CIT V/s Tata Elsxi even when the assessing authority has rightly included the according to parameters set out in section 10A and the decision relied upon by the Tribunal has not reached finality?
Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to exclude certain comparable on the basis of functional dissimilarity by following its earlier orders which has not reached finality and even when the TPO had chosen he comparable on the basis of its functional similarity and by application of qualitative and quantitative tests?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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Regarding Substantial Question of Law No.1: 3. The issue is covered by the decision of the Hon’ble Supreme Court in the case of Commissioner of Income-tax, Central – III vs. HCL Technologies Ltd., [2018] 93 Taxmann.com 33(SC).
The relevant portion of the judgment of the Hon’ble Supreme Court in the case of HCL Technologies Ltd. (supra), is quoted below for ready reference:- “17. The similar nature of controversy, akin this case, arose before the Karnataka High Court in CIT v. Tata Elxsi Ltd. [2012] 204 Taxman 321/17/taxman.com 100/349 ITR 98. The issue before the Karnataka High Court was whether the Tribunal was correct in holding that while computing relief under Section 10A of the IT Act, the amount of communication expenses should be excluded from the total turnover if the same are reduced from the export turnover? While giving the answer to the issue, the High Court, inter-alia, held that when a particular word is not defined by the legislature and an ordinary meaning is to
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from ‘export turnover’ must also be excluded from ‘total turnover’, since one of the components of ‘total turnover’ is export turnover.
Any other interpretation would run counter to the legislative intent and would be impermissible.
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In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature.
Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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are satisfied that such deduction shall be allowed from the total turnover in same proportion as well”. Regarding Substantial Question of law No.2:
“9.2. Now, let us examine the relevant portion of the order of this Tribunal in DCIT v. Ikanos Communication India P. Ltd in ITA No.137/Bang/2015 for ay 2010-11 dt 10.11.2015, which was providing contract software development services to its principal, as under:
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Since this Tribunal has found that the comparables, ICRA Techno Analytics Ltd, Infosys Technologies ltd. Kals information Systems Ltd (Seg) and Tata Elxsi Ltd (Seg)) are functionally different, in the above cases, following them, the DRP’s decision is unheld and the corresponding, grounds of the Revenue are dismissed. Per contra, ground Nos.1, 2 & 3 of the CO of the assessee are allowed.”
However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International 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 in Tax Havens (like in the case of Vodafone
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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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 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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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.”
Having heard the learned counsels 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
Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd.,
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is liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/- JUDGE
AN/-