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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 7TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.388/2017
BETWEEN:
THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU - 560095.
THE INCOME-TAX OFFICER WARD-11(1) PRESENT ADDRESS, WARD - 2(1)(1) 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU – 560 095.
... APPELLANTS
(BY SRI.K V ARAVIND, ADV.)
AND:
M/S CDC SOFTWARE INDIA PVT. LTD. 6TH AND 7TH FLOOR, CANBERRA BLOCK UP CITY 24, VITTAL MALLYA ROAD, BENGALURU – 560 025. PAN:AACCP 7154M
... RESPONDENT
(BY SRI.A SHANKAR & SRI. M LAVA, ADVS. )
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:14/10/2016 PASSED IN IT(TP)A NO.1645/BANG/2013, FOR THE ASSESSMENT YEAR 2005-2006 ANNEXURE –D, PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN IT(TP)A NO. 1645/BANG/2013 DATED:14/10/2016 ANNEXURE – D, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BENGALURU.
THIS APPEAL COMING ON FOR HEARING, 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. A.Shankar & Mr. M.Lava, Advs. for Respondent – Assessee.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, ‘B’ Bench, Bangalore in IT[TP]A No.1645/Bang/2013 dated 14.10.2016, relating to the Assessment Year 2005-06.
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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This Appeal has been admitted on 05.06.2018 to consider the following substantial questions of law. “1. Whether, on the facts and circumstances of the case, the Tribunal is right in law in directing AO/TPO to exclude certain comparable based on functional dissimilarity even when the TPO has chosen the said comparable by applying qualitative and quantitative filers when culling out comparable companies?
Whether on the facts and in the circumstances of the case the Tribunal is right in law in directing the Transfer Pricing Officer to exclude comparable namely, Bodhtree Consulting Ltd. on the basis of RPT filter by following its earlier order in case of Symbol Technologies Ltd. which has not reached finality and even when the TPO has rightly considered the same on the basis of RTP filter?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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“11. We have heard rival submissions and perused the material on record. In the case of Symbol Technologies Ltd., which is also a software development service company, it was held by that Bodhtree Consulting Ltd., Foursoft Ltd, Thirdware Sloutions Ltd., are held to be incomparable on the grounds of functionally dissimilarity vide Para 22 which reads as under: xxxxxxx
In respect of Sankya Infotech Ltd., the coordinate bench in the case of Symbol Technologies vide para 18 held as follows:- xxxxxxxxx 13. Similarly in respect of Tata Elxsi Ltd., the coordinate bench vide paras 25-27 held as follows: xxxxxxxx
We do not find any reason to differ from the decision of the coordinate bench in the above case. Therefore we direct the AO/TPO to exclude the companies (1) Bodhtree Consulting Ltd., (2) Exensys Software Solutions Ltd., (3) sankhya Infotech Ltd., (4) Foursoft Ltd., (5) Thirdware solutions Ltd., (6) Tata Elxsi Ltd., (Seg) from the list of comparable. Thus the ground No.4 is disposed off.”
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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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 Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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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 requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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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. 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
Date of Judgment 7-8-2018, ITA No.388/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CDC Software India Pvt. Ltd.,
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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/-