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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 6TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.362/2017
BETWEEN : 1. THE PR. COMMISSIONER OF INCOME-TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095.
THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(4), PRESENT ADDRESS CIRCLE-3(1)(2), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095.
...APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND : M/s. HEWLETT PACKARD GLOBAL SOFT PVT.LTD., TH CONSULTING (INDIA) PVT. LTD., 39/40, ELECTRONICS CITY, PHASE-II, HOSUR ROAD, BENGALURU-560100. PAN: AAACD 4078L.
…RESPONDENT
(BY SRI SANDEEP HUILGOL, ADV. FOR SRI T.SURYANARAYANA, ADV.)
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 26/08/2016 PASSED IN IT(TP)A No.435/BANG/2013, FOR THE ASSESSMENT YEAR 2008-2009, 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.435/BANG/2013 DATED 26/08/2016, ANNEXURE-D, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1](2), 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. Sandeep Huilgol, Adv., and Mr. T.Suryanarayana, 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, Bangalore Bench ‘B’, Bangalore, in IT[TP]A No.435/Bang/2013 dated 26.08.2016, relating to the Assessment Year 2008-09.
The appeal has been admitted on 24.01.2018 to consider the following substantial question of law formulated in the appeal memorandum:
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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“Whether on the facts and in the circumstances, the Tribunal in case of TH Consulting [India] Pvt. Ltd., is right in law in holding that Aptico Ltd., Chowksi Laboratories Ltd., and Wapcos Ltd are to be excluded from the list of comparables chosen by TPO on the ground of functional dissimilarity without doing any FAR analysis of the assessee with those other cases and without appreciating that comparability of these companies on the basis of specific facts brought on record by the TPO in the case of the assessee?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: “4. We have considered the rival submissions and per used the materials on record including the relevant pages of the Annual Reports of these comparable companies. The first company is Apitco Limited. For this company, pages 362 to 364 and 378 of the paper book were referred. As per these pages of the paper book being relevant portion of Annual report of this company, this company is deriving income from
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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Asset Reconstruction & management Services, Project Related Services, Micro Enterprises Development, Infrastructure planning & Development, Research Studies & Tourism, Skill Development, Environment management, Entrepreneurship Development & Training, Cluster Development & Energy Related Services etc. The business profile of the assessee company as noted by the TPO on page 2 of his order includes management Consultancy Services which includes assisting the AEs in improving their performance, primarily through the analysis of existing business problems and development of plans for improvement. In our considered opinion, the scope of services being rendered by the assessee is very narrow as compared to the scope of services being rendered by this company i.e. Apitco Limited and therefore, even the risk being taken by that company is also high and therefore, this company cannot be considered as a comparable in the present case because of functional dissimilarity. We direct the AO/TPO to exclude this company from the final list of comparables.
The second comparable company in dispute is Choksi Laboratories Limited. For this company, page no.407 of the paper book is
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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referred by the learned AR of the assessee. As per this page of the paper book being relevant portion of Annual report of this company, this company is a commercial testing house engaged in the testing of various products and also offers services in the field of pollution control as allied activity. . In our considered opinion, the nature & scope of services being rendered by the assessee is very different and narrow as compared to the scope of services being rendered by this company i.e. Choksi Laboratories Limited and therefore, this company also cannot be considered as a comparable in the present case because of functional dissimilarity. We direct the AO/TPO to exclude this company also from the final list of comparables.
The fourth comparable company in dispute is WAPCOS Limited (Seg.). For this company, page no. 580, 587, 590,595 & 635 of the paper book is referred by the learned AR of the assessee. As per these pages of the paper book being relevant portion of Annual report of this company, this company derives majority of its revenues from consultancy and contracts and it is having three business centre being 1) Centre for Power, 2) Centre for infrastructure and 3) Centre for water Resources. In our considered
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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opinion, the nature & scope of services being rendered by the assessee is also very different as compared to the scope of services being rendered by this company i.e. WAPCOS Limited (Seg.) and therefore, this company also cannot be considered as a comparable in the present case because of functional dissimilarity. We direct the AO/TPO to exclude this company also from the final list of comparables.
As per above discussion, it is seen that there is no merit in the objection of the revenue seeking non exclusion of one comparable i.e. Rites Limited and we have held that all three companies, exclusion of which is being requested by the assessee i.e. 1) Apitco Limited, 2) Choksi Laboratories Limited and 3) WAPCOS Limited (Seg.) should be excluded from the final 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
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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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 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
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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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.
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
Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd.,
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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.
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 is liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/- JUDGE
NC.