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1/10 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.368/2017
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(3), PRESENT ADDRESS, CIRCLE-3(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095.
...APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND : M/s. FAIR ISAAC INDIA SOFTWARE PVT.LTD. 135, OLD AIRPORT ROAD, KODIHALLY, BENGALURU-560017. PAN: AABCF 7670G.
…RESPONDENT
(RESPONDENT SERVED, BUT UNREPRESENTED)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 08.09.2016 PASSED IN IT(TP)A No.24/BANG/2014, FOR
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software Pvt. Ltd.,
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THE ASSESSMENT YEAR - 2009-2010, 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 IT(TP)A No.24/BANG/2014 DATED: 08.09.2016, ANNEXURE-D, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 1(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.
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 ‘A’, Bangalore, in IT[TP]A No.24/Bang/2014 dated 08.09.2016, relating to the Assessment Year 2009-10.
The appeal has been admitted on 17.01.2018 to consider the following substantial questions of law formulated in the appeal memorandum:
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software Pvt. Ltd.,
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“1. Whether in the facts and circumstances of the case, the Tribunal is right in law in excluding the comparables, namely, Kals Information Systems, Bodhtree Consulting Ltd., and Tata Elxsi Ltd on the ground of functional dissimilarity by following its earlier order which has not reached finality and even when the TPO had chosen the comparables as it satisfies qualitative and quantitative filters applied by the TPO and Tribunal ought to have decided the comparability of these companies on the basis of specific facts brought out on record by the TPO in the case of the assessee?
Whether in the facts and circumstances of the case, the Tribunal is right in law in excluding comparables namely, M/s. Sasken Communication Technologies Ltd., Persistent Systems Ltd., Larsen & Tourbo Infotech Ltd., and Infosys Ltd., on the basis of h igh turnover by following its earlier order in case of M/s. Yodlee Infotech Ltd., and Unisys India Pvt. Ltd., which has not reached finality and TPO had rightly chosen the same after applying required tests and without appreciating that the sales turnover of the company does not have any impact on the margins earned and there is no
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software Pvt. Ltd.,
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correlation between size of the company and the profit margins reported when the said companies have satisfied all the qualitative and quantitative filters?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law No.1: “[1] Kals Information Systems Ltd.
“xxxxx”
11.1.3 Following the decision of the co-ordinate Bench of the Tribunal in the case of M/s. CISCO Systems [India] Pvt. Ltd., [supra], we direct that Kals Informations Systems Ltd., be excluded from the final list of comparables on the functional comparability.
[2] Bodhtree Consulting Ltd.
“xxxxx”
11.2.2 In view of the co-ordinate Bench of the Tribunal in the case of M/s. CISCO
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software Pvt. Ltd.,
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Systems [India] Pvt. Ltd., [supra], we direct Bodhtree Consulting Ltd., to be excluded from the list of comparables.
“xxxxx”
[3] Tata Elxsi Ltd.
“xxxxx”
11.3.4 In view of the decision of the co-ordinate Bench of this Tribunal in the case of M/s. CISCO Systems [India] Pvt. Ltd., [supra], we direct that Tata Elxsi Ltd., be excluded from the final list of TPO’s comparables.”
Regarding Substantial Question of Law No.2: “12. In support of its contentions for rejection of the comparables viz., Sasken Communication Technologies Ltd., Persistent Systems Ltd., Larsen Toubro Infotech Ltd., and Infosys Ltd., reliance was placed on the decision of this Tribunal in the case of Yodlee Infotech Ltd., v. ITO, IT[TP]A No.108/Bang/2014 dated 12.12.2014, M/s. Unisys India Pvt. Ltd., v. DCIT in IT[TP]A No.67/Bang/2015 dated 30.09.2015 and M/s. CISCO Systems [India] Pvt. Ltd., [supra].
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software Pvt. Ltd.,
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12.1 We find that in the case of Yodlee Infotech Ltd., [supra], this Tribunal at para 20 of its order has held as under:-
“xxxxx”
12.2 Further, this Tribunal in the case of M/s. Unisys India Pvt. Ltd., [supra] with regard to the comparables viz., Infosys Ltd., and Persistent Systems Ltd., on the functional comparability has held at para 32 and 36 as follows:-
“xxxxx”
12.3 Following the decisions of the Tribunal in the case of Yodlee Infotech Ltd., [supra] and Unisys India Pvt. Ltd., [supra], we direct that Sasken Communication Technologies Ltd., [seg], Persistent Systems Ltd., Larsen & Toubro Infotech Ltd., and Infosys Ltd., be excluded from the final list of TPO’s comparables.”
However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software 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
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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.
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 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software 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.
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-
Date of Judgment 06-08-2018, ITA No.368/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Fair Isaac India Software Pvt. Ltd.,
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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.