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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.308/2017
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(2), PRESENT ADDRESS, 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095.
…APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND : M/s. BROADCOM INDIA RESEARCH PVT. LTD., CAMPUS 1A, 5TH FLOOR, RMZ ECOSPACE, BELLANDUR VILLAGE, VARTHUR HOBLI, BENGALURU-560103.
…RESPONDENT
(BY SRI SANDEEP HUILGOL, ADV. FOR SRI T.SURYANARAYANA, ADV.)
Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research 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 03/11/2016 PASSED IN ITA No.62/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010, ANNEXURE-E, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE IN IT(TP)A No.62/BANG/2014 DATED 03/11/2016, ANNEXURE-E AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(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. Aravind.K.V, Adv. for Appellants – Revenue. Mr. Sandeep Huilgol, Adv. for Mr. T.Suryanarayana, Adv. 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.62/Bang/2014 dated 03.11.2016, relating to the Assessment Year 2009-10.
The appeal has been admitted on 17.01.2018 to consider the following substantial
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questions of law formulated in the appeal memorandum:
“1. Whether in the facts and circumstances of the case, the Tribunal is right in law in excluding the comparables, namely, M/s. Bodhtree Consulting Ltd., Persistent Systems Ltd., Infosys Lte., and Larsen & Toubro Infotech 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 erred in excluding the comparables, namely, in not considering the ground raised by Revenue with respect to working capital adjustment by holding that the same is decided in appeal preferred by assessee even when the same was required to be adjudicated and Tribunal ought to have seen that assessee had not been able to demonstrate that
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the working capital differences had impacted its profits?”
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 Nos.1 & 2: “15. The ld counsel for the assessee relied on the decision of Infinera India Pvt. Ltd., in IT[TP]A No.977 & 1008/Bang/2014 for the asst. year 2009-10, wherein at pages 10 and 11 it has been held as under:
“xxxxx”
The ld counsel for the assessee submitted that Persistent Systems Ltd., Consulting Ltd., is dissimilar for the following reasons:
“xxxxx”
The ld counsel for the assessee relied on the decision of Infinera India Pvt. Ltd., in It[TP]A No.977 & 1008/Bang/2014 for the asst.
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year 2009-10, wherein at pages 15 and 16 it has been held as under:
“xxxxx”
The ld counsel for the assessee submitted that L & Tribunal Infotech is dissimilar for the following reasons:
“xxxxx”
The ld counsel for the assessee relied on the decision of Invensys Development Centre India Pvt. Ltd., in ITA No.383/Hyd/2014 for the asst. year 2009-10, wherein at para 10.3 it has been held as under:
“xxxxx”
The ld counsel for the assessee submitted that Infosys Ltd., is dissimilar for the following reasons:
“xxxxx”
The ld counsel for the assessee relied on the decision of Infinera India Pvt. Ltd., in It[TP]A No.977 & 1008/Bang/2014 for the asst. year 2009-10, wherein at pages 17 and 18 it has been held as under:
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“xxxxx”
We find that the DRP had erred in upholding inclusion of following additional comparable companies i.e., Bodhtree Consulting Ltd., Infosys Technologies Ltd., Persistent Systems Ltd., and Larsen & Turbo Infotech Ltd. We direct the TPO to exclude the same as comparable since the above 4 companies are functionally dissimilar to that of assessee. ”
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:
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“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 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
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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 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
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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.