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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 30TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.457/2016
BETWEEN :
THE Pr. COMMISSIONER OF INCOME-TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU 560 095.
THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(1), PRESENT ADDRES CIRCLE-1(1)(1), 2nd FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 048.
...APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND :
M/s ARM EMBEDDED TECHNOLOGIES PVT. LTD., BAGMANE WORLD TECHNOLOGY CENTER-SEZ, CITRINE BLOCK, 5TH & 6TH FLOOR MARATHAHALLI OUTER RING ROAD, DODDANAKUNDI VILALGE, MAHADEVAPURA,
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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BENGALURU-560 048. PAN:AAECA 1582E
…RESPONDENT
(BY SRI SANDEEP HUILGOL, ADV. FOR SRI T.SURYANARAYANA, ADV.)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 01/12/2015 PASSED IN ITA NO.1161/BANG/2011, FOR THE ASSESSMENT YEAR 2007-2008 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.1161/BANG/2011 DATED 01/12/2015 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING 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. Mr. Sandeep Huilgol, Adv. for Mr. T.Suryanarayana, Adv. 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, ‘A’ Bench, Bangalore, in IT [TP] A No.1161/Bang/2011 dated 1.12.2015 relating to the Assessment Year 2007-08.
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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This Appeal has been admitted on 19.04.2018 to consider the following substantial questions of law: “1.. Whether on the facts and in the circumstances of the case, the Tribunal erred in directing the TPO to exclude comparables such as KALS Information Systems, Avani Cimcon Technologies, Infosys Technologies Ltd., Celestial Labs Ltd., M/s Lucid Software Ltd., Tata Elxsi Ltd., Wipro Ltd., Ishir Infotech Ltd., Megasoft Ltd. by relying on its earlier decisions which have not reached finality and moreover the TPO has rightly chosen the said comparables considering the functions and as the said comparables satisfies all the required tests?
Whether on the facts and in the circumstances of the case, the Tribunal erred in directing the TPO to exclude comparables having RPT transactions of more than 15% ignoring to TPO’s observation that the basis for determining the threshold limit for eliminating companies having RPT transactions more than 25% was through the determination of Indian Companies with foreign shareholding greater than 26% and therefore had its basis in the provisions of the I.T.Act?”
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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The learned Tribunal, after discussing the rival contentions of both the Appellant-Revenue and Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law No.1: “ 18. Respectfully following the coordinate Bench decision of this Tribunal in the case of Cypress Semiconductor India P. Ltd (supra), we direct that the 4 companies viz., Infosys Ltd, KALS infosystems ltd., Tata Elxsi (seg), and Accel Transmatics Ltd., being functionally dissimilar be excluded from the final list of comparables selected by the TPO. 19. With respect to Lucid Software Ltd., since the assessee has raised additional ground before the Tribunal that this company is functionally dissimilar, following the decision in case of M/s. Quark Systems India (P) Ltd., (2011) 62 DTR 0182 we set aside the issue to the file of the Assessing Office to examine whether Lucid Software Ltd. is functionally dissimilar.
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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As regards the 3 companies viz., Accel Transmatics Ltd., Avani Cincom Technologies Ltd. and Celestial Labs, this Tribunal in the case of NXP Semiconductors India P. Ltd. (supra) has held as follows: xxxxxx 55. As regards Accel Transmatics Ltd. for A.Y. 2006-07 we have already held in paras 17 & 18 hereinabove that this company is to be excluded as a comparable. however, for the present AY 2007-08, since with regard to comparability of Accel Transmatics Ltd., as functionally dissimilar, the assessee has raised additional ground before the Tribunal, we therefore set aside the issue to the file of the Assessing Officer to examine whether it is functionally dissimilar, following the decision in case of M/s Quark Systems India (P) Ltd., (2011) 62f DTR 0182. 56. Respectfully following the decision of the Tribunal in the case of NXP Semiconductors India Pvt.
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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Ltd. (supra), we direct the AP/TPO to exclude the 2 companies viz., Avani Cincom Technologies Ltd., and Celestial Labs. from the final list of TPO’s comparable companies for the purpose of determining ALP.
Regarding Substantial Question of Law No.2: 23. Respectfully following the decision of the coordinate Bench of this Tribunal in the case of Cypress Semiconductor India P. Ltd (supra), we direct that the companies viz., Aztech Software Ltd. and Megasoft Ltd., wherein the related party transaction exceed 15% be excluded from the list of comparables chosen by the TPO. 24. As regards Geometric Solutions Ltd., since the assessee has raised additional ground before the Tribunal, we set aside the issue to the file of the Assessing Officer to examine whether Geometric Solutions Ltd. exceeds 15% RPT, following the decision in case of Cypress Semiconductor India P. Ltd. (supra) /
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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M/s Quark Systems India (P) Ltd., (2011) 62 DTR 0182.”
For the similar reasons, the Tribunal has excluded other comparables also.
The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 (Prl. Commissioner of Income Tax & Anr. –v- M/s Softbrands India Pvt. Ltd.,) wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the 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
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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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 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
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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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 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.”
Date of Judgment 30-07-2018, ITA No.457/2016 The Pr. Commissioner of Income Tax & another Vs. M/s ARM Embedded Technologies Pvt. Ltd.
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In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
Hence, the Appeal filed by the Appellant-Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
ln.