Loading judgment…
No AI summary yet for this case.
1/11 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 24TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.291/2016 BETWEEN :
PR. COMMISSIONER OF INCOME TAX-4 BMTC COMPLEX, KORAMANGALA BANGALORE
THE INCOME TAX OFFICER CIRCLE -12 (1) BANGALORE
... APPELLANTS
(BY SRI.SANMATHI E I, ADV.)
AND:
M/S MISYS SOFTWARE SOLUTIONS (INDIA) PVT. LTD. EAGLE RIDGE EMBASSY GOLF LINKS BUSINESS PARK OFF INTERMEDIATE RING ROAD DOMLUR, BANGALORE - 560 071 PAN:AAACK9067G
... 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:23/09/2015 PASSED IN IT(TP)A NO.1425/BANG/2010, FOR THE ASSESSMENT YEAR 2006-2007 ANNEXURE - A. PRAYING TO:
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
2/11
(A) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED:23/09/2015 PASSED BY THE ITAT, 'B' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO.IT(TP)A NO.1425/BANG/2010 FOR ASSESSMENT YEAR 2006-2007 ANNEXURE - A, AS SOUGHT FOR IN THIS APPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.I.Sanmathi, 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, Bangalore Bench ‘B’, Bangalore in IT[TP]A No.1425/Bang/2010 dated 23.09.2015, relating to the Assessment Year 2006-07.
This Appeal has been admitted on 03.10.2017 to consider the following substantial questions of law.
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
3/11
“1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the functions of taxpayer are not comparable to the functions of M/s.Kals Information Systems Ltd., Accel Transmatics Ltd and Tata Elxsi Ltd.,?
2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in directing the exclusion of comparables companies having RPT transactions more than 15% ignoring the 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 that 26% and therefore had its basis in the provisions of the Act and accounting standards AS-18?”
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
4/11
Regarding Substantial Question No.1: 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
“4.8 We have heard the rival contentions and perused and carefully considered the material on record including the impugned order of assessment for Assessment Year 2006-07, the directions of the DRP, the submissions put forth by both the learned Authorised Representative for the assessee and the learned Departmental Representative for Revenue and the judicial decisions cited and placed reliance upon. We now proceed to consider the comparability of individual companies objected to be the assessee.
Companies whose exclusion from TPO’s list of comparables is sought by the assessee. 5.0 Out of the 20 comparable companies finally selected by the TPO, the assessee seeks exclusion of the following companies:- i) Aztec Software Ltd. ii) Geometric Software Ltd. (Seg,) iii) Infosys Technologies Ltd.
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
5/11
iv) KALS Info-Systems Ltd. v) Tata Elxsi Ltd. (Seg.) vi) Lucid Software Ltd. vii) Accel Telematics Ltd. viii) Megasoft Ltd.
In support of its contentions for exclusion of the above 8 companies from the list of comparables to the assessee, the learned Authorised Representative for the assessee relied on various Tribunal decisions, including that of the Delhi High Court in the case of Agnity India Technologies Ltd., Logica Pvt. Ltd. (ITA No.1129/Bang/2011), Ariba Technologies India Pvt. Ltd. in IT(TP)A No.1179/Bang/2014 for Assessment Year 2006-07 and Huawei Technologies India Pvt. Ltd. in IT(TP)A No.1338/Bang/2010) for Assessment Year 2006- 07.
6.0 1) Aztec Software Ltd., 2) Geometric Software Ltd., 3) Mega Soft Ltd.
6.1 Aztec Software Ltd. - This company was selected as a comparable by the assessee itself in its T.P. Study. The assessee, however,
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
6/11
had objected to the inclusion of this company in the final set of comparables before the DRP on the ground that it had related party transactions of 17.78%, which is above the list of 15% specified as the yardstick by different co-ordinate benches of this Tribunal in various cases. In support of the above contention, for exclusion of Aztec Software Ltd., the learned Authorised Representative of the assessee placed reliance on the decision of the co-ordinate bench of this Tribunal in this case of Huawei Technologies India Pvt. Ltd. for ‘Assessment Year 2006-07 (supra).
6.2 Geometric Software Ltd. (Seg.) – The assessee objected to the inclusion of this company in the final set of comparables before the authorities below on the ground that this company had RPT of 19.34%, which is above the limit of 15% specified as the yardstick by different co-ordinate benches of this Tribunal in various cases. In support of the above contention, for exclusion of Geometric Software Ltd., the learned Authorised Representative for the assessee placed reliance on the decision of a co- ordinate bench of this Tribunal in the case of
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
7/11
Huawei Technologies India Pvt. Ltd. for Assessment Year 2006-07 (supra).
6.3 Megasoft Ltd. – This company was chosen as a comparable by the assessee itself in its T.P. Study. The assessee, however, objected to the inclusion of this company in the final list of comparables before the DRP on the gound that the RPT in this case in 17.08% which is above the limit of 15% specified as the yardstick by different co-ordinate benches of this Tribunal in various cases. In support of its contention, for exclusion of this company from the list of comparables, the learned Authorised Representative of the assessee placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of Huawei Technologies India Pvt. Ltd. for Assessment Year 2006-07 (supra).”
Regarding Substantial Question No.2:
“6.5.1. We have heard the rival contentions and have perused and carefully considered the material on record, including the judicial decision relied on by the assessee. We find that the co-ordinate bench of this Tribunal, in the case of Huawei
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
8/11
Technologies India Pvt. Ltd. for Assessment Year 2006-07 (supra) has excluded the above three companies from the set of comparables on grounds of having RPT in excess of 15% and at paras 16 & 17 of its order has held as under:- xxxxxxxxxx
6.5.2 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of Huawei Technologies India Pvt. Ltd. for Assessment Year 2006-07 (supra), we hold that these three companies, namely Aztec Software Ltd., Geometric Software Ltd. and Megasoft Ltd. shall be excluded from the set of comparables for the software development services segment of the assessee.”
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.
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
9/11
Nos.536/2015 c/w 537/2015 dated 25.06.2018 [Prl. Commissioner of Income Tax & Anr. V/s. 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 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
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
10/11
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 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
Date of Judgment 24-07-2018, ITA No.291/2016 Pr. Commissioner of Income Tax-4 & another Vs. M/s. Misys Software Solutions (India) Pvt. Ltd.
11/11
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.”
In the circumstances, having heard the learned Counsel appearing for both the parties, 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 Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
AN/-