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1/10 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.390/2015
BETWEEN : 1. Pr. COMMISSIONER OF INCOME TAX C.R. BUILDINGS, QUEENS ROAD, BANGALORE 560001.
DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12-(2), BANGALORE.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND : M/s. NXP SEMI CONDUCTORS INDIA PVT. LTD., I.T. PARK, NAGAWARA VILLAGE KASABA HOBLI, BANGALORE 560045 PAN: AADCP 9454H.
…RESPONDENT
(BY SRI MALLAHARAO.K., ADV. FOR SRI NAGESWAR RAO, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 05/03/2015 PASSED IN IT(TP)A NO.1560/BANG/2012, FOR THE ASSESSMENT YEAR 2008-2009, ANNEXURE-A,
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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PRAYING TO: 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: 05/03/2015 PASSED BY THE ITAT, 'A' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. I.T(TP)A NO.1560/BANG/2012 FOR ASSESSMENT YEAR 2008-2009, 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. Mallaharao K., Adv. for Mr. Nageswar Rao, 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 ‘A’, Bangalore, in IT[TP]A No.1560/Bang/2012 dated 05.03.2015, relating to the Assessment Year 2008-09.
The appeal has been admitted on 12.02.2016 to consider the following substantial questions of law:
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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“1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the assessing authority/TPO to omit the companies such as Celestial Biolabs Ltd., KALS Information Systems Ltd, Infosys Technologies Ltd., Wipro Ltd., Tata Elxsi Ltd., E- Zest Solutions Ltd., Thirdware Solutions Ltd., Lucid Software Ltd., Persistent Systems Ltd., Quintegra Solutions Ltd., Softsol India Ltd., from final list of comparables as it is functionally different form the assessee, by relying on the decision of the co-ordinate bench of the Tribunal in the case of 3DLPM Software Solutions/Curram Software International Pvt. Ltd/Yodlee Infotech Pvt. Ltd., even when the TPO in the order has rightly selected a set of comparable companies to arrive at the average mean margin of the software development segment and thereby arriving at the TP adjustment to the ALP international transactions entered into by the assessee?
Whether on the facts and in the circumstances of the case, the Tribunal is right in law in remanding the matter to assessing authority to reconsider the comparables i.e., Indium Software, VMF Softech Ltd and KPIT
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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Cummins Infosystems Ltd., even when the same was not required?”
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: “10. Celestial Biolabs Ltd.
10.4.1 We have heard both parties and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. We find that a co-ordinate bench of the Tribunal in the case of M/s. 3DPLM software Solutions Ltd. (supra), for Assessment Year 2008-09 has held that this company be excluded from the list of comparables; holding as under at paras 9.4.1 and 9.4.2 of its order :-
xxxxx
10.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra), we direct the Assessing Officer / TPO to omit this
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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company from the final set of comparables as it is functionally different from the assessee in the case on hand, who is purely a provider of software development services.
KALS Information Systems Ltd.
11.4.1 We have heard both parties and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. We find that a co-ordinate bench of the Tribunal in the case of M/s. 3DPLM Software Solutions Ltd. (supra), for Assessment Year 2008-09 has excluded this company as a comparable, observing that it was developing software products and was not purely a software service provider and at para 10.4 thereof it was held as under :-
xxxxx
11.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra), we direct the Assessing Officer / TPO to omit this company from the final set of comparables as it is functionally different from the assessee in the case on hand, who is purely a software service provider.”
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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Regarding Substantial Question of Law No.2: “22.3 We have heard both the learned Authorised Representative and the learned Departmental Representative in the matter. From the material on record, we find that the TPO in his order under Section 92CA of the Act has not explained how these companies fail the filters adopted by him. In view of this being the position, the co-ordinate bench of this Tribunal in assessee's own case for Assessment Year 2007- 08 in IT(TP)A No.1174/Bang/2011 dt.14.11.2014 has remanded the issue to the file of the TPO for fresh examination in the cases of (i) Indium Software (India) Ltd. and (ii) VMF Software Ltd. The same reasoning applies for this year under consideration i.e. for Assessment Year 2008-09 also for these two companies (supra) and also for KPIT Cummins Infosystems Ltd. In this view of the matter, we deem it fit to restore the issue of the comparability of the above three companies back to the file of the TPO to examine the computation given by the assessee in this regard and to decide the issue afresh after affording the assessee adequate opportunity of being heard and to make submissions in the matter, which shall be duly considered before a decision is taken. It is ordered accordingly.”
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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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/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
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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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 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India 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.”
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.
Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd.,
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Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
NC.