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1/12 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 20TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.663/2015
BETWEEN:
THE COMMISSIONER OF INCOME-TAX, 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BANGALORE - 560 095.
THE INCOME-TAX OFFICER, WARD-11(1), 2ND FLOOR, BMTC BUILDING. 80 FEET ROAD, KORMANAGALA, BANGALORE - 560 095.
…APPELLANTS
(By Mr. K.V. ARAVIND, ADV.)
AND:
M/S. AT & T GLOBAL BUSINESS SERVICES INDIA PVT. LTD., BLOCK A, GROUND FLOOR, SALARPURIA, SOFTZONE, BELLANDUR POST, BANGALORE. PAN: AACCA 9362N
…RESPONDENT
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN ITA NO. 1604/BANG/2012 DATED 11/06/2015 ANNEXURE-C CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(1), BENGALURU.
THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. K.V.Aravind, Adv. for Appellants-Revenue
The appellants-Revenue have filed this appeal u/s. 260A of the Income Tax Act, 1961 (for short ‘Act’) raising purportedly certain substantial questions of law arising from the order of the Income Tax Appellate Tribunal, Bangalore Bench ‘A’ (for short ‘Tribunal’) dated 11.06.2015 passed in I.T(TP)A No.1604/Bang/2012 for the A.Y.2008-09.
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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This appeal has been ADMITTED on 23.06.2016 to consider the following substantial questions of law framed by the learned counsel for the Appellants-Revenue:
“1. Whether, the Tribunal, on the facts and in the circumstances of the case was right in excluding i) Celestial Biolabs Ltd.; ii) Infosys Technologies Ltd.; iii) Tata Elxsi Ltd.; iv) Wipro Ltd.; v) Kals Information Systems Ltd.; vi) Persistent Systems Ltd.; vii) Avani Cincom Technologies Ltd.; viii) Thirdware Solutions Ltd.; ix) Lucid Software Ltd.; x) Quintegra Solutions Ltd.; xi) E-zest Solutions Ltd. and xii) Softsol India Ltd.; from the list of comparables, holding that they are functionally different, without appreciating that the comparables satisfy all the qualitative and quantitative filters applied by the TPO and that selection of comparables in a case depends on assessee specific FAR analysis?
Whether, the Tribunal, on the facts and in the circumstances of the case was right in excluding i) Celestial Biolabs Ltd.; ii) Infosys Technologies Ltd.; iii) Tata Elxsi Ltd.; iv) Wipro Ltd.; v) Kals Information Systems Ltd.; vi)
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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Persistent Systems Ltd.; vii) Avani Cincom Technologies Ltd.; viii) Thirdware Solutions Ltd.; ix) Lucid Software Ltd.; x) Quintegra Solutions Ltd.; xi) E-zest Solutions Ltd. and xii) Softsol India Ltd.; from the list of comparables, by relying on various decisions of Tribunal Benches and not deciding the selection of comparables on the basis of specific facts brought on record by the TPO?
Whether, the Tribunal, on the facts and in the circumstances of the case was right in excluding i) M/s.Avani Cimcon Technologies Ltd., ii) M/s.Quintegra Solutions Ltd., iii) Thirdware Solutions Ltd., and iv) Lucid Software Ltd., from the list of comparables, by disregarding the position of law that there could be differences between the enterprises compared under TNMM method that are not likely to materially affect the price or cost charged or the profits accruing to such enterprises?
Whether, the Tribunal, on the facts and in the circumstances of the case was right in excluding i) M/s.Avani Cimcon Technologies Ltd., ii) M/s.Quintegra Solutions Ltd., iii) Thirdware Solutions Ltd., and iv) Lucid Software Ltd., from the list of comparables, by concluding that the companies selected by the TPO are not
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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comparable to the assessee, overlooking the fact that reasonably accurate adjustments could be made to eliminate the material effects of the differences between them?
Whether the Tribunal was justified in fixing the RPT filter at 15% of total revenue and excluding Softsol India Ltd., as comparable, by superimposing the decisions of Tribunal in other cases, including those of other benches of Tribunal, without going into specific facts in the case of the assessee and without adducing the basis for arriving at the 15% cut off for RPT filter, in the case of assessee?
Whether, on the facts and circumstances of the case, the Tribunal was correct in not appreciating the facts that if any filter or criteria applied by the assessee for search of comparables is accepted or any filter or criteria applied by the TPO is relaxed, the entire accept/reject matrix changes resulting in a new comparable set including those companies which are neither taken by the assessee nor by the TPO in his final comparable set and which may not be finding place in the TP order u/s.92CA?”
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
“4. Having regard to the rival contentions and the material on record, we find that the assessee is challenging the following companies as comparables:
i) Celestial Biolabs Ltd. ii) Infosys Technologies Ltd. iii) Tata Elxsi Ltd. iv) Wipro Ltd. v) Kals Information Systems Ltd. vi) Persistent Systems Ltd. vii) Avani Cimcon Technologies Ltd. viii) Thirdware Solutions Ltd. ix) Lucid Software Ltd. x) Quintegra Solutions Ltd. xi) E-Zest Solutions Ltd. xii) Softsol India Ltd.
All these comparables challenged by the assessee were also taken as comparables in the case of 3DPLM Software Solutions Ltd., and this Tribunal has held these companies to be
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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functionally dissimilar with the said company and has directed them to be excluded from the list of comparables. In order to apply the said decision to the case before us, it is necessary to examine whether the nature of services rendered by both the companies under the respective international transactions are similar. The assessee herein is the subsidiary of VSi Services Holdings Pvt. Ltd., Mauritius and is engaged in providing software support solutions to VSI group companies. The international transaction which has been considered for ALP adjustment is software support or development services. In the case of 3DPLM also, the international transaction considered for ALP adjustment is in respect of software development services and the relevant assessment year is 2008-09. Therefore, in our opinion, the decision of the Tribunal in the case of 3DPLM Software Solutions Ltd., is applicable to the case before us. Therefore the relevant paragraphs of the above referred decision are reproduced hereunder for ready reference:
i) Celestial Biolabs Ltd.
xxxx ii) Infosys Technologies Ltd.
xxxx
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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iii) Tata Elxsi Ltd.
xxxx
iv) Wipro Ltd.
xxxx
v) Kals Information Systems Ltd.
xxxx
vi) Persistent Systems Ltd.
xxxx
vii) Avani Cimcon Technologies Ltd.
xxxx
viii) Thirdware Solutions Ltd.
xxxx
ix) Lucid Software Ltd.
xxxx
x) Quintegra Solutions Ltd.
xxxx
xi) E-Zest Solutions Ltd.
xxxx
xii) Softsol India Ltd. xxxx
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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Respectfully following the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd.,(cited supra) on similar set of facts, we direct the AO to exclude these companies from the list of comparables and re-compute the ALP in accordance with law.”
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
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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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 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
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd.,
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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.”
In the circumstances, having heard the learned Counsel appearing for the appellants-Revenue, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services 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.
Copy of this order be sent to the Respondent- assessee forthwith.
Sd/- JUDGE
Sd/-
JUDGE