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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 19TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.535/2015
BETWEEN:
PR. COMMISSIONER OF INCOME-TAX, C.R.BUILDING, QUEENS ROAD, BANGALORE - 560 001.
DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -11(5), BANGALORE.
…APPELLANTS
(By Mr. E.I. SANMATHI, ADV.)
AND:
M/S. KODIAK NETWORKS INDIA PRIVATE LTD., NO.410, 4TH FLOOR, ‘PRESTIGE SIGMA’, VITTAL MALLYA ROAD, BANGALORE-560 001. PAN: AAACK 0978J.
…RESPONDENT (By Mr. S SHARATH, ADV. for Mr. CHYTHANYA K.K, ADV.,)
THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO DECIDE THE FOREGOING
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd.,
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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 10/04/2015 PASSED BY THE ITAT, ‘C’ BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO.I.T. (TP)A NO. 1348/BANG/2014 FOR ASSEMENT YEAR 2006-07 ANNEXURE A.
THIS I.T.A. COMING ON FOR ORDERS, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. E.I.Sanmathi, Adv. for Appellants-Revenue Mr. S Sharath, Adv. for Mr. Chythanya K.K, Adv. for Respondent-Assessee
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, ‘C’ Bench, Bangalore (for short ‘Tribunal’) dated 10.04.2015 passed in I.T(TP)A No.1348/Bang/2014 for the A.Y.2006-07.
This appeal has been ADMITTED on 11.03.2016 to consider the following substantial questions of law framed by the learned counsel for the Appellants-Revenue:
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd.,
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“(1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the comparables, namely, (a) Kals Information Systems Ltd. (c) Lucid Software Ltd (b) Accel Transactions Ltd (d) Tata Elsxi Ltd (e) Megasoft Ltd, cannot be taken as comparable, being functionally different when it satisfies all the qualitative and quantitative filters adopted by the TPO? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in super-imposing the decision of other Benches of Tribunal in the case of the assessee to reject these comparables when selection of comparables in a case depends in transfer pricing on assessee specific FAR analysis? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in relying on the decision of other Benches of Tribunal, ought to have decided the comparability of these companies on the basis of specific facts brought on record by the TPO in the case of the assessee?”
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private 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: Regarding substantial question of law Nos.1 to 3:
“16. We have considered the rival submissions. In the light of the submissions made by the ld. counsel for the assessee, we are of the view that it is no longer necessary for us to go into question regarding affording the assessee opportunity to cross-examine all the persons who have information in response to TPO's notice u/s. 133(6)of the Act. We are also of the view that 4 out of the 5 comparable companies pointed out by the ld. counsel for the assessee before us, have already been held to be not comparable with a company engaged in the provision of software development services such as the assessee. Following were the relevant observations of the Tribunal in this regard (in respect of comparable companies viz., Kals Information Systems Ltd., Accel Transmatics Ltd., Lucid Software Ltd. and Tata Elxsi Ltd.) in the case of M/S. Sys Arris Software Pvt. Ltd. VS. DCIT
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd.,
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IT(TP)A.No.1621/Bang/2012 dated 16.5.2014 for AY 06-07:- xxxx
KALS Information Systems Ltd.
xxxx
Accel Transmatic Ltd.
xxxx
Tata Elxsi Limited
xxxx
In view of the aforesaid decisions, we are of the view that the following companies viz., (1) KALS Infosystems Ltd. (2) Tata Elxsi Ltd. (3) Lucid Software Ltd. , and (4) Accel Transmatics Ltd., have to be excluded from the final list of 14 comparables chosen by the TPO for determining the ALP.”
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.
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd.,
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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 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
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd.,
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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 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.
Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd.,
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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.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/-
JUDGE