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1/9 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.682/2015
BETWEEN : 1. Pr. COMMISSIONER OF INCOME TAX-VI CENTRAL REVENUE BUILDINGS QUEENS ROAD BANGALORE – 560001.
THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 12(3), BANGALORE.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND : M/s. SONUS NETWORKS INDIA PRIVATE LIMITED, CRESCENT-IV, 12TH FLOOR, PRESTIGE SHANTINIKETAN BUSINESS PRECINCT, WHITEFIELD ROAD, BANGALORE-560 048 PAN:AALCS5706P.
…RESPONDENT
(BY SRI ANKUR PAI, ADV. FOR SRI K.R.VASUDEVAN, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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DATED 14/05/2015, PASSED IN IT(TP)A No.1567/BANG/2012, FOR THE ASSESSMENT YEAR 2008-2009, ANNEXURE-A, PRAYING TO: [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: (b) SET ASIDE THE APPELLATE ORDERS DATED: 14/05/2015 THE ITAT, 'B' BENCH, BENGALURU IN IT(TP)A No.1567/BANG/2012 FOR ASSESSMENT YEAR 2008-09, ANNEXURE-A 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. Ankur Pai, Adv. for Mr. K.R.Vasudevan, 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 ‘B’, Bangalore, in IT[TP]A No.1567/Bang/2012 dated 14.05.2015, relating to the Assessment Year 2008-09.
The appeal has been admitted on 01.04.2016 to consider the following substantial questions of law:
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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(1) “In the facts and circumstances of the case, the Tribunal has erred in holding that few companies are functionally different from the assessee company when it satisfies all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than the TPO, but has not tested other comparables against the narrower functionality filter applied by it and ought to remanded the matter to the TPO for a fresh TP study after taking a new view on functional matrix which is narrower than the functionality matrix originally used by the TPO?”
(2) “Whether on the facts and in the circumstances of the case, the Tribunal has erred in directing the exclusion of comparable companies having RPT transactions more than 15% without asking the TPO to make a fresh TP study, since a quantitative filter, namely, the RPT filter, has been changed. Changing filter criteria changes the search process altogether, and mandates a fresh TP study using updated filters?”
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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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: “10.4 We have heard both parties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. We also find that the coordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007- 08 (supra) and in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) have held that this company was developing software products and was not purely or mainly a software service provider. Apart from relying of the above cited decisions of coordinate benches of the Tribunal
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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(supra), the assessee has also brought on record evidence from various portions of the company’s Annual Report to establish that this company is functionally dis-similar and different form the assessee and that since the findings rendered in the decisions of the coordinate benches of the Tribunal for Assessment Year 2007-08 (cited supra) are applicable for this year i.e. Assessment Year 2008-09 also, this company ought to be excluded from the list of comparables. In this view of the matter, we hold that this company i.e. KALS Information Systems Ltd., is to be omitted form the list of comparable companies. It is ordered accordingly.”
Regarding Substantial Question of Law No.2: “19.3 We have heard both parties and perused and carefully considered the material on record. We find that the coordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 has excluded this company from the set of comparables for the reason that RPT is in excess of 15% following the decision of another bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2011. As the facts for this year are
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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similar and material on record also indicates that RPT is 18.3%, following the afore cited decisions of the co-ordinate benches (supra), we hold that this company is to be omitted from the list of comparables to the assessee in the case on hand.”
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
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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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.
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
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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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.
The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
Date of Judgment 20-07-2018, ITA No.682/2015 Pr. Commissioner of Income Tax-VI & Another Vs. M/s. Sonus Networks India Private Limited.
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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 Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
NC.