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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. Nos.603/2015 & 241-242/2016
BETWEEN:
WIPRO GE HEALTHCARE PRIVATE LIMITED (FOR THE MERGED ENTITY) GE MEDICAL SYSTEMS INDIA PRIVATE LIMITED 122, PART-I, EPIP, WHITEFIELD ROAD BENGALURU - 560 066.
... APPELLANT
(BY SRI.ANKUR PAI, ADV. FOR SRI.K R VASUDEVAN, ADV.)
AND:
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(3), BANGALORE
... RESPONDENT
(BY SRI.K V ARAVIND, ADV.)
THESE ITAS ARE FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED :30/06/2015 PASSED IN IT(TP)A NO.332, 333 & 337/BANG/2011, FOR THE ASSESSMENT YEAR 2004-05 & 2005-06 ANNEXURE - L. PRAYING TO: A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT. B) TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE HON'BLE TRIBUNAL IN IT(TP)A NO. 332, 333 & 337/BANG/2011 DATED:30/06/2015 ANNEXURE - L.
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THESE APPEALS COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. Ankur Pai, Adv. for Mr. K.R. Vasudevan, Adv., for Appellant–Assessee. Mr. K.V. Aravind, Adv., for Respondent-Revenue
These Appeals are filed by the Assessee purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, Bangalore in IT[TP]A Nos.332, 333 & 337/Bang/2011 dated 30.06.2015, relating to the Assessment Years 2004-05 and 2005-06 which are quoted below for ready reference. “1. Whether on facts and circumstances of this case, the Honourable Tribunal has erred in holding the Cost Plus Method as the Most Appropriate Method for the international transaction relating to the contract manufacturing activity of the appellant in light of the comparable companies chosen by the Learned TPO, considering that the functions of the comparable companies so chosen are not closely comparable
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to the Appellant’s contract manufacturing activities?
Whether on facts and circumstances of this case, the Honourable Tribunal has erred in not following the parameters prescribed under Rule 10B of the Income-tax Rules, 1961 while selecting and excluding the comparable companies?”
The learned Tribunal, after discussing the rival contentions of both the Appellant-Assessee and Respondent-Revenue, has returned findings as under: “10. As regards the basis comparability adopted by the TPO i.e. the product comparability as against the functional comparability adopted by the assessee is concerned, it is stated by the learned counsel for the assessee that the very same issue had arisen in the case of related party to the assessee i.e. M/s.GE BE Pvt. Ltd., in ITA No.850/Bang/2010 dated 06/12/2013. The learned Departmental Representative, however, supported the orders of the AO/TPO. 11. On perusal of the order of the Tribunal in the case of M/s.GE BE Pvt. Ltd. (cited supra)
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we find that M/s.GE BE Pvt. Ltd., is a contract manufacturer of medical equipment and that it also entered into similar international transactions with its AEs which are reproduced at para.4 of the order of the Tribunal. In the said case also, the assessee therein, had adopted CPM as the most appropriate method for determining the ALP and had adopted comparables involved in manufacture of automobile parts on contract basis. The TPO therein was of the view that since the assessee was a manufacture of medical equipment, the comparables adopted by the company are not comparable to the assessee. The TPO held that the assessee has not chosen comparables using an objective, consistent, logical and transparent basis. Thus, the TPO rejected the comparables chosen by the assessee and identified 4 comparable companies which were also in the business of manufacture of medical equipment. The assessee took a stand therein also that 'TNMM' may be adopted as the most appropriate method. The TPO therein rejected the assessee's contention and adopted CPM as the most appropriate method and proceeded to make transfer pricing adjustment. This issue had come up before the Tribunal for adjudication
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and the Tribunal, after considering the issue at length, has held at paras.32 to 53 as under: xxxxxxxxxxx 12. Subsequent thereto, as regards the assessee's contention that the appropriate adjustments to the margins of the comparable companies as regards advertisement and marketing expenses should be made, the Tribunal, at para.54, has held as under: xxxxxxxxxxx 13. We find that the CIT(A) has granted adjustment to marketing and selling, finances based on actual expenditure incurred by the comparable companies and also working capital adjustment which has resulted in the adjustment at 'nil'. As the order of the CIT(A) on this issue is in consonance with the decision of the Tribunal in the case of group of company cited supra, we see no reason to interfere with the order of the CIT(A). Therefore, the assessee's grounds of appeal against the transfer pricing adjustment of contract manufacturing is concerned, is rejected.”
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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 in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could
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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 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
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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 both the sides, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
Hence, the Appeals filed by the Appellant- Assessee are liable to be dismissed and are accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE AN/-