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1/8 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.224/2017 BETWEEN:
PR. COMMISSIONER OF INCOME TAX-7 BMTC COMPLEX, KORMANGALA BANGALORE.
INCOME TAX OFFICER WARD-7(1)(4), BANGALORE.
…APPELLANTS (By Mr. SANMATHI E.I. ADV.)
AND:
M/S. ZYME SOLUTIONS P. LTD. No.38/1/23, VENKATAMMA COMPLEX SOUTH END ROAD, BASAVANAGUDI BANGALORE-560004 PAN: AAACZ2465R.
…RESPONDENT
(By Mr. NARENDRA KUMR J. JAIN, ADV.)
THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULTED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APELLATE ORDER DATED 03/06/2016 PASSED
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BY THE ITAT, ‘B’ BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE’S CASE, IN APPEAL PROCEEDINGS IN MP No.36/BANG/2016 IN IT(TP)A No.465/BANG/2015 FOR A.Y. 2010-11 ANNEXURE-A & GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Sanmathi E.I. Adv. for Appellants - Revenue Mr. Narendra Kumar J. Jain, Adv. for Respondent - Assessee
The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly one substantial question of law arising from the order of the ITAT, Bangalore Bench ‘B’, Bangalore, dated 03.06.2016 passed in Misc.Petition No.36/Bang/2016 in IT(TP)A No.465/Bang/2015 (M/s.Zyme Solutions P. Ltd., vs. Income-tax Officer) for A.Y.2010-11.
This appeal has been admitted on 17.01.2018 to consider the following substantial question of law
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framed by the learned counsel for the Appellants- Revenue:- “Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to give working capital adjustment on actual figures computed from the final list of comparables without appreciating that Rule 10B of IT Rules, 1962 provides for making reasonable accurate adjustments to the uncontrolled comparable transaction provided if the assessee is able to demonstrate that the difference in its working capital has affected the profit margin and if such adjustment could be computed in a reasonable accurate manner but the assessee in the above case has not been able to demonstrate that the working capital difference had impacted the profits and whether comparable companies have financed their working capital by own funds or borrowed funds?”.
In so far as the aforesaid substantial question of law raised in the present appeal is concerned, the learned counsel for the Revenue Mr.E.I.Sanmathi submitted that the learned ITAT in its Order dated
Date of Judgment 24-07-2018 I.T.A.No.224/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Zyme Solutions P. Ltd.
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03/06/2016 passed in M.P.No.36/Bang/2016 (IT(TP)A No.465/Bang/2015) has given the findings, the relevant portion of which is quoted below for ready reference:-
“ 4. We have heard the rival contentions. Ground taken by the assessee with regard to the working capital adjustment is reproduced hereunder
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Observation of the Tribunal in relation to the above ground appearing in order is reproduced hereunder:
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It is clear from the above that Tribunal had allowed the ground of the assessee, though second part of the ground was not specifically dealt with. Not dealing with the second part of the ground regarding incorrect computation of working capital is a mistake apparent on record. There can be no dispute that working capital adjustment has to be calculated from the final list of comparables and cannot be restricted. We therefore modify para 43 of the order and direct
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the AO/TPO to give working capital adjustment based on actual figures computed from the final list of comparables.
In the result, the MP filed by the assessee is allowed”.
However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. Vs. M/s. Softbrands India Pvt. Ltd.,) has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable. The relevant portion of the said 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
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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
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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.”
Having heard the learned counsels for the parties, we are therefore of the opinion that no substantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue is
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liable to be dismissed and it is dismissed accordingly. No costs.
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