THE PR COMMISSIONER OF INCOME TAX vs. M/S ARM EMBEDDED TECHNOLOGIES PVT LTD

THE PR.COMMISSIONER OF INCOME TAX, 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BANGALORE - 560 095.

THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), PRESENT ADDRESS, CIRCLE-1(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE - 560 048.

This appeal has been ADMITTED on 05.06.2018 to consider the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal erred in directing the TPO to exclude comparables such as Kals Information Systems, Accel Transmatics, Infosys Technologies Ltd, Tata Elxsi Ltd, by relying on its earlier decisions which have not reached finality and moreover the TPO has rightly chosen the said comparables considering the functions and as the said comparables satisfies all the required tests?

Whether on the facts and in the circumstances of the case, the Tribunal erred in directing the TPO to exclude comparables having RPT transactions of more than 15% ignoring the TPO’s observation that the basis for determining the threshold limit for eliminating companies having RPT transactions more than 25% was through the determination of Indian Companies with

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: 17. The ld. counsel for the assessee submitted that 5 comparables at Sl. Nos. 4,5,10,11 & 16 of the final set of comparables selected by the TPO may be rejected as being functionally dissimilar on the basis of decision of the Tribunal in the case of Cypress Semiconductor India P. Ltd. v. DCIT, ITA No.1167/Bang/2010 dated 27.03.2015. The relevant paragraphs of the Tribunal’s order are as follows:- xxxx xxxx

Respectfully following the coordinate Bench decision of this Tribunal in the case of Cypress Semiconductor India P. Ltd. (supra), we direct that the 4 companies viz., Infosys Ltd., KALS Infosystems Ltd., Tata Elxsi (Seg.) and Accel Transmatic Ltd. being functionally dissimilar be excluded from the final list of comparables selected by the TPO.” Regarding substantial question of law No.2: “22. The ld. counsel for the assessee next submitted that 3 comparables at Sl.No. 1, 2 & 18 of the final comparables of the TPO having more than 15% Related Party Transactions may be rejected as held in 24/7 Customer.com v. DCIT (ITA No.227/Bang/2010) and Cypress Semiconductor India Pl. Ltd. (supra). The observations of the Tribunal at paras 22 & 23 in the case of Cypress Semiconductor India Pvt. Ltd. (supra) in this regard are as follows:- xxxx xxxx

Respectfully following the decision of the coordinate Bench of this Tribunal in the case of Cypress Semiconductor India P. Ltd. (supra), we direct that the companies viz., Aztech Software Ltd. and Megasoft Ltd. wherein the related party transactions exceed 15% be excluded from the list of comparables chosen by the TPO.”

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

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. 8. The appeals filed by the Revenue are therefore dismissed with no order as to costs.” 5. 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.