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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 18TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.397/2015
BETWEEN:
PR. COMMISSIONER OF INCOME-TAX, C.R.BUILDING, QUEENS ROAD, BANGALORE - 560 001.
DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -12(4), BANGALORE.
…APPELLANTS
(By Mr. E.I. SANMATHI, ADV.)
AND:
M/S. TEXTRON GLOBAL TECHNOLOGY CENTRE PRIVATE. LTD., FLOOR 2, BLOCK B (TOWER 2), SEZ CAMPUS, GLOBAL VILLAGE, RVCE POST, MYLASANDRA, OIT MYSORE ROAD, BANGALORE-560 059. PAN:AACCT 0118M.
…RESPONDENT (RESPONDENT SERVED)
Date of Judgment -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre Private Ltd.,
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THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO 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 AND SET ASIDE THE APPELLATE ORDER DATED 20/03/2015 PASSED BY THE ITAT, ‘B’ BENCH, BANGALORE, IN APPEAL PROCEEDINGS C.O.No.49/Bang/2012 in IT (TP)A NO. 29/BANG/2012 FOR ASSESSMENT YEAR 2005-06 ANNEXURE A.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. E.I.Sanmathi, Adv. for Appellants-Revenue
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, ‘B’ Bench, Bangalore (for short ‘Tribunal’) dated 20.03.2015 passed in appeal proceedings C.O.No.49/Bang/2012 in I.T(TP)A No.29/Bang/2012 for the A.Y.2005-06.
Date of Judgment -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre Private Ltd.,
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This appeal has been ADMITTED on 02.02.2016 to consider the following substantial questions of law framed by the learned counsel for the Appellants-Revenue: “(1)
Whether on the facts and in the circumstances of the case, the Tribunal is right in law in adopting high turnover and brand value criteria for excluding Infosys Technologies as a comparable in absence of turnover criteria in Rule 10B of the Income Tax Rules and also when the sale of the turnover and profit margins are not linked in the software industry unlike capital intensive companies?”
(2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that Tata Elxsi Limited cannot be taken as comparables on the basis of facts of a different case for different assessee without making any specific FAR analysis vis-à-vis the assessee-company in contrast to the fact that Tata Elxsi Limited satisfy all the qualitative and quantitative filters applied by the TPO?
(3) Whether on the facts and in the circumstances of the case, the Tribunal is right in
Date of Judgment -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre Private Ltd.,
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law in directing the TPO to apply RPT filter of 15% by superimposing the decisions of Tribunal in other cases without going into specific facts of the taxpayer and without adducing the basis for arriving at the 15% cut off for RPT filter?”
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 No.1: “15. As regards ground No.4 raised by the revenue, the CIT(A) followed the decision of the ITAT Delhi in the case of Agnity India Technologies v. ITO (ITA 3856/Del/2010) in coming to the conclusion that Infosys Technologies Ltd., is not comparable for the reason of its size, turnover and brand. The decision of the Tribunal in the case of Agnity India Technologies (supra) has since been confirmed by the Hon’ble Delhi High Court. Therefore the grievance projected by the Revenue in this regard is without any merit.”
Date of Judgment -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre Private Ltd.,
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Regarding substantial question of law No.2: “25. We have considered his submission and find that the ITAT Hyderabad Bench on identical facts, held on comparability of TATA Elxsi Ltd. as follows:-
xxxx
Though the issue has been set aside to the AO in the aforesaid decision, the ITAT Hyderabad in the case of NTT Data India Enterprise Application Services Pvt. Ltd., ITA No.1612/Hyd/2010 order dated 23.10.2013 and in a subsequent ruling in the case of Invensys Development Centre (India) Pvt. Ltd., ITA No.1256/Hyd/2010 order dated 28.2.2014, held that TATA Elxsi is not functionally comparable with that of a software development service provider such as the Assessee.”
Regarding substantial question of law No.3: “13. We have heard the rival submissions. As far as the grounds of appeal of the Revenue are concerned, ground No.2 with regard to
Date of Judgment -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre Private Ltd.,
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improper application of the RPT filter by the CIT(A), it is not in dispute before us that this Tribunal, in the cases of 24/7 Customer Pvt. Ltd. (ITA No.227/Bang/2010), and Sony India Private Ltd. reported in (2009) 315 ITR (80) 150 (Del.) and various other cases has taken a view that comparables having RPT of upto 15% of total revenues can be considered. In view thereof, the Revenue’s grievance on this issue as projected in ground No.2 has to be allowed. It is held that the CIT(A) ought to have adopted a threshold limit of 15% of the total revenue attributable to related party transaction as ground for rejecting comparable companies. Consequently it is held that comparable companies having RPT upto 15% of the total revenues alone can be included.”
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 -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre 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 -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre 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 -18-07-2018 I.T.A.No.397 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Textron Global Technology Centre Private Ltd.,
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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 the Revenue-appellants, 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.
Copy of this order be sent to the Respondent- assessee.
Sd/- JUDGE
Sd/-
JUDGE