Loading judgment…
No AI summary yet for this case.
1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 13TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.86/2015
BETWEEN:
THE COMMISSIONER OF INCOME-TAX CIT(A), C.R. BUILDING QUEENS ROAD, BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(1), RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE.
…APPELLANTS (By Mr. K.V. ARAVIND, ADV.)
AND:
M/S. ASM TECHNOLOGIES LTD., No.80/2, LUSANNE Court RICHMOND ROAD BANGALORE-560025 PAN: AABCA4362P.
…RESPONDENT (By Mr. A. SHANKAR & M. LAVA, ADVS.)
THIS I.T.A. IS FILED UNDER SECTION 260-A OF IT ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
2/10
OF LAW STATED ABOVE. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(TP)A No.158/Bang/2014 DATED 30/09/2014 ANNEXURE-D AND CONFIRM THE ORDER OF THE DISPUTE RESOLUTION PANEL CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE.
THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. K.V. Aravind, Adv. for Appellants- Revenue Mr. A. Shankar & M. Lava, Advs. for Respondent - Assessee
The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly certain substantial questions of law arising from the order of the ITAT, Bangalore Bench ‘C’, Bangalore, dated 30.09.2014 passed in IT(TP)A No.158/Bang/2014 (M/s.ASM Technologies Ltd., vs. Deputy Commissioner of Income-tax) for A.Y.2009-10.
The proposed substantial questions of law framed in the Memorandum of appeal by the Appellants-Revenue are quoted below for ready reference:-
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
3/10
“1. Whether, on the facts and in the circumstances of the case, Tribunal was justified in holding that the determination of ALP has to be restricted to only transactions with AE and not the total revenue of the assessee by relying on the decision in the case of M/s. Thyson Krupp reported in (2013) 55 SOT page 497 and Phoenix Mecano (India) Pvt. Ltd in ITA No.7361/Mum/2012 without appreciating that the facts in those cases are clearly distinguishable from that of the tax payer and recorded perverse finding?.
Whether, on the facts and in the circumstances of the case, Tribunal was justified in excluding Bodhtree Consulting Ltd from the list of comparables holding that the company was functionally different without appreciating that the comparable satisfy all the qualitative filters applied by the TPO and that selection of comparables in a case depends on assessee specific FAR analysis and recorded perverse finding?.
Whether, the Tribunal, on the facts and in the circumstances of the case was right in excluding Bodhtree Consulting Limited by relying on the decision of the Bangalore Tribunal in the
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
4/10
case of Cisco Systems India Pvt Ltd and not deciding the selection of the comparables on the basis of specific facts brought on record by the Transfer Pricing Officer and recorded perverse findings?”.
This Appeal was admitted on 11.12.2015 to consider the aforesaid substantial questions of law framed by the learned counsel for the Appellants- Revenue.
In so far as the first substantial question of law raised by the Revenue is concerned, the learned counsel for the Revenue submitted that the learned ITAT in its Order dated 30.09.2014 has given the findings, the relevant portion of which is quoted below for ready reference:- “ 16. As far as this ground is concerned, the value of the international transaction between the assessee and its AE- PTI is a sum of Rs.20,07,38,607/-. The TPO however applied the AM of the comparables on the total turnover of the assessee which includes transactions with non-
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
5/10
AE also. The adjustment have been done by taking transactions at the entity level and not in respect of transaction with the AE. The adjustment done by the TPO are as follows : xxxxxxxxxxxxx The learned counsel for the assessee submitted that in the following decisions, whereas the Tribunal have taken the view that determination of ALP has to be restricted to only transactions with AE and not the total revenue of the assessee: • Tyson Kruppp (2013) 55 SOT) 497 ; and • Phoenix Mecano (India) Pvt. Ltd.,- ITA.7361/Mum/2012 [A. Y 2008-09]
In the aforesaid decisions it has been held that TP adjustment can only be applied to international transactions of the assessee with AE and it cannot be applied at entity level. Following the decisions of the Tribunal referred to above, we allow ground no.3 raised by the assessee.
In so far as the second and third substantial questions of law raised by the Revenue are concerned, learned counsel for the Revenue submitted that the learned ITAT in its Order dated 30.09.2014 has given
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
6/10
the findings, the relevant portion of which is quoted below for ready reference:- COMPANIES INCLUDED IN THE FINAL LIST OF COMPARABLES WHICH THE ASSESSEE WANTS TO BE EXCLUDED:- Bodhtree Consulting Ltd.:- As far as this company is concerned, it is not in dispute that in the list of comparables chosen by the assessee, this company was also included by the assessee. The assessee, however, submits before us that later on it came to the assessee’s notice that this company is not being considered as a comparable company in the case of companies rendering software development services. In this regard, the ld. counsel for the assessee has brought to our notice the decision of the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. v. ITO, ITA No.7633/Mum/2012, order dated 6.11.2013. In this case, the Tribunal followed the decision rendered by the Mumbai Bench of the Tribunal in the case of Wills Processing Services (I) P. Ltd., ITA No.4547/Mum/2012. In the aforesaid decisions, the Tribunal has taken the view that Bodhtree Consulting Ltd. is in the business of software products and was engaged in providing open & end to end web solutions software consultancy and design & development of software using latest technology. The decision rendered by the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. (supra) is in relation to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Following the aforesaid
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
7/10
decision of the Mumbai Bench of the Tribunal, we hold that Bodhtree Consulting Ltd. cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should not be the basis on which the said company should be retained as a comparable, when factually it is shown that the said company is a software product company and not a software development services company. Following the aforesaid decision of the Tribunal, we hold that Bodhtree Consulting Ltd., should be excluded from the list of comparables chosen by the TPO. The AO/TPO is directed to compute the Arithmetic mean by excluding the aforesaid companies from the list of comparable”.
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.
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
8/10
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 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.
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
9/10
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. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
Date of Judgment 13-07-2018 I.T.A.No.86/2015 The Commissioner of Income-tax & Anr. Vs. M/s. ASM Technologies Ltd.,
10/10
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 liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/-
JUDGE
Srl.