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1/8 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.180/2014
Between:
GE BE Private Limited, Rep. by its Authorised Signatory, Mr. Ganesh Karnatakam, Finance Controller, C/o GE BE Private Limited, 60, Export Promotion Industrial Park, Whitefield, Bangalore – 560 066.
…Appellant (By Mr. C.K. Nandakumar, Advocate)
And:
The Deputy Commissioner of Income Tax, Circle 11(3) Bangalore.
…Respondent
(By Mr. Aravind K.V, Advocate)
This I.T.A. is filed under Section 260-A of Income Tax Act 1961, praying to (a) formulate the substantial question of law stated as above and answer the same in favour of the Appellant, (b) To allow the appeal and set aside the findings
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to the extent against the Appellant in the order passed by the Learned Tribunal in ITA No. 846/Bang/2010 dated 06.12.2013 Annexure A, in the interest of justice & equity etc.
This I.T.A. coming on for Hearing, this day S. Sujatha J. delivered the following:-
J U D G M E N T
Mr. C.K.Nandakumar, Adv. for Appellant – Assessee Mr. Aravind K.V, Adv. for Respondent – Revenue
The Appellant - Assessee has filed this appeal raising purported substantial question of law arising from the Order of the learned Income Tax Appellate Tribunal Bangalore “B” Bench, Annexure A dated 06/12/2013 in ITA No.846/Bang/2010 for AY 2004- 05. 2. The appellant Assessee has suggested the following substantial question of law for our consideration in this appeal:- “ Whether on facts and circumstances of this case the Learned Tribunal was justified in holding Cost Plus method as the Most Appropriate Method as against Transactional Net Margin Method for the
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international transaction in respect of contract manufacturing activity of sale of manufactured goods by the Appellant to its Associated Enterprise as per the provisions of the Act?”
In so far as the only substantial question raised by the appellant – Assessee in this appeal is concerned, the learned counsel for the Assessee submitted that the learned ITAT in its Order dated 06/12/2013 has given the findings, the relevant portion of which is quoted below for ready reference:- “32. We have given a careful consideration to the rival submissions. We shall first recapitulate the sequence of events. The dispute raised by the Assessee in Gr.No.1 to 7 relate to the determination of Arm’s Length Price (ALP) in respect of the international transaction of sale of manufactured goods by the Assessee to one its Associated Enterprise (AE). The Assessee manufactures components of medical devices and sells it to its AE. The pricing is claimed to be based on the GE Global pricing policy. The Assessee sources
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raw materials and components, performs the manufacturing functions and supplies the entire produce to its AE. To justify the price that it received from its AE is at Arm’s Length the Assessee filed a Transfer pricing Study report. The Assessee claimed that it performed functions and undertook risks that are normally performed by a contract manufacturer. The Assessee chose Cost Plus Method (CPM) as the Most Appropriate Method (MAM) for determination of ALP. The Assessee identified 19 comparable companies which were in the business of manufacture of (i) steel forgings, (ii) automotive brake systems, (iii) compressors; (iv) colour TV picture tubes, (v) Axle shafts, (vi) automotive gears; (vii) rear fork assembly; (viii) sheet metal components, assemblies and sub- assemblies, (ix) auto head lights. (x) fuel tanks, axle housing; (x) steering gears, (xi) wheels for automobiles; (xii) design engines; (xiii) steering gear assembly; (xiv) automotive air conditioning systems; (xv) steel metal parts. The arithmetic mean of the comparable companies was 15.72% gross mark-up on
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cost. The Assessee’s gross mark-up on cost was 16.24% and therefore it was claimed that the price received from the AE by the Assessee in respect of the international transaction was at Arm’s length.”
However, this Court in a recent judgment in I.T.A.No.536/2015 c/w. I.T.A.No.537/2015 (Pr. Commissioner of Income Tax, Bangalore and Another Vs. M/s. Softbrands India P.Ltd.,) rendered on 25-06-2018, 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 and 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
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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. 56. We are therefore of the considered opinion that the present appeals filed by the
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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.
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The appeals filed by the Revenue are therefore dismissed with no order as to costs.” 5. Having heard the learned counsel for the appellant – Assessee, this Court is satisfied that no substantial question of law would arise in the present case and the appeal filed by the Assessee is therefore, liable to be dismissed. Accordingly, it is dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE BMV*