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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.82/2015
BETWEEN:
THE COMMMISSIONER OF INCOME-TAX C.R.BUILDING, QUEENS ROAD, BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(1), RASHTROTHANA BHAVAN, NRUPATHUNGA ROAD, BANGALORE-560 001.
…APPELLANTS (By Mr. K.V. ARAVIND, ADV.)
AND:
M/s. AIRBUS INDIA OPERATIONS PVT. LTD., (FORMERLY KNOWN AS AIRBUS ENGINEERING CENTRE INDIA PVT. LTD.) 4TH FLOOR, XYLEM, PLOT NO.4 & 4A, DYAVASANDRA INDUSTRIAL AREA, MAHADEVAPURA POST, WHITEFIELD ROAD, BANGALORE-560 048.
…RESPONDENT
(By Mr.ANKUR PAI, ADV. FOR Mr.K.R.VASUDEVAN, ADV.)
THIS I.T.A IS FILED U/S.260A OF I.T.ACT, 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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STATED ABOVE. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN IT(TP)A No.35/Bang/2014 DATED 10/10/2014 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 ADMISSION, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr.K.V.Aravind, Adv. for Appellants - Revenue Mr.Ankur Pai, Adv. 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, ‘B’ Bench, Bangalore, dated 10.10.2014
passed in IT(TP)A No.35/Bang/2014 (M/s.Airbus India Operations Private Limited vs. The Deputy Commissioner of Income Tax) for A.Y.2009-10.
The proposed substantial questions of law framed in the Memorandum of appeal by the
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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Appellants-Revenue are quoted below for ready reference:- (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding the functions of the assessee are not comparable to the functions of Bodhtree Consulting Ltd., Kals Information Systems Ltd., Infosys Technologies Ltd., and Tata Elasxi by super imposing decisions of other benches of Tribunal without doing any FAR analysis in the instant case even when this comparables satisfies all the qualitative and quantitative filters applied by the TPO and the Tribunal ought to have decided comparability of these companies on the basis of specific facts brought on record by the TPO in the case of assessee?
(2) Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that foreign exchange loss/gain is operating in nature without ascertaining the nexus of forex gain/loss with the business activity of the taxpayer and without appreciating that such loss/gain attributable to the operating activity and though they may be incidental to the operating activity, they cannot be deemed as operating in nature since they are not critical to
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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operational activities of the business conducted by the tax payer?”
This Appeal was admitted on 31.08.2015 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, learned counsel for the Revenue submitted that the learned ITAT in its Order dated 10.10.2014 has given 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.,: This company is listed at Sl.No.3 in the final list of comparables chosen by the TPO which is set out in para-4 of this order. The comparability of this company with a software development services company such as the Assessee for AY 09-10 was
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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considered by this Tribunal in the case of M/s. Cisco Systems (India) Pvt. Ltd., IT(TP)A No.271/Bang/2014 for AY 09-10 order dated 14- 8-2014. This Tribunal held as follows:
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Respectfully following the decision of the Tribunal referred to above and taking note of the fact that the facts and circumstances under which the aforesaid company was considered by TPO as comparable with a software development service provider such as the Assessee for identical reasons, we direct the TPO to exclude the aforesaid company from the list of comparable companies for the purpose of computation of ALP.
The next submission of the learned Counsel for the Assessee was that though, Infosys Technologies Ltd., & Tata Elxsi Ltd. (seg.) have to be excluded by applying the Turnover filter, they are also additionally functionally not comparable as held by this Tribunal in the case of Genisys Intergrating Systesm (India) Ltd., (supra) and Cisco Systems (India) (supra). We have considered his submission and we find that in the case of Cisco Systems (India) (supra), this
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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tribunal hs also held that the aforesaid two companies are also not functionally comparable to a company such as the Assessee rendering purely software development services. The following were the relevant observations of the Tribunal.
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Respectfully following the decision of the Tribunal referred to above and taking note of the fact that the facts and circumstances under which the aforesaid company was considered by the TPO as comparable with a software development service provider such as the Assessee for identical reasons, we direct the TPO to exclude the aforesaid two companies from the list of comparable companies for the purpose of computation of ALP”.
In so far as the second substantial question of law raised by the Revenue is concerned, learned counsel for the Revenue submitted that the learned ITAT in its Order dated 10.10.2014 has given the findings, the relevant portion of which is quoted below for ready reference:-
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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KALS INFORMATION SYSTEMS LTD: This company is listed at Sl.No.3 in the final list of comparables chosen by the TPO which is set out in para-4 of this order. The comparability of this company with a software development services company such as the Assessee for AY 09-10 was considered by this Tribunal in the case of M/s. Cisco Systems (India) Pvt. Ltd., IT(TP)A No.271/Bang/2014 for AY 09-10 order dated 14-8-2014. This Tribunal held as follows:
xxxxxxxxxxxxxxxxxxx
Respectfully following the decision of the Tribunal referred to above and taking note of the fact that the facts and circumstances under which the aforesaid company was considered by the TPO as comparable with a software development service provider such as the Assessee for identical reasons, we direct the TPO to exclude the aforesaid company from the list of comparable companies for the purpose of computation of ALP”.
However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015 delivered on
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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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 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
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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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 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
Date of Judgment 13-07-2018 I.T.A.No.82/2015 The Commissioner of Income-tax & Anr. Vs. M/s. Airbus India Operations Pvt. Ltd.,
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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 liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
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JUDGE
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