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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 6TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.930/2017
BETWEEN :
THE COMMISSIONER OF INCOME TAX CIT(A) LTU, JSS TOWERS, BSK III STAGE, BENGALURU-560 085
THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, JSS TOWERS, BSK III STAGE, BENGALURU-560 085
...APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND :
M/s SONIC WALL INFOSECURITY PVT. LTD. 4TH FLOOR, WING A, OFFICE 1, SALARPURIA SOFTZONE, BELLANDUR, VARTHUR HOBLI, BENGALURU-560 103
PAN: AAECA 3617Q
…RESPONDENT
(RESPONDENT – SERVED.)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 21.04.2017 PASSED IN IT(TP)A NO.302/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010 ANNEXURE-D, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II.
Date of Judgment 06-07-2018, ITA No.930/2017 The Commissioner of Income Tax & another Vs. M/s Sonic Wall Infosecurity Pvt. Ltd.
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ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.302/BANG/2014 DATED 21.04.2017 AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. K.V. Aravind, Adv. for Appellants – Revenue.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, Bangalore, in IT [TP]A No.302/Bang/2014 dated 21.04.2017, relating to the Assessment Year 2009-10.
Though the Appeal has been admitted on 09.01.2018 raising the substantial question of law as framed by the Revenue in the Memorandum of Appeal, learned Counsel for the Revenue does not press the same, instead presses for the substantial question of
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law which is now reframed by memo dated 6.7.2018, which reads thus: “Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding certain comparables, namely, Bodhtree Consulting Limited, Accentia Technologies Ltd. and Cosmis Global Ltd. on the basis of functional dissimilarity by following its earlier judgments which has not reached finality and even when the Transfer Pricing Officer has considered the comparables on the basis of qualitative and quantitative filters?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned a finding as under:
“8. Apart from this, the assessee is also seeking exclusion of Bodhtree Consulting Limited.
Having considered the rival submissions as well as the relevant material on record, at the outset we find that the functional
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comparability of this company with a captive software development services provider has been examined by the co-ordinate bench of this tribunal or the Assessment Year 2009-10 in the case of VMware Software India Pvt. Ltd. Vs. DCIT (supra) in para 16 as under:
xxxxxx
It has not been disputed before us that the facts discussed by this Tribunal in the said case that this company is engaged in the software products and also engaged in providing web end to end solutions, software consultancy & design and development. Therefore in view of the decision of the co-ordinate bench of this Tribunal, we held that this company is functionally not comparable to the assessee and accordingly we direct the TPO/AO to exclude this company from the set of comparables. 16. The assessee is also seeking exclusion of comparable companies namely Cosmic Global Ltd. & Accentia Technologies Ltd.
Having considered the rival submissions as well as the relevant material on record, we find that the functional comparability of these two companies namely Cosmic Global
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Ltd. & Accentia Technologies Ltd. has been considered by this co-ordinate bench of this Tribunal vide order dt.18.10.2016 in the case of Flextronics Technologies (India) Pvt. Ltd. Vs. DCIT (supra) in paras 7 to 10 as under:
xxxxx
It is clear that the Tribunal has held that these two companies are not functionally comparable to the ITES provider-assessee. Accordingly, when the companies are not found to be comparable due to the nature of business activity and functionally are different then there is no need for going into further analysis of asset employed and risk involved. Following the earlier order of this Tribunal, we direct the TPO/AO to exclude these two companies namely Cosmic Global Ltd. & Accentia Technologies Ltd. from the set of comparables.”
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
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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 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
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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
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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.”
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.
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A copy of this Order shall be sent to the Respondent-Assessee.
Sd/- JUDGE
Sd/- JUDGE AN/-