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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 26TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A.No.500/2016
BETWEEN : 1. PRINCIPAL COMMISSIONER OF INCOME TAX-6 C.R. BUILDING, QUEENS ROAD BANGALORE-560001.
DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12(3) BANGALORE.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND : M/s. SYSARRIS SOFTWARE PRIVATE LIMITED SKR TOWER, 19/2, 15TH CROSS, 4TH PHASE, JP NAGAR DOLLARS COLONY BANGALORE-560078 PAN: AABC P2952 J.
…RESPONDENT
(BY SRI S.SHARATH, ADV. FOR SRI CHYTHANYA.K.K, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 22/01/2016 PASSED IN IT(TP)A No.85/BANG/2012, FOR THE ASSESSMENT YEAR 2005-2006, ANNEXURE-A, PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND / OR
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. (2) SET ASIDE THE APPELLATE ORDER DATED:22/01/2016 PASSED BY THE ITAT, 'A' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. IT(TP)A NO.85/BANG/2012 FOR THE ASSESSMENT YEAR 2005-2006, ANNEXURE-A, AS SOUGHT FOR IN THIS APPEAL; AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.I.Sanmathi, Adv. for Appellants – Revenue. Mr. S.Sharath, Adv. for Mr. Chythanya.K.K., Adv. for Respondent – Assessee.
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.85/Bang/2012 dated 22.01.2016, relating to the Assessment Year 2005-06.
The appeal has been admitted on 13.12.2017 to consider the following substantial questions of law formulated in the appeal memorandum:
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to exclude Bodhtree Consulting Ltd., Sankhya Infotech Ltd., Thirdware Solutions Ltd., Tata Elxsi Ltd., Satyam Computers Ltd., as comparables in the case of taxpayer on the ground of functional dis-similarity even with the TPO has rightly chosen the same considering the functions, FAR analysis and applying the required test?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing the TPO to exclude comparable, namely, M/s. Foursoft Ltd., which has related party transaction or controlled transactions in excess of 15% of total revenue by following its earlier order in the case of 24 X 7 Customer.com Private Ltd., even when proper RPT filter is 25% of sale and not 15%?
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under:
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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Regarding Substantial Question of Law No.1: “20. We have perused the orders and heard the rival contentions. Decision of the coordinate bench in M/s. Kodiak Networks India Pvt. Ltd., [supra] has considered the comparability of M/s. Bodhtree Consulting Ltd., with M/s. Kodiak Networks India Pvt. Ltd., [supra]. M/s. Kodiak Networks India Pvt. Ltd., [supra] was also providing software development services and its revenue came to Rs.16.23 crores. Concerned assessment year was also 2005-06. Vis-à-vis comparability of M/s. Bodhtree Consulting Ltd, this Tribunal has held as under at para 32 to 34 of its order:
xxxxx.”
Regarding Substantial Question of Law No.2: “28. We also find that M/s.Foursoft Ltd., had a RPT of 19.89% of its sales and this has been clearly mentioned by the TPO in the list of comparables complied by him at page 91 of his order. By virtue of the order of the order of coordinate bench in the case of M/s. 24/7 Customer.Com P. Ltd., [supra] RPT filter of 15% can be considered as threshold level of filter. Accordingly we are of the opinion that M/s.
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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Foursoft Ltd., could not be considered as a proper comparable. We therefore direct exclusion of M/s. Foursoft Ltd., from the list 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 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
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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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.
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
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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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.
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
Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited.
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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.
Sd/- JUDGE
Sd/- JUDGE
NC.