THE PR COMMISSIONER OF INCOME TAX CIT(A) vs. M/S GENISYS INFORMATION

1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 5TH DAY OF JULY 2018

PRESENT

THE HON'BLE Dr.JUSTICE VINEET KOTHARI

AND

THE HON’BLE Mrs.JUSTICE S.SUJATHA

I.T.A.No.698/2017

BETWEEN:

5th Floor, BMTC Building

80 Feet Road, Kormangala

Bengaluru-560 095.

Ward-11(2), Present Address

ACIT, C-3(1)(2)

2nd Floor, BMTC Building

80 Feet Road, Kormangala

Bengaluru-560 095.

…APPELLANTS

(BY Mr.Aravind K.V., ADV.)

AND:

M/s.Genisys Information Systems (India) Pvt. Ltd., 33-36 & 43-46, Export Promotion Indl. Park, Whitefield, Bengaluru-560 066 PAN:AACCG 3306J

…RESPONDENT

(BY Mr.Sharath, Adv., for Mr.Chaithanya K.K., ADV.)

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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THIS I.T.A IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961, PRAYING TO I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE II) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.59/BANG/2014 DATED 22.02.2017 ANNEXURE-D CONFIRMING THE ORDER OF THE DRP AND CONFIRM THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU AND ETC.

THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY Dr. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-

JUDGMENT

Mr.Aravind K.V. Adv. for Appellants-Revenue Mr. Mr.Sharath, Adv., for Mr.Chaithanya K.K., 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 22.02.2017 passed in IT(TP)A No.59/Bang/2014 (Income-tax Officer vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,) for A.Y.2009-10.

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in allowing relief to assessee with regard to 10A re-computation by relying upon the ratio laid down by the Hon’ble High Court in the case of CIT v/s. M/s. Tata Elxsi?

(2) Whether on the facts and in the circumstances of the case, the Tribunal is right in confirming the direction of DRP with regard to Transfer Pricing adjustment whereby the DRP had directed the assessing authority to carryout the working capital adjustment both in software segment and ITES segment as per the actual figures worked out by the assessee without putting any upper cap?”

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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The relevant portion of the judgment of the Hon’ble Supreme Court in the case of HCL Technologies Ltd. (supra), is quoted below for ready reference:-

“17. The similar nature of controversy, akin this case, arose before the Karnataka High Court in CIT v. Tata Elxsi Ltd. [2012] 204 Taxman 321/17/taxman.com 100/349 ITR 98. The issue

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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before the Karnataka High Court was whether the Tribunal was correct in holding that while computing relief under Section 10A of the IT Act, the amount of communication expenses should be excluded from the total turnover if the same are reduced from the export turnover? While giving the answer to the issue, the High Court, inter-alia, held that when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from ‘export turnover’ must also be excluded from ‘total turnover’, since one of the components of ‘total turnover’ is export turnover.

Any other interpretation would run counter to the legislative intent and would be impermissible.

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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which could have never been the intention of the legislature.

The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-assessee, has given the following findings against Revenue with regard to various issues raised before it with regard to ‘Transfer Pricing’ and ‘Transfer Pricing Adjustments’

made by the concerned authorities below. We consider it appropriate to quote

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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the relevant portions hereunder:

“3. Ground No.1 – Working Capital adjustment:-

The DRP has directed the Assessing Officer to carry out the working capital adjustment as per the actual figures and do not put any cap on the same. The transfer pricing officer while allowing the working capital adjustment has held as under:

Working Capital Adjustment

xxxx

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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following the order of the coordinate bench we dismiss the ground of revenue.”

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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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 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.

Date of Judgment 05-07-2018 I.T.A.No.698 /2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s.Genisys Information Systems (India) Pvt. Ltd.,

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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.” 6. 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/- TL

JUDGE