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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 11th DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs. JUSTICE S.SUJATHA
I.T.A.No.485/2013 Between: 1. The Commissioner of Income- Tax, C.R. Building, Queens Road, Bangalore.
The Dy. Commissioner of Income-Tax,
Circle – 11(2), Rashtrothana Bhavan, Nrupathunga Road, Bangalore. …Appellants (By Mr. K.V.Aravind, Advocate)
And:
M/s 24/7 Customer.com Pvt. Ltd., Embassy Golf Link, Business Park, Challaghatta Village, Intermediate Ring Road, Varthur Hobli, Bangalore South Taluk, Bangalore. …Respondent ****
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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This I.T.A. is filed under Section 260-A of Income Tax Act 1961, praying to (a) Formulate the substantial questions of law stated therein, (b) allow the appeal and set aside the order passed by the ITAT Bangalore in MP No. 37/Bang/2013 dated 03/05/2013 (in ITA No. 227/BNG/2010) Annexure-D, confirm the order of the Appellate Commissioner confirming the order passed by the Deputy Commissioner of Income Tax, Circle -11(2), Bangalore in the interest of justice & equity etc.
This I.T.A. coming on for Admission, this day S. Sujatha J. delivered the following:-
J U D G M E N T Mr. K.V. Aravind. Adv. for Appellants - Revenue
The Appellants - Revenue have filed this appeal raising purported substantial questions of law arising from the Order of the learned Income Tax Appellate Tribunal Bangalore Bench “A”, Annexure D dated 03/05/2013 passed in M.P.No.37/Bang/2013 in ITA.No.227/Bang/2013 for AY 2004-05. 2. The appellants - Revenue have suggested two substantial questions of law which are quoted below for ready reference: - “(1) Whether on the facts and in the circumstances and in law the Tribunal was
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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correct in directing the Assessing officer/Transfer Pricing Officer to identify the risks to bring it on par with comparables and make required adjustments to the profit margin without pointing out the risk in comparables and without appreciating that TP regulations in India are against making any assumptions in respect of adjustments and such risk adjustment cannot be provided without making necessary assumptions and recorded perverse finding? (2) Whether on the facts and in the circumstances and in law the Tribunal was correct in directing the AO to identify the risks without appreciating that risk adjustment could not be allowed in the absence of specific difference in risk and its impact on profit margin and recorded preserves finding?”
In so far as the two substantial questions of law raised in the present appeal are concerned, the learned counsel for the Revenue, Mr. K.V. Aravind submitted that the learned ITAT in its Order dated 03/05/2013 passed in M.P.No.37/Bang/2013 (ITA
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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No.227/Bang/2010) has given the findings, the relevant portion of which is quoted below for ready reference:-
“ 5.1. The learned Authorised Representative submitted that a specific ground has been raised on market risk adjustment at GroundNo.4 of the concise grounds of appeal which had not been adjudicated by the Tribunal in order in ITA No.227/Bang/10 dt.9.11.2013. In this ground it is submitted that the learned CIT(Appeals) had erred in concluding that the business risk is borne by the assessee and therefore did not warrant a market risk adjustment. In this regard, the earned Authorised Representative submitted that the petitioner is a captive service provider and is operating in a risk free environment. Therefore, the risks assumed by the petitioner are lower than those assumed by companies operating in uncontrolled conditions and therefore adjustments require to be made to the margins of the comparable companies to eliminate the differences on account of risks. He also submitted that the co-ordinate benches of the Bangalore Tribunal have acknowledged that market risk adjustment has to be granted for comparability in appropriate cases. In support of
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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this proposition, the learned Authorised Representative relied on the decisions in the following cases.
i) Intellinet Technologies India Pvt Ltd (ITA No.1237/Bang/2007)
ii) Bearing Point Business (ITA No.1124/Bang/2011)
5.2 We have heard both parties on the issue and carefully considered the material on record. It is a matter of record that the assessee had raised a specific ground at No.4 of the concise grounds of appeal which was not addressed by us in our order dt.9.11.2012 and requires adjudication. The issue of risk adjustment was before the authorities below and the TPO market risk is offset by single customer risk. We find that on similar facts, the co-ordinate benches of Bangalore Tribunal in the cases cited viz. Intellinet Technologies India Pvt. Ltd.(supra) and Bearing Point Business (supra) have held that the TPO ought to have given risk adjustment to the margins of the comparables for bringing them on par with the assessee and remanded the issue to the file of the TPO for computation of the risk adjustment. Respectfully following the
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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aforesaid decisions of the co-ordinate benches of the ITAT, Bangalore, we remand the issue of market risk adjustment to the Assessing Officer/TPO for working out and computing the same after due examination of the assessee’s submission. It is ordered accordingly”
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
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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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 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.
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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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 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.
Date of Judgment 11-07-2018 I.T.A.No.485/2013
The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd.,
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The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
Having heard the learned counsel for the appellant – Revenue, this Court is satisfied that no substantial question of law would arise in the present case and the appeal filed by the Revenue is therefore, liable to be dismissed. Accordingly, it is dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
BMV*