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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 17TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A.No.111/2015
BETWEEN :
THE COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD, BANGALORE.
THE INCOME TAX OFFICER, WARD-11(1), RASHTROTHANA BHAVAN, NRUPATHUNGA ROAD, BANGALORE-560 001.
...APPELLANTS
(BY SRI K.V.ARAVIND, ADV.)
AND :
M/s APTEAN SOFTWARE INDIA PVT. LTD., (FORMERLY KNOWN AS CDC SOFTWARE INDIA PVT. LTD.) LEVEL-5 (8TH FLOOR), “GOLDEN HEIGHTS” NO.1/2, 59TH ‘C’ CROSS ROAD, 4TH ‘M’ BLOCK, RAJAJI NAGAR, BANGALORE-560 010. PAN: AACCP 7154 M
…RESPONDENT
(BY SRI A.SHANKAR & SRI M.LAVA, ADVS.)
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31/10/2014 PASSED IN IT(TP)A NO.1285/BANG/2010, FOR THE ASSESSMENT YEAR 2006-2007 ANNEXURE-D. PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE IN IT(TP)A NO.1285/BANG/2010 DATED 31/10/2014 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(1), BANGALORE.
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. Mr. A.Shankar & Mr. M.Lava, Advs. 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 ‘B’, Bangalore, in ITA No.1285/Bang/2010 dated 31.10.2014, relating to the Assessment Year 2006-07.
The appeal has been admitted on 18.08.2015 to consider the following substantial questions of law framed in the memorandum of appeal:
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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“1. Whether the Tribunal, on the facts and in the circumstances of the case was right in excluding Accel Transmatics Ltd., Lucid Software Ltd., KALS Information Systems Ltd. and Tata Elxsi Ltd., from the list of comparables holding that they are functionally different without appreciating that the comparables satisfy all the qualitative and quantitative filters applied by the TPO and that selection of comparables in a case depends on assessee specific FAR analysis?
Whether, the Tribunal on the facts and circumstances of the case right in excluding Accel Transmatics Ltd., Lucid Software Ltd., KALS Information Systems Ltd. and Tata Elxsi Ltd., by relying on various decisions of the Tribunal and not deciding the selection of the comparables on the basis of specific facts brought on record by the TPO?
Whether, the Tribunal on the facts and in the circumstances of the case right in considering the comparables as engages in software products business, merely because it has developed software products by following software development process, development services for its development, without have legal ownership on software products?”
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law Nos.1 to 3: “9. The following were the relevant observations of the Tribunal on the aforesaid comparable companies in the case of Trilogy E- Business Software India Pvt. Ltd., [supra]:-
“xxxxx”
The facts and circumstances under which the aforesaid companies were considered as comparable is identical in the case of the Assessee as well as in the case of Trilogy E- Business Software India Pvt. Ltd., [supra]. Respectfully following the decision of the Tribunal referred to above in the case of Trilogy E- Business Software India Pvt. Ltd., [supra], we direct that the following companies be excluded from the list of 14 comparable arrived at by the TPO.
a] KALS Information Systems Limited
b] Accel Transmatic
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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As far as the comparable chosen by the TPO viz., TATA Elxsi [Seg.] [Sl.No.8 of the final list of comparable chosen by TPO] is concerned, this Tribunal in the case of Logica Pvt. Ltd., [supra] held that this company is not functionally comparable with a software development service provider. The following were the relevant observations of the Tribunal in this regard.
“xxxxx”
In view of the above, the aforesaid company should also be excluded for the purpose of comparison while determining the ALP of the international transaction in question.
As far as the comparable chosen by the TPO viz., M/s. Lucid Software Limited [Sl.No.9 of the final list of comparable chosen by TPO] is concerned, this Tribunal in the case of M/s. 3DPLM Software Solutions Ltd., held that this company is not functionally comparable with a software development service provider. The following were the relevant observations of the Tribunal in this regard.
“xxxxx”
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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In view of the above, the aforesaid company should also be excluded for the purpose of comparison while determining the ALP of the international transaction in question.”
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
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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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.
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
Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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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.
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 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd.
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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.