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1/8 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.696/2017
Between:
The Pr. Commissioner of Income-tax, CIT(A) 5th floor, BMTC Building 80 Feet Road, Kormangala Bengaluru-560 095.
The Deputy Commissioner of Income-Tax Circle 11(2), Present Address: Circle-2(1)(1) 2nd Floor, BMTC Building, 80 Feet Road, Koramangala Bengaluru – 560 095.
…Appellants (By Mr. Aravind K.V. Advocate)
And:
M/s. Cibersites India Pvt. Ltd., 6th & 7th Floor, Bagmane Construction Pvt.Ltd., SEZ, K.R. Puram, Marathalli Ring Road, Mahadevpura and Doddanekkundi, Bengaluru – 560 037.
…Respondent (By Mr. S. Sharath, Advocate)
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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This I.T.A. is filed under Section 260-A of Income Tax Act 1961, praying to: 1. Formulate the substantial questions of law stated above. 2. Allow the appeal and set aside the orders passed by the Income-Tax Appellate Tribunal, Bengaluru in IT(TP)A No.1318/Bang/2014 dated 23-03-2017 and confirm the order of the Appellate Commissioner, confirming the order passed by the Deputy Commissioner of Income Tax, Circle-2(1)(1), Bengaluru & etc.
This I.T.A. coming on for Admission, this day Dr. Vineet Kothari J. delivered the following:-
J U D G M E N T
Mr. Aravind K.V. Adv. for Appellants – Revenue Mr. S. Sharath, Adv. for Respondent - Assessee
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 23/03/2017 in IT(TP)A.No.1318/Bang/2014 for AY 2009-10. 2. The Revenue has suggested three substantial questions of law, which are quoted below for ready reference:
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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“1. Whether on the facts and circumstances of the case, the Tribunal is right in holding that M/s. Bodhtree Consulting Ltd., cannot be taken as comparable, being functionally different when it satisfies all the qualitative and quantitative filters adopted by the TOP?
Whether on the facts and circumstances of the case, the Tribunal was right in seeking exact comparability, while searching for comparable companies of the assessee under TNMM whereas the requirement of law and international jurisprudence require seeking similar comparable companies?
Whether on the facts and circumstances of the case, the Tribunal was right in imposing the decisions of its co- ordinate benches rendered in other cases to the facts of the taxpayer without doing any FAR analysis of the taxpayer with those other cases?”
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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The learned counsel appearing for the Appellants – Revenue, Mr.K.V. Aravind submitted that he does not press the second and third substantial question of law raised by him in the present appeal.
In so far as the first purported substantial question of law raised by the Revenue is concerned, the learned ITAT in its Order dated 23/03/2017 has given the findings, the relevant portion of which is quoted below for ready reference:-
“8.
We have considered the rival submissions. We find that in Para.2 of the Tribunal order cited above, it is noted that the assessee in that case is engaged in Software Development Services. In the present case also, it is noted by the TPO in para.3.1 of his order that the present assessee is also engaged in rendering Software Development Services. Hence, in our considered opinion, this tribunal order is to be followed in the present case because the functional profile is
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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same and the assessment year is also same. In that case, the Tribunal held as per para.13 and 14 that these two companies are to be excluded from the final list of comparables. Respectfully following this tribunal order, in the present case also, we direct the AO/TPO to exclude these two companies are to be excluded from the final list of comparables. This ground is allowed.”
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:
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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“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 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
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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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 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
Date of Judgment 05-07-2018 I.T.A.No.696/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Cibersites India Pvt. Ltd.,
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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.”
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*