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1/9 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.549/2016
Between:
Pr. Commissioner of Income Tax-7, BMTC Complex, Kormangala, Bangalore.
The Deputy Commissioner of Income-Tax, Circle – 12(5), Rashtrothana Bhavan, Bangalore
…Appellants (By Mr. E.I Sanmathi. Advocate)
And:
M/s. Witness Systems Software India Pvt. Ltd., No.32, AR Towers, 5th floor, Residency Road, Bangalore. PAN: AAACW 5507F.
…Respondent
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software 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. Decide the foregoing question of law and / or such other questions of law as may be formulated by the Hon’ble Court as deemed fit and set aside the appellate order dated: 30/03/2016 passed by the ITAT, ‘A” Bench, Bengaluru, as sought for, in the respondent- assessee’s case, in appeal proceedings in IT(TP)A No. 299/Bang/2013 for A.Y. 2008-09 Annexure-A & grant such other relief as deemed fit in the interest of justice & 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. E.I Sanmathi. 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 A dated 30/03/2016 in IT(TP)A.No.299(B)/Bang/2013 for AY 2008-09.
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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The Revenue has suggested two substantial questions of law in this appeal, which are quoted below for ready reference:
“1. Whether on the facts and circumstances of the case, the Tribunal erred in holding that M/s. Accentia Technologies Ltd., is different from assessee – company, when it satisfies all the qualitative and quantitative filters applied by the TPO and the Tribunal has used a narrower functionality filter that the TPO, but has not tested other comparables against the narrower functionality filter applied by it?
Whether on the facts and in the circumstances of the case, the Tribunal was right in not setting aside the matter to the TPO for fresh Transfer Pricing study after taking a new view on functional matrix which is narrower than the functionality matrix originally used by the TPO?”
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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The learned counsel appearing for the Appellants – Revenue, Mr.E.I. Sanmathi submitted that he does not press the second substantial question of law raised by him in the present appeal, but he suggested the following question to be added:-
“Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding Comparable namely, Celestial Bio Labs Ltd on the ground of functional dissimilarity when it satisfies all the qualitative and quantitative filters applied by the Transfer Pricing Officer?”
In so far as the first purported substantial question of law as also the additional proposed substantial question of law raised by the Revenue are concerned, the learned ITAT in its Order dated 30/03/2016 has given the findings, the relevant portion of which is quoted below for ready reference:-
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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“7. As regards exclusion of two comparable companies namely M/s. Avani Cimcon Technologies Ltd., and M/s. Celestial Biolabs Ltd., the Tribunal decided the functional comparability of the companies in para. 13 and 14 as under:- ... … … … … … … … … 8. When thee is no change in the business activity of the assessee as well as the comparable companies in question during the year under consideration then in view of the findings of the Co-ordinate Bench of this Tribunal these two companies namely M/s. Avani Cimcon Technologies Ltd., and M/s. Celestial Biolabs Ltd., cannot be considered as functionality comparable with the assessee accordingly, by following the order of this Tribunal in assessee’s own case for the assessment year 2007-08, we affirm the findings of the CUT(A) on this issue.”
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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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 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 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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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. 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
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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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. 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
Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd.,
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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. The copy of this judgment be sent to the Respondent – Assessee forthwith.
Sd/- JUDGE
Sd/- JUDGE
BMV*