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1/11 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 4TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No179/2016
BETWEEN:
PR. COMMISSIONER OF INCOME TAX-5 C.R. BUILDING, QUEENS ROAD BANGALORE.
THE INCOME TAX OFFICER WARD-11(1), BANGALORE.
…APPELLANTS (By Mr. SANMATHI E.I. ADV.)
AND:
M/S. RADISYS INDIA P. LTD., 6TH FLOOR, ELECTTRA WING B EXORA BUSINESS PARK BEHIND PRESTINGE TECH PARK MARATHAHALLI – SARJAPURA OUTER RING ROAD, BANGALORE-560 103 PAN: AACCC3169M.
... RESPONDENT (RESPONDENT SERVED)
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO 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; SET ASIDE THE APPELLATE ORDERS DATED 26/08/2015 THE ITAT, ‘A’ BENCH, BENGALURU IN IT(TP)A No.1246/Bang/2011 FOR ASSESSMENT YEAR 2007-08 ANNEXURE-A TO GRANT SUCH OTHER RELIEF AS DEEMD FIT, IN THE INTEREST OF JUSTICE.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY DR. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Sanmathi E.I. Adv. for Appellants-Revenue
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, ‘A’ Bench, Bangalore, dated 26.08.2015 passed in IT(TP)A No.1246/Bang/2011 (Radisys India P. Ltd. vs. Income- tax Officer) for A.Y.2007-08.
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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The proposed substantial questions of law framed in the Memorandum of appeal by the Appellants-Revenue are quoted below for ready reference:-
“(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in super imposing the decision of other bench of Tribunal in the case of assessee to reject some of the comparables when selection of comparables in a case depends on assessee specific FAR analysis?
(2) Whether on the facts and in the circumstances of the case, the Tribunal erred in holding few companies are functionally different from assessee when they satisfy all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than TPO, but has not tested other comparables against the narrower functionality filter applied by it?
(3) Whether on the facts and in the circumstances of the case, Tribunal was right in setting aside the matter to TPO for fresh TP study
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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after taking a new view on functional matrix which is narrower than the functionality matrix originally used by TPO?”
The appeal was ADMITTED by the cognate bench of this Court on 24.10.2017 on the following substantial questions of law Nos.2 and 3:
“(2) Whether on the facts and in the circumstances of the case, the Tribunal erred in holding few companies are functionally different from assessee when they satisfy all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than TPO, but has not tested other comparables against the narrower functionality filter applied by it?
(3) Whether on the facts and in the circumstances of the case, Tribunal was right in setting aside the matter to TPO for fresh TP study after taking a new view on functional matrix which is narrower than the functionality matrix originally used by TPO?”
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-assessee, has given the following findings with regard to various issues raised before it by the assessee with regard to ‘Transfer Pricing’ and ‘Transfer Pricing Adjustments’ made by the concerned authorities below. We consider it appropriate to quote from the order of Tribunal rejecting the Application seeking a review before Tribunal as hereunder:-
“10. We have perused the orders and heard the rival contentions. For exclusion of the companies mentioned at para 08 above, assessee has relied on the decision of coordinate bench in the case of M/s. i2 Technologies India P. Ltd. (supra). TPO has not disputed the claim of the assessee that it was a software development service provider. In fact, the selection of comparables done by the TPO from the capitaline and prowess data base was based on assessee’s functional profile as software development services segment and marketing services segment, adjustments done were confined to software development segment
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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only. 26 comparables selected by the TPO in the said case also were the very same and even the average PLI worked out was very same as here viz, 25.14%. In the circumstances, we are of the opinion that assessee is justified in relying on the order of this Tribunal in M/s. i2 Technologies India P. Ltd (supra) for exclusion of 14 companies listed above. In the said decision, this Tribunal relying on its own earlier decision in the case of NXP Semi Conductors India P. Ltd v. ACIT [IT(TP)A 1174/Bang/2011, dt.14.11.2014], had held as under at paras 10 to 15, as under : xxxx
M/s Accel Transmatic Ltd, M/s Avani Cimcon Tech. Ltd., M/s Celestial Labs Ltd. and M/s KALS Information Systems Ltd, were 4 of the companies among the comparables considered in the case of M/s NXP Semiconductors India Pvt. Ltd. (Supra). Co-ordinate Bench at para-18 to 19 of its order dated 14-11-2014 held as under: xxxx
M/s E-Zest Solutions Ltd. M/s Persistent System Ltd. M/s Quintegra Solutions Ltd and M/s Thirdware Solutions Ltd (Seg.) were also considered by the Tribunal in the case of M/s NXP Semiconductors India Pvt. Ltd., (Supra). Paras 26
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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to 27 of the order in the case of M/s NXP Semiconductors India Pvt.Ltd. is produced here under: xxxx Accordingly, we direct the exclusion of the above four companies also from the comparables.”
Accordingly here also we direct that AO / TPO shall recomputed the correct margin of Megasoft Ltd while retaining it in the list of comparables. 14. Result of the above discussion is that the following companies will go out of the list of comparables:
Sl. No. Name of the Company 1 Accel Transmatic Ltd (Seg) 2 Avani Cimcon Technologies Ltd (seg) 3 Celestial Labs Ltd 4 E-Zest Solutions Ltd 5 Helios and Matheson Information Technology Ltd 6 Infosys technologies 7 Ishir Infotech Ltd 8 KALS Information Systems Ltd 9 Lucid Software Ltd 10 Persistent Systems Ltd 11 Quintegra Solutions Ltd 12 Tata Elxsi Ltd (seg) 13 Thirdware Solutions Ltd 14 Wipro Ltd (seg)
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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While retaining M/s. Megasoft Ltd, as a comparable, Ld. AO/TPO shall correctly rework its segmental results as in accordance with our direction at para 13 above.
This Court in ITA No.536/2015 C/w ITA No.537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. Vs. M/s. Softbrands India Pvt. Ltd.,) 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
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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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. 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 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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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 appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case. The appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs.
Date of Judgment 04-07-2018 I.T.A.No179/2016 Pr. Commissioner of Income Tax-5 & Anr.. Vs. M/s. Radisys India P. Ltd.,
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Copy of this order be sent to the Respondent- assessee forthwith.
Sd/- JUDGE
Sd/-
JUDGE