Loading judgment…
No AI summary yet for this case.
1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 04th DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.616/2017
BETWEEN:
PR. COMMISSIONER OF INCOME TAX-7 BMTC COMPLEX, KORMANGALA BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-12(4), BANGALORE.
…APPELLANTS (By Mr. SANMATHI E.I. ADV.)
AND:
M/S. TRIANZ HOLDINGS P. LTD (FORMERLY TRIANZ CONSULTING P. LTD.,) No.165/2, 5TH FLOOR, KALYANI MAGNUM DORAISANIPALYA, IIM POST BANNERGHATTA ROAD, BANGALORE-560076 PAN: AABCT 6050H.
…RESPONDENT (By Mr. ANKUR PAI DHUNGAT, ADV.)
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 AND SET ASIDE THE APPELLATE ORDER DATED 21-03-2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESEE’S CASE, IN APPEAL PROCEEDINGS IN
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 2/9
IT(TP)A No.1568/Bang/2012 FOR A.Y. 2008-09 ANNEXURE-A AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTERST OF JUSTICE.
THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY Dr. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Sanmathi E.I. Adv. for Appellants- Revenue Mr. Ankur Pai Dhungat, Adv. for Respondent - Assessee
The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly a substantial question of law arising from the order of the ITAT, Bengaluru Bench ‘B’, Bengaluru, dated 21.03.2017 passed in IT(TP)A No.1568/Bang/2012 (Trianz Holdings P. Ltd., vs. Deputy Commissioner of Income Tax) for A.Y.2008-09.
The proposed substantial question of law framed in the Memorandum of appeal by the Appellants-Revenue is quoted below for ready reference:- “Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding the comparables, namely, E-zest
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 3/9
Solution Ltd., Persistent System Ltd., Quintegra Solution Ltd., Thirdware Solution Ltd., Lucid Software Ltd., Celestial Biolabs, Infosys Technologies Ltd., Kals Information Systems Ltd., Tata Elxsi Ltd., Wipro Ltd., Bodhtree Consulting Ltd., Avani Cincom Technologies Ltd., on the basis of functional dissimilarity even when the assessing authority has applied qualitative and quantitative tests and the Tribunal failed to appreciate the FAR analysis brought on record by the TPO?”.
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-assessee, has given the following findings against Revenue with regard to various issues raised before it with regard to ‘Transfer Pricing’ and ‘Transfer Pricing Adjustments’ made by the concerned authorities below. We consider it appropriate to quote the relevant portions hereunder:-
“7.1 The assessee submitted that the comparables, Avani Cincom Technologies,
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 4/9
Celestial Biolabs, Infosys Techologies Ltd, Kals information Systems Ltd(Seg) , Tata Elxsi ltd(Seg) & Wipro Ltd (Seg) are functionally different. Celestial Biolabs, apart from functionally different, does not satisfy employee cost filter and had abnormal profit. For excluding them, it relied on this Tribunal decision in M/s. Curam Software International P. Ltd v. ITO ITA.1280/Bang/2012, dt.31.07.2013 for ay 2008-09, which has characterized itself as a provider of software development services to its Associated Enterprises (AE). The relevant portion of the order is extracted as under:
xxxxxxxxxxxxxxx
Since this Tribunal has found that the comparables, Celestial Biolabs, Infosys Techologies Ltd, Kals information Systems Ltd (Seg) , Tata Elxsi Ltd (Seg) & Wipro Ltd (Seg) are functionally different, following it , the TPO/AO is directed to exclude them from the list of comparables. However, the issue related to the comparable, Avani Cincom Technologies , which was included on the basis of information obtained u/s 133(6) by the TPO is remitted back to him for re-adjudication in the similar manner, this Tribunal has done in the above case.
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 5/9
7.2. The assessee submitted that the comparables, E-Zest Solution ltd, Persistent Systems Ltd, Quintegra Solution Ltd, Thirdware Solution Ltd and Lucid Software Ltd are functionally different. For excluding them, it relied on this Tribunal decision in M/s. 3DPLM Software Solutions Ltd v. DCIT IT(TP)A.1303/Bang/2012, dt.28.11.2013- ay 2008-09, which is established as a 100% export oriented unit under STPI scheme and was a provider of software development and other related services to its group companies. The relevant portion of the order is extracted as under:
xxxxxxxxxxxxxxxx
Since this Tribunal has found that the comparables, E-Zest Solution ltd, Persistent Systems Ltd, Quintegra Solution Ltd, Thirdware Solution Ltd and Lucid Software Ltd are functionally different, following it, the TPO/AO is directed to exclude them from the list of comparables.
7.3. Although the assessee objected the inclusion of LGS Global Ltd, it could not furnish any evidence and hence its plea is rejected.
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 6/9
7.4. In respect of the comparable, Bodhtree Consulting Ltd, the assessee pleaded that it is functionally different and relied on the decision of the Mumbai Tribunal in the case of M/s Nethawk Networks India P Ltd in ITA No 7633/M/2012 for ay 2008-09 dt 06.11.2013, which engaged in the business of software development services required for telecommunication related parts manufactured by its parent company i.e., M/s. Nethawk Oyj Finland and is a 100% captive unit for its parent as a solitary customer. The relevant portion of the order is extracted as under :
xxxxxxxxxxxx
Since the Mumbai Tribunal has found that the comparables, Bodhtree Consulting Limited is not engaged in the software development services and there is no segmental data comparable. Therefore, the FAR analysis goes against the TPO/AO Ex consequenti, directed the AO / TPO is directed to exclude it , following it , we direct the AO / TPO is directed to exclude it from the list of final comparables for working out the arithmetic mean”.
This Court in ITA No.536/2015 C/w ITA No.537/2015 delivered on 25.06.2018
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 7/9
(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. 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 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
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 8/9
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.
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
Date of Judgment 04-07-2018 I.T.A.No.616/2017 Pr. Commissioner of Income Tax-7 & Anr. Vs. M/s. Trianz Holdings P. Ltd., 9/9
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 counsels for the parties, we are therefore of the opinion that no substantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/-
JUDGE
Srl.