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1/11 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 03rd DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.138/2016
BETWEEN:
THE PR. COMMISSIONER OF INCOME-TAX, CIT(A) 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BANGALORE-560 095.
THE JOINT COMMISSIONER OF INCOME-TAX (OSD) CIRCLE-12(3), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORMANGALA, BANGALORE-560 095.
…APPELLANTS (By Mr. ARAVIND K.V. ADV.)
AND:
M/S. APIGEE TECHNOLOGIES (INDIA) PVT. LTD., (FORMERLY SONOA NETWORKS (INDIA) PVT. LTD.,) No.17/2, 2ND “B” CROSS, 7TH MAIN 3RD FLOOR, 3RD BLOCK, KORAMANGALA BANGALORE-560 034 PAN: AAICS 9117R.
…RESPONDENT (By Mr. SANDEEP HUILGOL, ADV.)
THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. ALLOW THE APPEAL AND
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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SET ASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN ITA No.870/Bang/2013 DATED 23/09/2015 ANNEXURE-D AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX (OSD), CIRCLE-12(3), BENGALURU.
THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY Dr. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Aravind K.V. Adv. for Appellants - Revenue Mr. Sandeep Huilgol, Adv. for Respondent - Assessee
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, ‘B’ Bench, Bangalore, dated 23.09.2015 passed in IT(TP)A No.870/Bang/2013 (Apighee Technologies (India) Pvt. Ltd., vs. The Joint Commissioner of Income-Tax) for A.Y.2008-09.
The proposed substantial questions of law framed in the Memorandum of appeal by the
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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Appellants-Revenue are quoted below for ready reference:- “ 1. Whether on the facts and in the circumstances of the Tribunal is right in setting aside assessing officer’s addition of Rs.5,85,777/- even though assessing authority rightly disallowed a sum of Rs.5,85,777/- bearing an amount debited towards RAM, hard disk, memory card etc., as a part of computer consumables and the assessing officer treated such sum as capital in nature?
Whether on the facts and in the circumstances of the Tribunal is right in issuing certain directions in its order to re-compute the adjustment under section 92CA even when the TPO and AO has rightly computed transfer pricing adjustment in accordance with parameters of I.T. Acta and Rules framed there under?
3.Whether on the facts and in the circumstances of the Tribunal is right in allowing the appeal filed by the assessee relating issue of TDS by erroneously holding that payments referred to in the assessment order are outside the purview of section 194C of the Act when payments made by assessee squarely falls under
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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TDS obligations et out in section 194c of the act” and the assessing officer had rightly disallowed a sum of Rs.5,14,595/- bearing an amount on which the assessee had failed to deduct TDS as per provisions of the Act?
Whether on the facts and in the circumstances of the Tribunal is right in law in holding assessing authority is not right in treating expenditure of Rs.5,85,777/- as Revenue expenditure when the said expenditure is in the nature of capital expenditure?
Whether on the facts and in the circumstances of the Tribunal is right in law in setting aside the disallowance of expenditure of Rs.5,14,595/- being the amounts paid to M/s. Club Cabana, Rs.58.925/- and M/s. Golden Palms, Rs.4,55,670/- when same was rightly disallowed as these amounts were paid towards hiring of banquet hall which is a composite nature of contract and since, the company had not deducted TDS on these payments?”
Learned counsel for the Appellants-Revenue Mr.K.V.Aravind has filed a Memo dated 11.06.2018
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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reframing the substantial question of law No.2, which reads as under:- “2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in excluding Avani Cincom Technologies Ltd, Celestial Bio Labs Ltd, E-zest Solutions Ltd, Infosys Technologies Ltd, Kals Information Systems Ltd, Persistent Systems Ltd, Quintegra Solutions Ltd, Tata Elxsi Ltd, Thirdware Solutions Ltd, Wipro Ltd, and Lucid Software Ltd from the list of comparables, holding that they are functionally different, without appreciating that the comparable satisfy all the qualitative and quantitative filters applied by the TPO and that the selection of comparables in a case depends on the assessee specific FAR analysis, merely relying on various decisions of the Tribunal and not deciding the selection of comparables on the basis of the specific facts brought on record by the TPO and recorded perverse finding?”
Mr.K.V.Aravind also submits that he does not press the substantial questions of law Nos. 1, 3, 4 and 5. His submission is recorded.
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. 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 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:-
Regarding reframed substantial question of law No.2- “10. With respect to Avani Cimcon Technologies Ltd., it was the assessee’s submission that the assessee offers diversified operations such as software solutions, software development, consulting and information technology services to various clients. The assessee was also a products development company and has developed innovative product lines such as Dxchange, CARMA etc. Reliance was placed on the decision of 3DPLM Software Solutions Ltd. in IT(TP)A No.1303/Bang/2012 for
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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AY 2008-09 and Trilogy E-Business Software India (P) Ltd. in ITA No.1054/Bang/2011 for AY 2007-08.
We find that there is merit in the objection of the ld. counsel for the assessee and hence we direct that Avani Cimcon Technologies Ltd. be excluded from the list of comparables selected by the TPO.
With regard to the other 8 comparables selected by the TPO, the ld. counsel for the assessee submitted that these companies were functionally different from the assessee for the following reasons:-
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The assessee placed reliance on the following decisions in support of its contentions:- - 3DPLM Software Solutions Ltd. IT(TP)A No.1303/Bang/2012 (AY 2008-09) - Trilogy E-Business Software India P. Ltd., (ITA No.1054/Bang/2011 (AY 2007-08) - Systech Integrators India Pvt. Ltd. ITA No.1283/Bang/2012 (AY 2008-09) - Telcordia Technologies India Pvt. Ltd., ITA No.7821/Mum/2011 (AY 2007-08)
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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With regard to the other three comparables, the ld. counsel for the assessee submitted that these companies are also to be excluded from the list of comparables selected by the TPO for the following reasons:-
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The assessee’s reliance on 3DPLM Software Solutions Ltd. IT(TP)A No.1303/Bang/2012 (AY 2008-09) is well taken and hence the 11 companies identified by the assessee referred to in paras 12 and 14 hereinabove are functionally different. We therefore direct the TPO to exclude the aforementioned 11 comparables from the list of comparables for the TP study”.
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
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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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 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
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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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 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.
Date of Judgment 03-07-2018 I.T.A.No.138/2016 The Pr. Commissioner of Income-tax, CIT (A) & Anr. Vs. M/s. Apigee Technologies (India) Pvt. Ltd.,
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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 questions 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.
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