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1/7 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 05TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.314/2017
BETWEEN:
THE PR. COMMISSIONER OF INCOME-TAX, CIT(A) 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560 095.
THE INCOME-TAX OFFICER WARD-11(1), PRESENT ADDRESS WARD-1(1)(2), 80 FEET ROAD KORMANGALA, BENGALURU-560 095.
…APPELLANTS (By Mr. K.V. ARAVIND, ADV.)
AND:
M/S. APOTEX RESEARCH PVT. LTD., PLOT No.1 & 2, BOMMASANDRA INDUSTRIAL AREA, IV PHASE BENGALURU-560 099 PAN:AAECA2791B.
…RESPONDENT
(By Mr. MALLAHARAO K & Mr. SANDEEP S. KARHAIL, ADVS.)
THIS I.T.A IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 9161, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN IT(TP)A No.40/Bang/2014 DATED 04/11/2016 AND CONFIRM
Date of Judgment 05-07-2018 I.T.A.No.314/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Apotex Research Pvt. Ltd.,
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THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD- (1)(2), BENGALURU & ETC.
THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY Dr. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. K.V. Aravind, Adv. for Appellants- Revenue Mr. Mallaharao K, & Mr. Sandeep S. Karhail, 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, Bangalore Bench ‘A’, Bangalore, dated 04.11.2016 passed in IT(TP)A No.40/Bang/2014 (Apotech Research Pvt. Ltd., vs. The Income Tax Officer) for A.Y.2009-10.
The proposed substantial question of law framed in the Memorandum of appeal by the Appellants-Revenue is quoted below for ready reference:-
Date of Judgment 05-07-2018 I.T.A.No.314/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Apotex Research Pvt. Ltd.,
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“Whether in the facts and circumstances of the case, the Tribunal erred in excluding the comparables, namely, Celestial Biolabs Ltd., IDC India Ltd., Oil Field Instrumentations Ltd., on the ground of functional dissimilarity by following its earlier order in the assessee’s own case for earlier assessment years which has not reached finality and even when the TPO had chosen the comparables as it satisfies qualitative and quantitative filers applied by the TPO and Tribunal ought to have decided the comparability of these companies on the basis of specific facts brought out on record by the TPO in the case of the assessee?”.
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:-
Date of Judgment 05-07-2018 I.T.A.No.314/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Apotex Research Pvt. Ltd.,
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“ 11. Having carefully examined the orders of lower authorities in the light of rival submissions, we find that the profile of Celestial Biolabs Ltd., IDC India Ltd., and Oil field Instrumentations (India) Ltd. were examined by the Tribunal in assessee’s own case for the AYs 2007-08 & 2008-09 and the Tribunal has categorically held that these comparables cannot be considered to be good comparables for the purpose of computing the ALP, therefore, they have to be excluded form the list of comparables. The relevant observations of the Tribunal for AY 2008-09 with respect to Celestial Biolabs Ltd., IDC India Ltd. and Oil field Instrumentations (India) Ltd. are extracted hereunder:-
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Since the profile of assessee company and the comparables remains the same and there is no change in the activities. We therefore following the order of the Tribunal in the earlier years in assessee’s own case, hold that the aforesaid 3 comparables are not good comparables.
Therefore, the AO/TPO is directed to exclude these comparables from the list of comparables for the purpose of computing the ALP”.
Date of Judgment 05-07-2018 I.T.A.No.314/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Apotex Research Pvt. Ltd.,
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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. 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
Date of Judgment 05-07-2018 I.T.A.No.314/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Apotex Research Pvt. Ltd.,
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(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.
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
Date of Judgment 05-07-2018 I.T.A.No.314/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Apotex Research Pvt. Ltd.,
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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 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
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JUDGE Srl.