Loading judgment…
No AI summary yet for this case.
1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 3RD DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.551/2016
BETWEEN :
Pr. COMMISSIONER OF INCOME TAX-7 BMTC COMPLEX, KORMANGALA BANGALORE
THE DEPUTY COMMISSIONER COMMISSIONER OF INCOME TAX CIRCLE 5(1)(1), BANGALORE
...APPELLANTS
(BY SRI JEEVAN J. NEERALGI, ADV.)
AND :
M/s TRIANZ HOLDINGS PVT. LTD., NO.165/2, 5TH FLOOR KALYANI MAGNUM DORAISAMIPALYA, IIM POST BANNERGHATTA ROAD BANGALORE-560 076 PAN:AAFCA8051P
…RESPONDENT
(BY SRI ANKUR PAI, ADV.)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 06.04.2016 PASSED IN IT(TP)A NO.419/BANG/2015, FOR THE ASSESSMENT YEAR 2010-11 ANNEXURE-A. PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
2/10
QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 06.04.2016 PASSED BY THE ITAT, 'C' BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT - ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO.419/BANG/2015 FOR A.Y. 2010-11 ANNEXURE-A AND GRANT SUCH OTHER RELIEF AS DEEMED FIT.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. Jeevan J. Neeralgi, Adv. for Appellants – Revenue. Mr. Ankur Pai, Adv. for Respondent – Assessee.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, ‘C’ Bench, Bangalore, in IT [TP]A No.419/Bang/2015 dated 06.04.2016, relating to the Assessment Year 2010-11.
The proposed substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under: “1. Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee is entitled for set off of brought forward losses of earlier
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
3/10
years for computation of deduction under section 10A by following the decision of this Hon’ble High Court in the case of CIT v/s Yokogowa even when the said decision has not reached finality and no such provision of set off of brought forward losses of earlier years of other units is prescribed under the Act?
Whether on the facts and in the circumstances of the case, that the Tribunal is right in law in confirming the directions of the Dispute Resolution Panel with regard to reimbursement of expenses from transfer pricing adjustments even though the TPO had rightly adjusted the reimbursement of expenses made to associated enterprises considering the nature of these expenses, benefit derived by the assessee and failure on the part of the assessee to substantiate its claim for such expenditure?”
Regarding Substantial Question No.1: 3. It is not in dispute that the issue involved in the substantial question No.1 is covered by the decision
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
4/10
of the Hon’ble Supreme Court in case of ‘Commissioner of Income Tax And Another v. Yokogawa India Limited’ reported in 2017 (391) ITR 374 (SC), holding that deduction under Section 10A of the Act is to be computed at the stage of computing gross total income of the eligible undertaking under Chapter IV of the Act and at the stage of computation of total income under Chapter VI of the Act and deduction under Section 10A of the Act only qua the eligible under taking and without reference to other eligible or non eligible units or undertakings of same assessee.
Regarding Substantial Question No.2: 4. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned a finding as under: “(iii) Transfer pricing adjustment: Rs.2,87,64,996/-
After due consideration of the copies of the (i) Cost Reimbursement Agreement entered into by the assessee with M/s Trianz Inc. dated
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
5/10
1.4.2009; and (ii) Reimbursement Agreement with M/s Trianz Consulting Inc. dated 1.10.2009 respectively, the DRP had directed as under: “5.5. …………the reimbursement of expenses has been made in the case of M/s Trianz Consulting Inc. in accordance with the agreement dated 1.10.2009 which is as per the laws of our country. Therefore, reimbursement of expenses is as per the agreement and, therefore, should not be taken by the TPO towards, determining the transfer pricing adjustment. However, adjustment can be made with reference to M/s Trianz Inc. and transfer pricing adjustments may be recalculated accordingly.”
Further, while disposing off of the assessee’s petition for rectification of its earlier directions issued through order u/s 144C (5) of the Act dated 3.12.2014, the DRP, in its Order u/s 154 r.w.s. 144C of the Act dated 13.3.2015, had directed as under: “4. We have carefully considered the directions of the DRP dated 03.12.2014 and copies of the reimbursement agreements with M/s Trianz Consulting
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
6/10
Inc. dated 01.04.2009 and 01.10.2009 respectively, placed on record. We find that there is a mistake on the part of the DRP in not considering the expenses listed in annexure – I of the agreement with M/s Trianz Inc. stating that the agreement does not contain any such provision. At present, it is noted that the details of the expenses to be determined are listed in annexure-I and referred to in Clause 2 of the agreement. As logical corollary to this finding, the expenses as per the agreement in the case of M/s Trianz Inc. are also to be allowed as in the case of M/s Trianz Consulting Inc. and should not be taken by the TPO/AO towards determining the Transfer Pricing adjustments. Accordingly, we direct the AO to exclude the amount of USD 473392 paid to M/s Trianz Inc. from the Transfer pricing Adjustments.”
This has been objected to by the Revenue on the pretext that the DRP erred (i) as the nature of these expenses were such that they cannot be attributed to have been solely and exclusively for the distribution business of the assessee; (ii) as the assessee that it had derived tangible benefit
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
7/10
from the expenditure has not been substantiated with evidence; and (iii) as no evidence or likelihood of any independent entity dealing in similar circumstances being such expenditure.
However, on a careful scrutiny of the documentary evidence produced by the assessee during the course of hearing, the detailed reasoning (directions) of the DRP in allowing the assessee’s claim based on the documentary evidences adduced, we are of the view that the directions of the DRP are justifiable which require no interference. It is ordered accordingly.”
The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 [Prl. Commissioner of Income Tax & Anr. V/s. M/s.Softbrands India Pvt. Ltd.,] wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the Judgment is quoted below for ready reference:
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
8/10
“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 picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
9/10
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
Date of Judgment 03-07-2018, ITA No.551/2016 Pr. Commissioner of Income Tax-7 & another Vs. M/s Trianz Holdings Pvt. Ltd.
10/10
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.”
In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
AN/-