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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 2ND DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.516/2017
BETWEEN :
Pr. COMMISSIONER OF INCOME TAX -4 BMTC COMPLEX, KORAMANGALA, BANGALORE
DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-12 (1) BMTC COMPLEX, KORMANGALA, BANGALORE
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND :
M/s METRIC STREAM INFOTECH NO.KAY ARR VALKI PINE HURST, 100 FEET ROAD, 1ST PHASE 2ND STAGE, BTM LAYOUT, BANGALORE.
…RESPONDENT
(BY SRI CHYTHANYA K.K., ADV.)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 09.12.2016 PASSED IN IT(TP)A NO.216/BANG/2014, FOR THE ASSESSMENT YEAR-2009-2010, ANNEXURE-A PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE
Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 09.12.2016 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT[TP]A NO.216/BANG/2014 FOR A.Y. 2009-10 ANNEXURE-A & 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. E.I.Sanmathi, Adv. for Appellants – Revenue. Mr. Chythanya K.K., 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, ‘A’ Bench, Bangalore, in IT [TP] No.216/Bang/14 dated 09.12.2016 (M/s MetricStream Infotech –v- The Deputy Commissioner of Income Tax) relating to the Assessment Year 2009-10.
The proposed substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under:
Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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“1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing assessing authority/TPO to exclude 7 comparable from list of comparable chosen by TPO on the ground of turnover filter even when sales turnover of the company does not have any impact on the margins earned and there is no correlation between the size of the company and the profit margins reported and further in the business model like that of assessee having a cost plus markup, the turnover is not relevant since there is no impact of turnover on the cost plus margin earned ? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing assessing authority/TPO to exclude certain comparable on the basis of functional dissimilarity by appreciating changes in any filter – either qualitative or quantitative – by any appellate authority should be followed by fresh TP study or by not selectively applying their modified qualitative filter to only few comparable challenged by the assessee ?”
Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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The learned Tribunal, after discussing the rival contentions of both the Appellant-Revenue and Respondent-Assessee, has returned the finding as under: “ 09. We find that the Companies mentioned from serial No.1 to serial No.7 have been discussed in the orders of the co-ordinate Bench in M/s Mcafee Software (India) Pvt. Ltd – v- DIT in IT(TP)A No.04/Bang/2012 and hence to be excluded as not being comparable.
With regard to Bodhtree Consulting Ltd., it is submitted that the company is in the business of software products and was engaged in providing open & end to end web solutions software consultancy and design & development of software using latest technology whereas the appellant is purely engaged in the business of providing software development services to its parent company. Therefore, the company shall be excluded from the list of comparables to determine the arm’s length price in the appellant’s case.”
Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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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- 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: “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
Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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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 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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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.”
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.
Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech
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Hence, the Appeal filed by the Appellant-Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE
ln.