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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.345/2016
BETWEEN:
THE PR. COMMISSIONER OF INCOME-TAX, CIT(A) 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BANGALORE-560 095.
THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-3(1)(1), 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560 095.
…APPELLANTS (BY Mr. ARAVIND K.V. ADV.)
AND:
M/S. ISG NOVASOFT TECHNOLOGIES LTD., GROUND FLOOR, NORTH WING VAYU BLOCK, SALARPURIA GR TECH PARK WHITEFIELD, BANGALORE-560 066 PAN: AABC 12488Q.
…RESPONDENT (By Mr. K. MALLAHA RAO, 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 SET ASIDE THE ORDERS PASSED BY THE ITAT,
Date of Judgment 03-07-2018 I.T.A.No.345/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. ISG Novasoft Technologies Ltd.,
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BENGALURU IN IT(TP)A No.185/Bang/2015 DATED 30/09/2015, ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), 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-Assessee Mr. K.Mallaha Rao, Adv. for Respondent-Revenue
The appellants-Revenue have filed this appeal u/s. 260A of the Income Tax Act, 1961 (for short ‘Act’) raising purportedly certain substantial questions of law arising from the order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’ Bangalore (for short ‘Tribunal’) dated 30.09.2015 passed in IT(TP)A No.185(B)/2015 (M/s. ISG Novasoft Technologies Ltd. v. The Deputy Commissioner of Income-tax) for the A.Y.2007-2008.
The proposed substantial questions of law framed in the memorandum of appeal by the appellants- Revenue is quoted below for ready reference:
Date of Judgment 03-07-2018 I.T.A.No.345/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. ISG Novasoft Technologies Ltd.,
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“Whether, on the facts and the circumstances of the case, the Tribunal is right in law in directing the TPO to consider M/s.Microland Ltd as a comparable and directing to exclude M/s. Accentia Technologies Ltd as a comparable due to extraordinary events like merger and acquisition by following its earlier decision which has not reached finality since the said order has been challenged before this Hon’ble Court in ITA No.7/2014?”
The learned Tribunal, after discussing the rival contentions of both the appellants-Revenue and the Respondent-assessee, has given the following findings 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: “5. We have perused the orders and hear the rival contentions. The issue of comparability of M/s Accentia Technologies Ltd., in the ITES segment had come up before this Tribunal in the
Date of Judgment 03-07-2018 I.T.A.No.345/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. ISG Novasoft Technologies Ltd.,
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case of M/s Novo Nordisk India Pvt.Ltd., Vs DCIT (Supra) This Tribunal had held as under;
xxxx
Since assessment year involved is very same, we are of the opinion that the assessee has to succeed on its contention. We direct the lower authorities to exclude Ms Accentia Tech.Ltd., from the list of comparables, while analyzing the pricing of the international transaction undertaken by the assessee in the ITES segment. Ground no.8 of the assessee is allowed.”
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 and the relevant portion of the said judgment is quoted below for ready reference:
Date of Judgment 03-07-2018 I.T.A.No.345/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. ISG Novasoft Technologies Ltd.,
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“ 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 opinion, give rise to any substantial question of law. 56. We are therefore of the considered opinion that the present appeals filed by the
Date of Judgment 03-07-2018 I.T.A.No.345/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. ISG Novasoft Technologies Ltd.,
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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. 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
Date of Judgment 03-07-2018 I.T.A.No.345/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. ISG Novasoft Technologies Ltd.,
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substantial question of law arises in the present case. The appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/-
JUDGE