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1/11 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 10TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.191/2012
BETWEEN:
COMMISSIONER OF INCOME-TAX-III, CENTRAL REVENUE BUILDINGS QUEENS ROAD, BANGALORE-560 001
THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(4), BANGALORE
…APPELLANTS (By Mr.JEEVAN J. NEERALGI, ADV.)
AND:
M/S.TATRA VECTRA MOTORS LTD., (NOW KNOWN AS KAMAZ VECTRA MOTORS LIMITED) C/O NANGIA & CO., SUITE-4A, PLAZA, M-6 JASOLA, NEW DELHI-110 025
…RESPONDENT
(By MR.T.V.AJAYAN & MR.RAJESH CHANDRA KUMAR, ADVS.)
THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO DECIDE THE QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW; SET ASIDE THE ORDER OF THE TRIBUNAL IN ITA NO.1284/BANG/2010 DATED
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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31/01/2012 FOR THE ASSESSMENT YEAR 2006-07 ANNEXURE- A.
THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Jeevan J. Neeralgi, Adv. for Appellants-Revenue Mr. T.V. Ajayan & Mr. Rajesh Chandra Kumar, Advs. for Respondent-assessee
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, ‘A’ Bench, Bangalore (for short ‘Tribunal’) dated 31.01.2012 passed in ITA No.1284/Bang/2010 for the A.Y.2006-07.
This appeal has been ADMITTED on 31.07.2012 to consider the following substantial questions of law as framed by the Revenue in the Memorandum of Appeal:
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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“1. Whether tribunal is right in law in holding that the assessee is eligible for a standard deduction of 5% from the Arm’s Length Price under the proviso to section 92C(2) of the Income Tax Act?
Whether the tribunal is right in law in not considering the corrigendum dated 30.04.2010 to the circular 5/2010 issued by the Board with regard to the applicability of the amended proviso to section 92C(2) to all cases pending before the TPO after 01.04.2009?”
The learned Tribunal, after discussing the rival contentions of both the appellants-Revenue and the Respondent-assessee, has returned the findings as under:
Regarding substantial question of law No.1:
“12. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, the assessee has not disputed the adjustments u/s. 92CA of the Act, but challenging the working of ALP without giving benefit of the option available under the erstwhile proviso to section
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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92C(2) of the Act, so it becomes relevant to discuss the provisions contained in the erstwhile proviso to section 92C(2) of the Act, which was inserted by Finance Act, 2002 w.e.f. 1-4-2002 and reads as under:
“Provided, that where more than one price is determined by the most appropriate method, the arm’s length price shall be taken to be the arithmetical mean of such prices, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five per cent of such arithmetical mean.”
Regarding substantial question of law No.2:
“16. As regards to the applicability of the amended provisions in proviso to section 92C(2) of the Act which is applicable w.e.f. 1.10.2009 is concerned, it is noticed that this issue has been adjudicated by the ITAT Pune Bench “A”, Pune in ITA No.1350/PN/2010 in the case of Starnet Networks (India) P. Ltd. v. DCIT (supra), wherein the relevant findings has been given in paras 20 to 23 of the order dated 03.10.2011 and read as under:
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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xxxx
xxxx
xxxx
However, before parting we may also refer to a Corrigendum dated 30.9.2010 by the CBDT by way of which para 37.5 of the circular No 5/2010 (supra) has been sought to be modified. The Corrigendum reads as under: “ CORRIGENDUM
In partial modification of Circular No. 5/2010 dated 03.6.2010,
(i) In para 37.5 of the said Circular, for the lines “the above amendment has been made applicable with effect from 1st April, 2009 and will accordingly apply in respect of assessment year 2009-10 and subsequent years.”
the following lines shall be read;
“the above amendment has been made applicable with effect from 1st October, 2009 and shall accordingly apply in relation to all cases in which proceedings are pending before the Transfer Pricing Officer (TPO)on or after such date.”
(ii) In para 38.3, for the date “1st October, 2009, the following date shall be read: “1st April, 2009”.
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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In terms thereof, it is canvassed that the amended proviso has been made applicable with effect from 1.10.2009 and shall apply even to cases where proceedings were pending before the TPO on or after such date, irrespective of the assessment year involved and, therefore, in the instant case the benefit of the erstwhile proviso cannot be extended to the assessee. We have carefully pondered over the assertion made by the appellant that the Corrigendum is untenable in the eyes of law. Firstly, the said corrigendum does not bring out any preamble so as to throw light on the circumstances and the background in which the same has been issued. Secondly, it is well understood that the Explanatory Notes to the provisions of a Finance Act passed by the Parliament seeks to explain the substance of the provisions of the Act as intended by the Legislature. In fact, the Hon’ble Supreme Court in the case of K.P Varghese v ITO 131 ITR 597 (Ker) emphasized the sanctity of the statements contained in the Explanatory Notes of the provisions and stated that the interpretation placed in such documents is binding interpretation of law. The contents of the Corrigendum are quite inexplicable. Notwithstanding the aforesaid and without going
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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into the validity of the Corrigendum dated 30.9.2010 (supra), we are of the view that the same would not operate to the detriment of the assessee since at the relevant point of time the contents of the Circular No 5/2010 (supra) were in operation. In other words, the withdrawal of the interpretation placed in circular No 5 /2010 (supra) on the applicability of the amended proviso is sought to be done away by the Corrigendum dated 30.9.2010 and, therefore, such withdrawal shall be effective only after 30.9.2010, even if such Corrigendum is accepted as valid. We may note here that the appellant has assailed the validity of the Corrigendum itself on which we have not made any determination. Therefore, the Corrigendum dated 30.9.2010, in our considered opinion, has no bearing so as to dis-entitle the assessee from its claim of the benefit of +/-5% in terms of the erstwhile proviso to section 92C(2) of the Act. In coming to the aforesaid, we have been guided by the parity of reasoning laid down in the judgments of the Hon’ble Bombay High Court in the cases of BASF (India) Ltd. v CIT 280 ITR 136 (Bom); Shakti Raj Films Distributors v CIT 213 ITR 20 (Bom); and, Unit Trust of India & Anrs. v ITO 249 ITR 612 (Bom). The Hon’ble High Court has opined in the
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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case of BASF (India) Ltd. (supra) that the circulars which are in force during the relevant period are to be applied and the subsequent circulars either withdrawing or modifying the earlier circulars have no application. Moreover, the circulars in the nature of concession can be withdrawn prospectively only as held by the Hon’ble Supreme Court in the case of State Bank of Travancore v CIT 50 CTR 102 (SC). Considering all these aspects, we therefore find no justification in the action of the lower authorities in disentitling the assessee from its claim for the benefit of +/-5% to compute ALP in terms of the erstwhile proviso to section 92C(2) of the Act. We order accordingly.”
The controversy involved herein is no more res integra in view of the decision of 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.,) wherein it has been observed 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,
Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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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:
“ 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 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors 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 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd.,
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The appeals filed by the Revenue are therefore dismissed with no order as to costs.” 5. 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