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1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 29TH DAY OF JUNE 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.51/2016 BETWEEN:
PRINCIPAL COMMISSIONER OF INCOME-TAX BANGALORE-6, B.M.T.C. BUILDING KORAMANGALA, BANGALORE-95.
DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 12(3), 3RD FLOOR, BMTC BUILDING KORAMANGALA, BANGALORE-95.
…APPELLANTS (By Mr. JEEVAN J. NEERALGI, ADV.)
AND:
M/S. SABRE TRAVEL TECHNOLOGIES PVT. LTD., 2ND FLOOR, NAVIGATOR BUILDING INTERNATIONAL TECH PARK WHITE FIELD MAIN ROAD BANGALORE-560 066.
…RESPONDENT (By Mr. ANKUR PAI, ADV.)
THIS I.T.A IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, PRAYING TO 1. DECIDE FOREGOING QUESTIONS OF LAW OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT IN FAVOUR OF THE APPELLATE. 2. SET ASIDE THE ORDER DT:30/06/2015 PASSED BY THE ITAT IN IT(TP)A
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. Ltd.,
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No.30/Bang/2014 FOR THE ASSESSMENT YEAR 2009-10 IN THE INTEREST OF JUSTICE AND EQUITY & ETC.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY Dr. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Jeevan J. Neeralgi, Adv. for Appellants Mr. Ankur Pai, Adv. for Respondent
The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly certain substantial questions of law arising from the order of the ITAT, ‘B’ Bench, Bangalore, dated 30.06.2015 passed in IT(TP)A No.30/Bang/2014 (M/s.Sabre Travel Technologies Pvt. Ltd. vs. Deputy Commissioner of Income-tax) for A.Y.2009-10.
The proposed substantial questions of law framed in the Memorandum of appeal by the Appellants-Revenue are quoted below for ready reference:-
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. Ltd.,
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(1) “Whether, the in the facts and circumstances of the case, the ITAT is right in holding that Bodhtree Consulting Ltd., cannot be taken as comparable, being functionally different, when it satisfies all the qualitative and quantitative filters applied by the TPO?
(2) Whether, the ITAT is right in rejecting the comparables when selection of comparables in a case, in transfer pricing depends upon the assessee specific FAR analysis and the ITAT ought to have decided the comparability of these comparables on the basis of specific facts brought on record by the TPO in the case of the respondent assessee?
(3) Whether, the ITAT was right in holding that the size and turnover of the company are deciding factors for treating a company as a comparable and consequently, erred in excluding the comparables in the software Development segment?
(4) Whether, in the facts and circumstances of the case, the ITAT is right holding that few companies are functionally different from the respondent company when it satisfies all the
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. Ltd.,
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qualitative and quantitative filters applied by the TPO?
(5) Whether, the ITAT is right in excluding uncontrolled comparables having turn over more than Rs.200 Crores in the absence of turnover criterion prescribed in Rule 10B of the Income-Tax Rules and also being no co-relation between turnover and profit margin?
(6) Whether, the ITAT is right in relying upon the decision of other Benches of ITAT, ought to have decided the comparability of these companies on the basis of specific facts brought on record by the TPO in the case of the respondent?”
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 from the order of Tribunal rejecting the
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. Ltd.,
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Application seeking a review before Tribunal as hereunder:-
“10. Before applying the said decision to the facts of the case before us, it has to be seen whether the activities of both the companies are similar to each other and whether the comparable companies adopted in the said case are also the same and the SP No.30/Bang/2014 & IT(TP)A No.30/Bang/2014 M/s. Sabre Travel Technologies Pvt. Ltd. assessment year is also the same. We find that the assessment year in the case of Airbus India Operations Pvt. Ltd., (cited supra) is also 2009-10 and further that Airbus India Operations Pvt. Ltd., (cited supra) is also a wholly owned subsidiary of Airbus Invest SAS and that it is engaged in the business of rendering software engineering services and innovative technology services to Airbus and it ancillaries. Operating profit on cost of Airbus India Operations Pvt. Ltd., (cited supra) is 8.62% and the operating revenue is Rs.28,43,49,124/-. Therefore, the operating revenue of both the companies is less than Rs.200 crore. From the list of comparables as adopted by the TPO, which are reproduced in paragraph 5 of pages 3 & 4 of the
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. Ltd.,
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order of the Tribunal in the case of Airbus India, we find that all the companies adopted by the TPO therein are also the companies adopted by the TPO in the case before us. Therefore, it is clear that services rendered by both the companies under the international transaction are similar and that the TPO has also adopted the very same companies as comparables in both the cases. Therefore, similarity of facts and circumstances is established. In the case before us, the assessee is seeking exclusion of Bodhtree Consulting Ltd., and Tata Elxsi Ltd., on the ground of functional dissimilarity and Sasken Communication Technologies Ltd., Persistent Systems Ltd., Zylog System Ltd., Mindtree Ltd., Larsen and Turbo Infotech and Infosys Technologies Ltd., on the ground of turnover filter of 200 crores”.
“Respectfully following the decision of the co-ordinate bench of the Tribunal, we direct the AO/TPO to exclude these 7 companies from the final list of comparables on the ground of turnover filter of the >Rs.200/- Crores.”
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. Ltd.,
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The learned Tribunal has excluded the other companies from the final list of comparables also on the same reason.
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 findings of the learned Tribunal remain the final fact findings of the learned Tribunal and are binding on the lower authorities of the Department as well as this Court and unless an established ex-facie perversity is found in the findings of the learned Tribunal, the appeal u/s.260A of the Act is not maintainable. We do not find any such perversity in the aforesaid findings.
The relevant portion of the said judgment is quoted below for ready reference:
Date of Judgment 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. 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 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. 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 29-06-2018 I.T.A.No.51/2016 Principal Commissioner of Income-Tax & Anr. Vs. M/s. Sabre Travel Technologies Pvt. 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