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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.84/2016
BETWEEN : 1. Pr. COMMISSIONER OF INCOME TAX
CENTRAL REVENUE BUILDINGS
QUEENS ROAD
BANGALORE-560001.
INCOME TAX OFFICER
WARD-12(1)
BANGALORE.
...APPELLANTS
(BY SRI SANMATHI.E.I., ADV.)
AND : M/s. RADISYS INDIA PVT LTD., 6TH FLOOR, WING B ELECTRA EXORA BUSINESS PARK [ORESTIGE TECH PARK 2] MARATHAHALLI – SARJAPUR RING ROAD BANGALORE-560103 PAN : AACCC3169M.
…RESPONDENT
(RESPONDENT – SERVED)
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17.07.2015 PASSED IN ITA No.38/BANG/2014, FOR THE ASSESSMENT YEAR 2009-10, PRAYING TO 1]. DECIDE THE
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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FOREGOING QUESTION OF LAW AND OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND 2]. SET ASIDE THE APPELLATE ORDER DATED 17.07.2015 PASSED BY THE ITAT, ‘B’ BENCH, BENGALURU IN APPEAL PROCEEDINGS No.ITA No.38/BANG/2014 FOR ASSESSMENT YEAR 2009-10; AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. Sanmathi.E.I., Adv. for Appellants – Revenue.
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore, in IT[TP]A No.38/Bang/2014 dated 17.07.2015, relating to the Assessment Year 2009-10.
The proposed substantial questions of law framed by the Revenue in the Memorandum of Appeal is as under:
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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“[1] Whether on the facts and in the circumstances of the case, the Tribunal holding that few companies are functionally different from assessee when it satisfies all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than TPO, but has not tested other comparables against the narrower functionality filter applied by it?
[2] Whether on the facts and in the circumstances of the case, the Tribunal was right in not setting aside the matter to TPO for fresh TP study after taking a new view on functional matrix which is narrower than the functionality matrix originally used by TPO?
[3] Whether on the facts and in the circumstances of the case, the change in any filter – quantitative or qualitative – by any appellate authority should be followed by fresh TP study, or whether the Tribunal can selectively apply their modified qualitative filter to only few comparables challenged by the assessee or whether a fresh TP study has to be done?”
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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Regarding first substantial question of law:- The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned a finding, we consider it appropriate to quote from the order of Tribunal as under: “6.4.2 Following the decision of the co-ordinate bench of this Tribunal in the case of Airbus India Operations Pvt. Ltd., for Assessment Year 2009- 10 [supra] and taking note of the facts and circumstances under which the TPO considered this company, which is a software product company, as comparable to a captive provider of software development services to its AE, as is the assessee in the case on hand, we direct the TPO to exclude this company from the list of comparable companies.”
Regarding second substantial question of law:- The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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Respondent-Assessee, has returned a finding, we consider it appropriate to quote from the order of Tribunal as under:
“7.4.2 Following the decision of the co- ordinate bench of this Tribunal in the case of Airbus Operations Pvt. Ltd, [supra] for Assessment Year 2009-10 and taking note of the facts and circumstances under which the TPO included these two companies, viz., Tata Elxsi Ltd., [seg] and Infosys Technologies Ltd., we hold that these two companies cannot be comparable to a captive software development service provider, as is the assessee in the case on hand. We, therefore, direct the TPO to exclude these two companies from the list of comparable.”
Regarding third substantial question of law:- The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned a finding, we
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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consider it appropriate to quote from the order of Tribunal as under:
“8.4.3 We have examined the issue pertaining to the comparability of Persistent Systems Ltd., including the decision relied on by the assessee. While the co-ordinate bench in the case of NXP Semi Conductors India Pvt. Ltd., for Assessment Year 2008-09 [supra] has deleted this company from the list of comparables for that year; at best it can be good guidance for deciding on its comparability in the case on hand. However, in our considered view, this alone will not suffice. Apart from demonstrating the similarity and comparability between the assessee and NXP Semi Conductors India Pvt. Ltd., it is also necessary for the assessee to demonstrate and establish that the facts and circumstances applicable to Assessment Year 2008-09, the year for which the decision in the case of NXP Semi Conductors India Pvt. Ltd., was rendered are also applicable to the year under consideration i.e., Assessment Year 2009-10.”
The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A.
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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: “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
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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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. 57. 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
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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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.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Date of Judgment 29-06-2018, I.T.A. No.84/2016 Pr. Commissioner of Income Tax & another Vs. M/s. Radisys India Pvt. Ltd.
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A copy of this order shall be sent to the Respondent-Assessee.
Sd/- JUDGE
Sd/- JUDGE
NC.