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NC: 2024:KHC:39748-DB ITA No. 411 of 2017
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 411 OF 2017 BETWEEN:
PR. COMMISSIONER OF INCOME TAX BMTC COMPLEX, KORMANGALA BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(5) BANGALORE. …APPELLANTS (BY SRI. SANMATHI E.I., ADV.)
AND:
M/S. XCHANGING SOLUTIONS LTD., NO.13, 14 AND 15 SJR I PARK, EPIP INDL AREA, PHASE-I, WHITEFILED, BANGALORE-560066 PAN:AAEFCS9303L. …RESPONDENT (BY SRI.NAGESHWAR RAO D.D., ADV. (V/C))
THIS APPEAL IS UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31/10/2016 PASSED IN IT(TP)A NO.1294/BANG/2012, FOR THE ASSESSMENT YEAR 2008-2009, PRAYING TO (1) DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE COURT AS DEEMED FIT
Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA
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NC: 2024:KHC:39748-DB ITA No. 411 of 2017
AND SET ASIDE THE APPELLATE ORDER DATED 31/10/2016 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT- ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO.1294/BANG/2012 FOR A.Y.2008-09 & GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.G.PANDIT AND HON'BLE MR JUSTICE C.M. POONACHA
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE S.G.PANDIT)
Heard the learned counsel Sri.Sanmathi.E.I., for appellants/Revenue and learned counsel Sri.Nageshwar Rao.D.D., for respondent/assessee through video conference.
The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 31.10.2016 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate
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NC: 2024:KHC:39748-DB ITA No. 411 of 2017
Authority’) in IT(TP)A.No.1294/Bang/2012 for the assessment year 2008-09.
This
Court,
admitted the appeal on 13.01.2020 to consider the following substantial question of law: “[i] Whether on the facts and circumstances of the case, the Tribunal is right in directing the assessing officer/TPO to adopt the arms length commission of corporate guarantee at 0.5% instead of prevailing market rate and without appreciating that corporate and financial institutions charge for such credit guarantees and prevailing market rate for guarantee commission is on average at 3% of the credit availed? [ii] Whether on the facts and in the circumstances of the case, the Tribunal is right in directing in fixing the interest rate at 2% instead of standard rate available in market or rate/basis points fixed by regulatory bodies and without appreciating that the interest by the Associates Enterprises to tax payers was in foreign currency and the standard procedure is LIBOR + BASIS POINTS prescribed by RBI/Regulatory authority for that period?
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NC: 2024:KHC:39748-DB ITA No. 411 of 2017
[iii] Whether on the facts and in the circumstances of the case, the Tribunal is right in directing the assessing authority/TPO to redo the determination of the Arms Length Price in respect of providing software development services by considering the proper working capital adjustment without appreciating that in the South Zone conference meet it was decided not to allow working capital adjustments and average working capital will not show the actual working capital employed during the year and future the segmental working capital is not disclosed in the annual reports?”
Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue.
On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under
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NC: 2024:KHC:39748-DB ITA No. 411 of 2017
the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.
In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.
Sd/- (S.G.PANDIT) JUDGE
Sd/- (C.M. POONACHA) JUDGE
MPK CT:bms List No.: 2 Sl No.: 0