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1/11 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 12TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.484/2013
BETWEEN:
THE COMMISSIONER OF INCOME-TAX C.R. BUILDING, QUEENS ROAD BANGALORE
THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 11(1) RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE
... APPELLANTS
(BY SRI. K. V. ARAVIND, ADV.)
AND:
M/s 3D PLM SOFTWARE SOLUTIONS LIMITED (SUCCESSOR TO DELMIA SOLUTIONS PVT. LTD., POST MERGER) NO.46/B & 47 1ST MAIN ROAD, 3RD PHASE JP NAGAR, BANGALORE – 560 078
... RESPONDENT
(BY SRI.ANKUR PAI, ADV. FOR SRI. K.R. VASUDEVAN. ADV.)
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THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 10/05/2013 PASSED IN ITA NO.1109/BANG/2010, FOR THE ASSESSMENT YEAR 2006-2007, ANNEXURE – C, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.1109/BANG/2010 DATED 10/05/2013 ANNEXURE – C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 11(1), BANGALORE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. K.V. Aravind, Adv. for Appellants – Revenue. Mr. Ankur Pai, Adv., for Mr. K.R. Vasudevan, Adv., for Respondent – Assessee
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 ‘A’, Bangalore in IT[TP]A No.1109/Bng/2010 dated 10.05.2013, relating to the Assessment Year 2006-07.
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This Appeal has been admitted on 5.2.2016 to consider the following substantial questions of law as framed by the Revenue in the Memorandum of Appeal. “1. Whether on the facts and in the circumstances of the case and in law the Tribunal was right in super imposing the decisions of the other benches and the decision of the ITAT while rejecting the comparables (i) Accel Transmatic Limited, (ii) KALS Information Systems Limited, and (iii) Lucid Software Limited without appreciating the fact that selection of comparables in a case depends on assessee specific FAR analysis and recorded a perverse finding ?
Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in rejecting the comparables adopted by the Transfer Pricing Officer only on the basis of the order passed by the Tribunal in case of the assessee for other Assessment Year, despite the finding recorded by the Transfer Pricing Officer regarding functions and profitability of the comparables and the assessee company are similar and recorded a perverse finding ?
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Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in fixing the related party transaction filtered at 15% of the total revenue without going into the specific facts in the case of the Tax Payer and without adducing the basis for arriving at such cut-off at 15% and recorded a perverse finding ?”
Regarding Substantial Question Nos.1 & 2: 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: “7. As regards comparable companies a) Infosys Ltd., b) Aztec Software Ltd., c) Persistent Systems Ltd., d) Sasken Communication Ltd., e) Flextronics Software Systems Ltd., f) iGate Global Solutions Ltd.,
It is submitted by the learned counsel for the assessee that the turnover filter of more than 200 Crores is to be applied resulting exclusion of these companies from the list of comparables. We find that this issue is also covered in favour of the assessee by the decision of this Tribunal in the
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case of M/s Genesis Microchip (I) Pvt. Ltd. vs. DCIT ITA No.1254/Bang/2010 which has also been followed by the co-ordinate Bench of this Tribunal in the assessee’s own case for the assessment year 2007-08. Respectfully following the same, we direct the AO/TPO to exclude these companies from the list of comparables.
As regards the comparable companies….. a) Accel Transmatics Ltd., b) Kals Information Systems Ltd., c) Lucid Software Ltd.,
We find that these companies were considered as comparables in the assessment year 2007-08 also and also this Tribinal at para- 3.4.A, D & E has observed as under: a) Accel Transmacti Ltd. (Seg)
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D. KALS Information System Ltd. (Seg) Incidentally, the selection of this company as comparable by the TPO was rejected by the Tribunal in the case of Trilogy E-Business on the premise that the information obtained by the TPO by issuance of notice u/s 133(6) of the Act was not, however, available in public domain. The
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reasons recorded, for appreciation of facts, are extracted hereunder:
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3.4.1. In conformity with the findings of the co-ordinate Bench of the Tribunal in the case of Trilogy E-Business, we are of the considered view that (i) Accel Transmatic Ltd. (Seg), (ii) Avani Cimcon Technologies Ltd. (iii) Celestial Labs. Ltd., & (iv) KALS Information Systems Ltd. (Seg) cannot qualify as comparables in the case of the assessee under consideration. It is ordered accordingly.
E. Lucid Software Limited 3.4.2. The above company has been rejected as comparable in the case of Telcordia Technologies Pvt. Ltd. vs. ACIT (supra). The submissions and the finding of the Hon’ble Mumbai Tribunal is reproduced below:
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Respectfully following the above decision of the co-ordinate Bench in the assessee’s own case, we direct the AO/TPO to exclude these companies also from the list of comparables.”
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Regarding Substantial Question No.3: “6. Having heard both the parties and having considered the rival contentions and also material on record, we find that; a) Aztecsoft Limited., b) R Systems International Limited
are to be rejected as comparables as they have more than 15% of related parties transactions. The Tribunal for the assessment year 2007-08 had considered the issue of RPT Filter of more than 15% at para-3.5.3 of its order and has directed the AO/TPO to exclude these companies from the list of comparables. Respectfully following the decision of the Co-ordinate Bench in the assessee’s own case, we direct the AO to verify whether these two companies have more than 15% related parties transaction in the relevant financial year and if it is found to be so, these two companies are to be excluded from the list of comparables.”
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The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. 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
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(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 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.
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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.”
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.
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Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Copy of this Order be sent to the Respondent- Assessee, forthwith.
Sd/- JUDGE
Sd/- JUDGE
AN/-