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1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 24TH DAY OF JULY 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.83/2016
BETWEEN:
PR. COMMISSIONER OF INCOME TAX CENTRAL REVENUE BUILDINGS QUEENS ROAD, BANGALORE - 560 001
DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5 (1) (2), BANGALORE
... APPELLANTS
(BY SRI.E I SANMATHI, ADV.)
AND
M/S.NOVO NORDISK INDIA PVT. LTD., PLOT NO.32, 47-50, EPIP AREA, WHITE FIELD, BANGALORE – 560 066 PAN NO.AAACN 7425M
... RESPONDENT
(BY SRI.MALLAHA RAO K, ADV. FOR SRI.K.NAGESWAR RAO, ADV. )
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:30/07/2015 PASSED IN ITA NO. 146/BANG/2015, FOR THE ASSESSMENT
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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YEAR - 2010-11, PRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. (2) SET ASIDE THE APPELLATE ORDER DATED 30-07-2015 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, BANGALORE, IN APPEAL PROCEEDINGS NO. I.T.A NO.146/BANG/2015 FOR ASSESSMENT YEAR: 2010- 11, AS SOUGHT FOR IN THIS APPEAL, AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.I. Sanmathi, Adv. for Appellants – Revenue. Mr. Mallaha Rao, Adv. for Mr. K. Nageswar Rao, 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, ‘C’ Bench, Bangalore in IT[TP]A No.146/Bang/2015 dated 30.07.2015, relating to the Assessment Year 2010-11.
This Appeal has been admitted on 22.07.2016 to consider the following substantial questions of law as framed by the Revenue in the Memorandum of Appeal.
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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“ 1) Whether on the facts and in the circumstances of the case, the transaction of supply of raw material excipient/insulin crystal by Novo Nordisk A/S to the assessee can be benchmarked for the purpose of determining the ALP together with the International transactions of import of products directly from M/s.Novo Nordisk A.S and selling the same in India ( which is purely distribution function performed by the assessee on behalf of Novo Nordisk A/S) on the plea that both the transactions are interlinked and therefore have to be benchmarked together?
2) Whether on the facts and in the circumstances of the case, if the answer to the above question is in the negative, how the ALP of the transactions has to be determined?
3) Whether on the facts and in the circumstances of the case, the determination of ALP as direct by the DRP is correct?
4) Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that the size and turnover of the company are deciding factors for treating a company as a comparable and in excluding
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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M/s.Infosys BPO Limited as a comparable of the Taxpayer?”
The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: “31. We deal with the comparable companies which the Assessee seeks exclusion. 1. Accentia Technology Ltd., 2. Infosys BPO Ltd. The comparability of these company with a ITES company was considered by this Tribunal in the case of Paraxel International (India) Pvt. Ltd. (supra) and the Tribunal held as follows on the comparability of the aforesaid companies with a company providing ITES in the following manner:- xxxxxxxxxxxx
As far as Accentia Technology Ltd., is concerned, even during the previous year relevant to AY 2010-11, there was amalgamation of Ascent Infoserve Private Limited with Accentia Technology Ltd., and consequent thereto the assets and liabilities
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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and accumulated reserves and the financial results for the year ended 31st March, 2010, of the amalgamating company were incorporated in the amalgamated company. As far as Infosys BPO Ltd., is concerned, the observations made by the Tribunal in the decision referred in the earlier paragraph will hold good for the present AY 2010- 11 also. Respectfully following the decision of the Tribunal referred to above, we direct that the aforesaid 2 companies be excluded from the list of comparable companies for the purpose of computing arithmetic mean for comparability purpose. The TPO is directed to give effect accordingly.”
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
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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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 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.
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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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. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd.
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In the circumstances, having heard the learned Counsel appearing for both the parties, 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
AN/-