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1/8 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.54/2016
Between:
Principal Commissioner of Income Tax, Bangalore-6, B.M.T.C building, Koramangala, Bangalore-95.
Income-Tax Officer, Circle 12(2), 6th Floor, R.P. Bhavan, Nrupathunga Road, Bangalore-560 001 …Appellants
(By Mr. Jeevan J Neeralgi, Advocate)
And:
M/s. Support.com India Pvt. Ltd., No.110, J.B. House, 3rd Floor, 4th Cross, 5th Block, Koramangala, Bangalore-560 095.
…Respondent
(By Mr. Tata Krishna, Advocate)
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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This I.T.A. is filed under Section 260-A of Income Tax Act 1961, 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 in favour of the Appellant. 2. Set aside the appellate order dated:19/06/2015 passed by the ITAT in IT(TP)A No.1214/Bang/2014 for Assessment Year 2009-10 in the interest of justice and equity.
This I.T.A. coming on for Hearing, this day Dr. Vineet Kothari J. delivered the following:-
J U D G M E N T
Mr. Jeevan J Neeralgi . Adv. for Appellants - Revenue Mr. Tata Krishna, Adv. for Respondent - Assessee
The Appellants - Revenue have filed this appeal raising purported substantial questions of law arising from the Order of the learned Income Tax Appellate Tribunal, Bench “B”, Bangalore, Annexure A dated 19/06/2015 in IT(TP)A.No.1214/Bang/2014 for AY 2009-10. 2. The appellants - Revenue have suggested the following substantial questions of law for our consideration, which are quoted below for ready reference: -
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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“1. WHETHER, in the circumstances of the case, the ITAT is right in holding that Kals Information Systems Ltd, cannot be taken as comparable, being functionally different when it satisfies all the qualitative and quantitative filters applied by the TPO?
WHETHER, the ITAT is right in superimposing the decision of other Benches of ITAT in the present case to reject the comparables when selection of comparables in the case of transfer pricing depends on assessee-specific FAR analysis?
In so far as the substantial questions of law raised by the appellants – Revenue are concerned, the learned ITAT in its Order dated 19/06/2015 has given the findings, the relevant portion of which is quoted below for ready reference:- “12. We have considered the rival submissions and also considered the relevant material available on record. We have also gone through the decisions relied upon by
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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both the parties. All the decisions relied upon by both the parties. All the decisions as relied upon by the assessee are based on the submissions of the assessee and not based on the actual facts emerged out from the financial statement of the company. The financial statement filed before us is incomplete and does not throw any light on the points raised by the assessee. Further, the facts which are based on the decisions of this Tribunal in the cases relied upon by the assessee cannot be verified from the incomplete record filed before us. Therefore, it is not possible to examine the actual facts of the source of revenue and business carried out by this company during the year under consideration. It is pertinent to note that the functional similarity has to be judged on the basis of actual performances of the activities by the comparable companies. The functional comparability cannot be judged on the basis of projected information in the Annual Report without examination of the corresponding financial data from the financial statement. One needs to go deep into the actual facts
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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and activities and source of revenue rather than the inflated picture projected in the management commentary. The real data are to be examined to arrive at a conclusion of nature of functional profile and source of revenue of the comparable company. We further note that in the case of M/s 3DPLM Software Solutions Ltd (supra) the coordinate Bench of this Tribunal found that this company is a functional comparable to the software development services. In view of the facts and circumstances of the case, we are of the considered opinion that the real facts and date are required to be properly examined at the end of the AO/TPO. Accordingly, we set aside the issue to the file of AO/TPO on the issue of functional comparability of Bodhtree Consulting Ltd with the assessee company for proper examination of the facts and then to decide the issue as per law.”
However, this Court in a recent judgment in I.T.A.No.536/2015 c/w. I.T.A.No.537/2015 (Pr.Commissioner of Income Tax, Bangalore and
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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Another Vs. M/s. Softbrands India P.Ltd.,) rendered on 25-06-2018, has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable and the relevant portion of the said 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
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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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.
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
Date of Judgment 29-06-2018 I.T.A.No.54/2016
Principal Commissioner of Income -Tax & Anr. Vs. M/s. Support.com India Pvt. Ltd.,
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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 counsel for the parties, this Court is satisfied that no substantial question of law would arise in the present case and the appeal filed by the Revenue is therefore, liable to be dismissed. Accordingly, it is dismissed. No costs.
Sd/- JUDGE
Sd/-
JUDGE
BMV*