And The Factthat Ites Is The Primary Business Of The(Xe)Mpany? v. Acit'’, (2013) 38 Taxmann.com141 (Hyderabad - Trib)Neid That Profile Of Hsbcsupra Is Similar To Assessee And Therefore, Vishal

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 15 DAY OF JANUARY 2071PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’‘’BLE MR. JUSTICE NATARAJ RANGASW ALT.A. NC.681 OF 2015 BETWEEN: 1.|THE PR. COMMISSIONER OF INCOME TAX C.R. BUILDING, QUEENS ROAD BANGALORE-560001. 2.|THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(1), NEW DELHI. .., APPELLANTS~ (BY SRI. T.N.C. SRIDHAR, ADV.,) AND* M/S. EDS ELECTRONICS DATA|SYSTEMS INDIA PVT. LTD.,[NOW MERGED WITH MPHASIS LIMITED]ABACUS SQUARE, 6TH FLOOR|BLOCK-A, BAGMANE PARIN.BAGMANE TECHNOLOGY PARK|C.V. RAMAN NAGAR|BANGALORE-560093.PAN: AAACB 68720C. ~. RESPONDENT (BY SRI. SURYANARAYANA T, ADV.) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 23.06.2015 PASSEDIN ITA NO.5951/DEL/2010 FOR THE ASSESSMENT YEAR 2006-07,PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR_ SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BYTHE HON'BLE COURT AS DEEMED FIT. SET ASIDE THE APPELLATEORDER DATED 23.06.2015 PASSED BY THE ITAT, C BENCH,BENGALURU, AS SOUGHT FOR IN THE RESPONDENT-ASSESSEE'S|CASE, IN APPEAL PROCEEDINGS IN ITA NO.5951/DEL/2010 FORA.Y.2006-0 /. THIS I.7T.A. COMING ON FOR’ HEARING, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matter|of the appeal pertains to the Assessment year 2006-07..The appeal was admitted by a bench of this Court videorder dated 24.08.2016 on the following substantial|questions of law:| “(1) Whether on the facts ad in the)circumstances of the case, the Tribunal isrignt in law in_ excluding M/s_ Visna[InformationTecnnologiesLtdaS|comparable company of ITES segment inholding that M/s VITL outsources majorityofItsworkIgnoringthefact|that|outsourcing entails higner cost resulting inlower operating profit. (il)Whether on the facts and In|the circumstances of the case, the Tribunalis right in law in excluding M/s NucleusNetsoft & GIS (India) lItd., is not acomparable brushing aside the fact that itwas taken as a comparable by _ thassessee on its own TP study and the factthat ITES is the primary business of the(xe)mpany? 2.|Facts leading to filing of this appeal brieflystated are that the assessee is a company engaged in|the business of development of computer softwarethrough different units i.e., Software Technology Park|(STP) and Non STP units. The assessee got merged withM/s Mphasis Ltd. The assessee was having interactiontransaction with associated enterprises. During thefinancial year 2005-06, the assessee rendered IT.enabled services and had earned margin of 14.26% on total costs. In the transfer pricing study maintained by the assessee, it applied the transactional net mariginalmethod as the most appropriate method and on. selection of certain companies as comparables whoseaVerddgemarginStoodat.19.67%,theaSS@C@SSCconcluded its international transaction as being at arms|length. The Assessing Authority referred the matter to theTransferPricingOfficer.byan|orderdated10.09.7009|determinedthedifferencealtRs.120,973,568/- and subsequently, on the basis of thedirections issued by the dispute resolution panel,Assessing Authority determined the arms length pricedifference at Rs.5,18,68,568/-. The assessee thereupon.filed an appeal before the Income Tax Appellate Tribunal(hereinafter referred to as the tribunal’ for short). ThetripbunaldirectedexcIuSsIOnofVisnal InformationTecnnologies Ltd. And Nucleus Netsoft and Dy placing:rellance on decision of tne coordinate bench of tne.tribunal in-"HSBC ELECTRONIC DATEA PROCESSING|INDIA LTD. VS. ACIT'’, (2013) 38 TAXMANN.COM141 (HYDERABAD - TRIB)neid that profile of HSBCSupra is similar to assessee and therefore, Vishal Information Technologies Ltd. And Nucles Netsoft and|GIS India Ltd. are required to be excluded. In theaforesaid factual background, this appeal Nas been filed.3Learned counsel for the revenue submittedthat the tribunal without appreciating the fact that the|assessee in its transfer pricing study before the Transfer|Pricing Officer had chosen certain comparables and Nad|later on contended before the tribunal that the same.cannot be taken as comparables. Therefore, theassessee could not have been permitted to takecontradictory stand and therefore, the tribunal could notnave excluded the comparables. It is further submittedtnat the tridDunal nas failed to consider the findings ofthe Transfer Pricing Officer and Dispute Resolution Paneland has even failed to refer to the material brought on|record by the Transfer Pricing Officer. It is also urged.that when the appellate authority ignores the evidenceon record, the same gives rise to substantial question oflaw. In support of aforesaid submission, reliance has— been|placedon'VIJAYKUMARTALWAR|VS,COMMISSIONER OF INCOME TAX’, 330 1TR 1 4On the other hand, learned counsel for theassessee submitted that the decision of the tribunal that|Vishal Information Technologies Ltd. And Nuclues|Netsoft and GIS (India) Ltd. are functionally notcomparable is a finding of fact and the revenue has|neither challenged the same as perverse nor has.brought any material on record to demonstrate its|perversity and therefore, no substantial questions of law.arises for consideration. It is further submitted that In/any event, Vishal Information Technologies Ltd is notcomparable to the assessee and has rightly been.excluded as it is functionally dissimilar. In support of.aforesaid submissions, reliance has been placed on.SUDARSHAN SILKS & SAREES VS. CIT, 300 ITR.205and decision of Punjab and Haryana High Court inPCIT VS. IHG IT SERVICES (INDIA) PVT. LTD. ITANO.264/2016 DATED 05.12.2016and decision of the High Court of Delhi inCIT VS. UT STARCOM INC., ITANO.767/2017 DATED 25.09.2017. 5.|We have considered the submissions made.by learned counsel for the parties and have perused therecord. It is trite law that tribunal is a final fact finding|authority and has to consider the material brought|before it. In the instant case, the relevant extract of the|order passed by the tribunal, reads as under: 14.We|haveconsideredtherivalsubmission sand are of the view that In light of|the aforesaid decision of ITAT rendered in case|of a company, which is engaged in rendering|ITES services similar to that of the assessee,the aforesaid companies have to be excludedas functionally not comparable with that of tneassessee. We hold and direct accordingly. The|AO is directed to compute the arithmetic meanafter excluding the aforesaid companies from|tne list of comparables. Tne AO Is also directedto give the benefit of +/- 5% variation to tne|arithmetic mean of the assessee with thet of| the comparables as_ provided in the 2ndproviso to Section 92CA of the Act. Other.issues raised in grounds No.1.1 to 1.5 by the)assessee do not require any adjudication in|view of the above conclusions and as concededby the !d. Counsel for the assessee. 6.|Thus, from perusal of the relevant extract ofthe order passed by the tribunal, it is evident that thetribunal has neither considered evidence brought on|record by the Transfer Pricing Officer and has neitherconsidered the findings of the Transfer Pricing Officer as well as the dispute resolution panel and in a cryptic andcavalier manner has recorded a finding in favour of the|assessee. No cogent reasons worth the name have been.assigned by the tribunal for recording the findings.Therefore, in the facts and circumstances of the case,the order passed by the tribunal dated 23.06.2015 ishereby quashed. The substantial questions of law areanswered accordingly. The matter is remitted to thetribunal for decision afresh in accordance with law by a. ����%������������ &����������������������������������������� ����������� ��� �����������