Arrive At Export Turnover Only As Per The Definitions Given In Section 10B Of The Act And Total Turnover Has Not Deen Defined In The Section ? v. Tata Elxsik Ltd. Whicn Has Not Decome Final Since The Same Has Not Been Accepted By The Department And Slps Filed By The Revenue On The Issue Are Pending Before

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28 DAY OF SEPTEMBER 2020. PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE M.I.ARUN ILT.A. NO.51 OF 2014 BETWEEN: 1.COMMISSIONER OF INCOME TAX -III| CENTRAL REVENUE BUILDINGS QUEENS ROAD BANGALORE —- 560 OOL 2 |THE DEPUTY COMMISSIONER OF INCOME-TAX|CIRCLE 12(5)CIRCLE 12(5) BANGALORE. ... APPELLANTS (BY SRI.E.ILSANMATHI, ADV.,) AND: M/S YODLEE INFOTECH PVT. LTD.PRESTIGE TECHNOLOGY PARK.MERCURY (2B) BLOCK, 1 FLOOR|SARJAPUR|MARA THAHALLI RING ROADBANGALORE - 560 08/7 ... RESPONDENT (BY SRI.LNAGESHWAR RAO FOR SRI.MALLAHARAO K., ADVS.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 30.08.2013 PASSED IN] IT(T.P)A NO.1538/BANG/2012 FOR THE ASSESSMENT YEAR 2008-09, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO:(1) DECIDE THE FOREGOING QUESTION OF LAW AND / ORSUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT. (II) SET ASIDE THE APEPLLATE ORDER DATED 30.08.2013.PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH|BANGALORE,IN|APPEAL|PROCEEDINGSNO.I.T.(T.P).ANO.1538/BANG/2012 FOR ASSESSMENT YEAR 2008-09. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax) Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 2008-09. The appeal was admitted by a bench of this Court videorder dated 15.07.2014 on the following substantialquestions of law:| (1)Whether on the facts and in thecircumstances of the case the Tribunal Is|right in law in excluding Celestial Labs Ltd.,Infosys Technologies Ltd, KALS Information|Systems Ltd., Tata Elxsi Ltd. Wipro Ltd andLucid Software Ltd., by placing reliance on|its own order in the case of Trilogy E- Business Software India Ltd., order of.Mumbali Tribunal in the case of Telecordiatechnologies India P Ltd., and Bangalore|Tribunal in the case of 24/7 customer Pvt.Ltd., without appreciating the’ functionalsimilarity of the assessee company with the|above comparables and without going_ intomerits of each of the case? (il)Whether on the facts and in thecircumstances of the case the Tribunal Is|right in law in not appreciating that the risk|adjustment cannot be made without makingassumptions which are not permissible in|TransferPricinganalysisand|therisk|adjustment cannot be measured accurately? (iii) Whether on the facts and in the.circumstances of the case, the Tribunal was|justifiedIn|law.Innolding—that|reimbursement of traveling and technical|services charges incurred in foreign currency|are to be excluded both from total turnover|dSwel]aS|fromExportturnover=forcomputation of deduction under Section 10B|whereas such exclusion is permitted to| arrive at export turnover only as per the|definitions given in Section 10B of the Act|and total turnover has not Deen defined in|the Section ? (iv) Whether the Tribunal Is correct in-law in holding that the deduction under|Section 10B should be computed in the|above manner following the Judgment of|jurisdictional High court in the case of CIT|VS. Tata Elxsik Ltd. whicn has not Decome|final since the same has not been acceptedby the department and SLPs filed by the|revenue on the issue are pending before theHon’‘bie Supreme Court 2 |Facts leading to filing of the appeal brieflystated are that the assessee is a company engaged in.the business of providing software development supportServicetO|Itsholding|COM padaandassociatedEnterprise, Yodlee Inc US. The assessee operates as adedicated software development center for Yodlee Inc.USA and performs software development that supportsand supplement its holdings company’s offerings in the (iv) Whether the Tribunal Is correct in-law in holding that the deduction under|Section 10B should be computed in the|above manner following the Judgment of|jurisdictional High court in the case of CIT|VS. Tata Elxsik Ltd. whicn has not Decome|final since the same has not been acceptedby the department and SLPs filed by the|revenue on the issue are pending before theHon’‘bie Supreme Court 2 |Facts leading to filing of the appeal brieflystated are that the assessee is a company engaged in.the business of providing software development supportServicetO|Itsholding|COM padaandassociatedEnterprise, Yodlee Inc US. The assessee operates as adedicated software development center for Yodlee Inc.USA and performs software development that supportsand supplement its holdings company’s offerings in the account of aggregation industry. The assessee filed thereturn of Income on 29.09.7008 for Assessment Year2008-09, by which total income of Rs.4,24,888/- wasdeclared and deduction of Rs.5,05,83,628/- underSection 10B of the Act and Rs.3,05,84,109/- as bookprofits under Section 115JB of the Act was claimed. Thereturn was processed under Section 143(1) of the Actand was subsequently taken up for scrutiny. As theInternational transactions of the assessee were Inexcess of Rs.10 Crores, a reference under Section92CA(1) of the Act was made to Transfer Pricing Officeron 14.05.2011 in respect of international transactionsviz., Provision of Software Development Services andMarketing and Sales Support Services. The TransferPricing Officer by an order dated 31.10.2011 made anupward|adjustment.ofRs.3,44,14,532/-tO|theinternational transactions of the assessee wherein Arm’sLength Price (ALP) of the international transactions was.determined at Rs.40,34,77,023/- as against revenue of. Rs.36,90,62,491/- charged by the assessee.| 3.)Tne Assessing Officer thereafter issued adraft assessment order under Section 143(3) read withSection 144C of the Act on 23.10.2011, by which incomeof the assessee was determined at Rs.3,52,21,859/- asagainstthereturnincomeofRs.4,24,888/- and|Rs.3,05,84,109/- under Minimum Alternate Tax (MAT)provisions as computed by the assessee. The assesseefiled objections to the Dispute Resolution Panel (DRP)being aggrieved, by the draft assessment order. TheDispute Resolution Panel by an order dated 04.07.2012rejected the objections filed by the assessee. Theassessee thereupon filed an appeal before the IncomeTax Appellate Tribunal (hereinafter referred to as theTribunal’ for short). The Tribunal by an order dated30.08.2013 inter alia neld that Transfer Pricing Officerougnt to nave given risk adjustments to the margins ofthe comparables for bringing them at par with theassessee and remitted the matter to the file of Transfer Pricing Officer for examining the issue in the light of thedecisions referred to in the order. The Tribunal byplacing reliance of this court in M/S TATA ELXSI LTD.granted the benefit of deduction under Section 10B of.the Act. In the result, the appeal preferred by theassessee was partly allowed. Being aggrieved, therevenue is in appeal before us. 4Learned counsel for the revenue at the outsetfairly submitted that the substantial questions of law 3and 4 have been decided against the revenue by ajudgment of the Supreme Court in5COMMISSTONEROF INCOME TAX-III VS. HCL TECHNOLOGIES LTD: 404 ITR 719_ It is further submitted that the Tribunal.should have adjudicated the case of the assessee.independently and should Nave given findings instead of.placing reliance on the decisions. In this connection, our|attention has been invited to the order passed by theTribunal. It is further pointed out that the Tribunal has.failed to consider the findings recorded by the Dispute 4Learned counsel for the revenue at the outsetfairly submitted that the substantial questions of law 3and 4 have been decided against the revenue by ajudgment of the Supreme Court in5COMMISSTONEROF INCOME TAX-III VS. HCL TECHNOLOGIES LTD: 404 ITR 719_ It is further submitted that the Tribunal.should have adjudicated the case of the assessee.independently and should Nave given findings instead of.placing reliance on the decisions. In this connection, our|attention has been invited to the order passed by theTribunal. It is further pointed out that the Tribunal has.failed to consider the findings recorded by the Dispute Resolution Panel. It is urged that in any case, the issue.with regard to market risk adjustment ought to havebeen remitted for consideration afresh in accordancewith law. On the other hand, learned counsel for theassessee while inviting the attention of this court to theorder passed by the Tribunal submitted that the firstsubstantial.question|oflawdoes.Notarise for.consideration in the fact situation of tne case as the'issues Nave been dealt with on merits Dy the Tribunal. Itis further submitted that the issue with regard to market.risk adjustment nas rightly Deen remitted to the Tribunaland substantial questions of law 3 and 4 in fact areconcluded against the revenue in view of the decision.rendered by the Supreme Court in HCL TECHNOLOGIESLTD. supra. It is also pointed out that no substantialquestion of law arises for consideration in this appeal.5.|We have considered the subDMIsSSIONS madby learned counsel for the parties and have perused therecord. We have carefully gone through the order passed by the Tribunal. From perusal of paragraphs12.4.1 to 27.3, it is evident that the issue with regard tofunctional similarity of the assessee has been examinedin detail by the Tribunal. Therefore, we hold that thefirst substantial question of law framed by a bench ofthis court in fact, does not arise for consideration in theinstant case. So far as second substantial question oflaw. iS concerned, the Tribunal has remitted the issuewith regard to market risk adjustment to the AssessingOfficer in the light of the decision, which have been citedin the order of the Tribunal. We deem it appropriate tomodify the aforesaid directions contained in the order ofthe Tribunal and direct the Assessing Officer todetermine the issue with regard to market riskadjustment afresh in accordance with law. Accordingly,the second substantial question of law is answered. Thethird and fourth substantial questions of law are againstthe revenue and are covered by the by decision of theSupreme Court in HCL TECHNOLOGIES LTD. supra. �6�A/3C�;<�283937/6E�1614@0/0�:.3�122314�/0� 7/02;037�;<�� ����������������������00� �����������