Bang/2013( Income-Tax Officer v. M/S Radtsys India

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 29 DAY OF AUGUST 2018. PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA|I.T.A.No.130/2018 BETWEEN : 1.|PR. COMMISSIONBR OF INCOME TAX-5| BMTC COMPLEX, KORAMANGALA, BANGALORE — 960 O995 oD THE INCOME-TAX OFFICKR WARD -12 (1), BANGALORE _ APPBRLLANTS) (BY SRI.E.I.SANMATHI, ADV.) AND ; M/S.RADISYS INDIA PVT. LTD.,.KHORMERLY CONTINUOUSCOMPUTING INDIA P. LID.,6 FLOOR, ELECTRA, B-WING,|EXORA BUSINESS PARK,|PRESTIGE TECH PARK,MARATHAHALLIT,SARJAPUR OUTER RING ROAD,BBENGALURU — 560 103PAN: AAACC3 169M _ RESPONDENT THIS INCOME TAX APPEAL IS FILED UNDER SKC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:|24/08/2017 PASSED IN IT (TP)A NO.615/BANG/2013, FOR THE ASSESSMENT YEAR:2008-09 VIDE ANNEXURE - A, PRAYING TO:(1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR,SUCH OTHER QUESTIONS OF LAW As MAY BE FORMULATEDBY THR HON'BLE COURT AS DBEBMEBED FIT AND SKHT ASIDE APPELLATE ORDER DATED:24/08/2017 PASSED BY THE.INCOME TAX APPELLATE TRIBUNAL, 'B'’ BENCH, BENGALURU,IN IT(TP)A NO.615/BANG/2013 FOR ASSESSMENT YEAR 2008-O09 VIDE ANNBXURE - A. THIS LT.A. COMING ON FOR ADMISSION THIS DAY,S. SUJATHAJT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. Sanmathi E.I.Adv. for Appellants-_|Revenue | The Appellants-Revenue have filed this appealu/s.260Aof the Income Tax Act, 1961, raisingpurportedly certain substantial questions of law arising from the order of the.ITAT, ‘B’ Bench, Bangalore>.dated24.08.2017passed1nNIT(TP)ANo.615 /Bang/2013( Income-Tax Officer Vs. M/s Radtsys India P. Ltd.,)for A.Y.2008-09. 2. The proposed substantial questions of law framed.1n theMemorandumoT|appealby theAppellants-RevenueaTe€quotedbelowfor.readyreference:- Date of Judgment: 29-08-2018 I.T.A.No.130/2018Pr. Commissioner ot Income Tax-b & Anr. Vs.M/s.Radisys India Pvt. Ltd. 3/9 “1.Whether, on the facts and in _ thcircumstances of the case and in law, theTribunalWasjustifiedin|seekingexact|comparability, which searching for comparablecompanies of the assessee under TNMM whereas|the.requirementoflaw.andinternationaljurisprudence require seeking similar comparablecompanies?. 2. Whether, on the facts and in thecircumstances of the case and in law, theTribunal was right in seeking comparability inimposing condition beyond law whereas therequirement of law is to acknowledge only thosedifferences that are likely to materially affect themargin? 3. Whether, on the facts and in thecircumstances of the case and in law, theTribunal was justified in not acknowledging thatdeterminationofALPby|carryingOUT.comparabilityanalysis of the comparablecompanies is an art and not exact science as notwo companies are exactly same? 4. Whether, on the facts and in thecircumstances of the case and in law, theTribunalWasjustifiedindemandingcomparability standards that may itself defeat the purpose of law relating to determination ofALP under the Act? oS. Whether, on the facts and in thecircumstances of the case and in law, theTribunalWasjustifiedin|decidingcertaincomparables as functionally not comparable bydemanding comparability standards that mayitself defeat the purpose of law relating todetermination ofALP under the ACT? | 6. Whether, on the facts and in _ thcircumstances of the case and in law, theTribunal was justified in setting aside the 10Arecomputation made by the assessing authorityby following the decision of this Hon’ble HighCourt in the case of CIT v/s. Tata Elxt which hasnot reached finality”? 3. The learned counsel appearing for theAppellants — Revenue, Mr. E.I.Sanmathi, submittedthat he does not press the sixth Substantial Questionof Law raised by him in the present appeal. The same is"placed on record. | 4. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:- | ;Regarding substantial questions of law Nos. 1 to 5: 6. Whether, on the facts and in _ thcircumstances of the case and in law, theTribunal was justified in setting aside the 10Arecomputation made by the assessing authorityby following the decision of this Hon’ble HighCourt in the case of CIT v/s. Tata Elxt which hasnot reached finality”? 3. The learned counsel appearing for theAppellants — Revenue, Mr. E.I.Sanmathi, submittedthat he does not press the sixth Substantial Questionof Law raised by him in the present appeal. The same is"placed on record. | 4. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:- | ;Regarding substantial questions of law Nos. 1 to 5: “O08. In ground no.4, the Revenue is|aggrieved with the action of the CIT(AO in deletingM/s. Celestial Biolabs Ltd, as a comparable, onthe ground that it is functionally different. O9. The Ld. DR has submitted that it was.held by the CIT (A) that Celestial Biolabs Ltd, isnot comparable with that of the assessee. The Ld.DR has drawn our attention to paras 83 and 8&4of the CIT (A)’s order, which read as under: XXXXXXXXXXXNXX 10. On the other hand, the Ld. AR has)drawn our attention to pages 494 to 497 of thepaper book where this comparable has beenexcluded by the Tribunal vide its order passed inassessee’s own case for the earlier assessmentyear 2007-08 to the following effect: NXXXXXXKKKXXX 11. Following the order of the coordinatebench of the Tribunal (supra), we were of theopinion that this company M/s.Celestial Biolabs Ltd, should not have been deleted from the list ofcomparables. There is no change in fact andcircumstance of the case for the present year andtherefore we’re bound to follow the order of thecoordinate bench passed for the earlier year.Accordingly the ground of the revenue is requiredto be dismissed. 12. In ground nos.5 and 6, the Revenue is|aggrieved against the inclusion of M/s. SaksoftLtdandexclusion.ofM/s.|AvantCimconTechnologies Ltdfrom the list of comparables. 13. Relying on the earlier order of the)Tribunal at paras 87, 88 for M/s.Saksoft Ltd andParas96.andQT|forM/s.AvantCimconTechnologies, of CIT(A), the Ld. DR has submittedthat these companies are to be excluded as theCIT(A) has wrongly included M/s.Saksoft Ltd,andwronglyexcludedM/s.Avant|CimconTechnologies Ltd, on the basis that thesecompanies are notfunctionally comparable ~ 5.However, this Court in a recent judgment in > ITA No.536/2015 C/w ITA No.537/2015delivered on25.06.2018 (Pri. Commissioner of Income Tax & Date of Judgment: 29-08-2018 I.T.A.No.130/2018Pr. Commissioner ot Income Tax-b & Anr. Vs.M/s.Radisys India Pvt. Ltd.7/9 Anr. Vs. M/s. Softbrands India Pvt. Ltd.,)1 has held that in these type of cases, unless anex-facleperversityin the findings of the learned Income Tax AppellateTribunal is established by the appellants, the appeal atthe instance of an assessee or the Revenue under|Section 260-Aot the Act is not maintainable. The relevant portion of the said judgment is.quoted below for ready reference: §— Conclusion: oo. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|aCaSeofsubstantialquestion.Of|interpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectofthe TreatiesOVETthe|Domestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), if based on relevantfacts, such substantial questions of law couldbe raised before the High Court underSection Date of Judgment: 29-08-2018 I.T.A.No.130/2018Pr. Commissioner ot Income Tax-b & Anr. Vs.M/s.Radisys India Pvt. Ltd. 8/9 §— Conclusion: oo. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|aCaSeofsubstantialquestion.Of|interpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectofthe TreatiesOVETthe|Domestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), if based on relevantfacts, such substantial questions of law couldbe raised before the High Court underSection Date of Judgment: 29-08-2018 I.T.A.No.130/2018Pr. Commissioner ot Income Tax-b & Anr. Vs.M/s.Radisys India Pvt. Ltd. 8/9 260-A|of the Act, the Courts could haveembarked upon such exercise of framing and)answering such substantial question of law. Onthe other hand, the appeals of the present tenoras to whether the comparables have been rightlypicked up or not, Filters for arriving at the correctlist of comparables have been rightly applied ornot, do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the consideredopinion that the present appeals filed by theRevenue do not give rise to any substantialquestion of law and the suggested substantialquestions of law do not meet the requirements ofSection 260-A.of the Act and thus the appealsfiled by the Revenue are found to be devoid ofmerit and the same are liable to be dismissed. | 57. We make it clear that the same|yardsticks and parameters will have to beapplied, even tf such appeals are filed by theAssessees, because, there may be cases wherethe Tribunal giving its own reasons and findingshas found certain comparables to be goodcomparables to arrive at an‘Arm’s LengthPrice“in the case of the assessees with whichthe assessees may not be satisfied and have filed such appeals before this Court. Therefore weclarify that mere dissatisfaction with the findings|offacts arrived at by the learned Tribunal is notat all a sufficient reason to invokeSection 260-Aof the Act before this Court. o8. The appeals filed by the Revenue are)therefore dismissed with no order as to costs.” 6. Having heard the learned counsel for theAppellants-Revenue, we are therefore of the opinion thatno substantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue isliable to be dismissed and it is<-"*-"".<accordinglyNo costs. Copy of this order be sent to the Respondent-assessee forthwith. Sd/-.JUDGE| Sd/-.JUDGE|