By Sri. K v. Aravind, Adv

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 12 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.484/2013 BETWEEN: 1.THERE COMMISSIONER OF [INCOME-IC.R. BUILDING, QUEENS ROADC.R. BUILDING, QUEENS ROAD BANGALORE, 2.THR DEPUTY COMMISSIONER OF INCOME TAX |CIRCLE- 11(1)|RASHTROTHANA BHAVANNRUPATHUNGA ROADBANGALORECIRCLE- 11(1)|RASHTROTHANA BHAVANNRUPATHUNGA ROADBANGALORE ... APPELLANTS (BY SRI. K. V. ARAVIND, ADV.) AND M/s 3D PLM SOFTWARE SOLUTIONSLIMITED (SUCCESSOR TO DELMIA|SOLUTIONS PVT. LTD., POST MERGER)NO.46/B & 47.I MAIN ROAD, 3 PHASE, |JP NAGAR, BANGALORE - 5600 078_. RESPONDENT (BY SRI.ANKUR PAI, ADV. FOR SRI. K.R. VASUDEVAN. ADV.) Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 2/11 THIS [TA IS FILED UNDER SEHKC.260-A OF INCOME TAACT 1961, ARISING OUT OF ORDER DATED 10/05/2013—PASSED IN ITA NO.1109/BANG/2010, FOR THE ASSESSMENTYEAR 2006-2007, ANNEXURE —- C, PRAYING TO: I. FORMULATETHE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, Il.ALLOW THR APPEAL AND SET ASIDE THR ORDER PASSBED BYTHE ITAT, BANGALORE IN ITA NO.1109/BANG/2010 DATED10/05/2013 ANNEXURE — C AND CONFIRM THE ORDER OF THE.APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSEDBY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE.| THIS APPEAL COMING ON FOR HEARING, THIS DAY,|Ss. SUJATHA, ©, DELIVERED THE FOLLOWING: JU DGMENT Mr. K.V. Aravind,Adv. for Appellants — Revenue. |Mr. Ankur Pai,Adv., forMr. K.R. Vasudevan,Adv., forRespondent — Assessee_ This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, Bangalore inIT[TPIA No.1109/Bng/2010 dated|10.05.2013, relating to the Assessment Year2006-07 Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 3/11 a2This Appeal has been admitted on5.2.2016to consider the following substantial questions of law as.framed by the Revenue in the Memorandum of Appeal. | “1.WhetherOnlthefactsandin|the circumstances of the case and in law the Tribunalwas right in super imposing the decisions of theother benches and the decision of the ITAT whilerejecting the comparables (it) Accel TransmaticLimited, (i) KALS Information Systems Limited,and(ttt)LucidsoftwareLimitedwithoutappreciatingthe.factthatselectionof|comparables in a case depends on assesseespecific FAR analysis and recorded a perverse|finding ? D2 WhetherOnlthe factsandin|thecircumstances of the case and in law the Tribunalwas correct in rejecting the comparables adoptedby the Transfer Pricing Officer only on the basis ofthe order passed by the Tribunal in case of theassessee for other Assessment Year, despite thefinding recorded by the Transfer Pricing Officerregarding functions and _ profitability of thcomparables and the assessee company aresimilar and recorded a perverse finding ? Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 4/11 3.|WhetherOnlthe factsandin|thecircumstances of the case and in law the TribunalWasjustifiedin|fixingthe.relatedpartytransaction filtered at 15% of the total revenuewithout going into the specific facts in the case ofthe Tax Payer and without adducing the basis forarriving at such cut-off at 15% and recorded aperverse finding ?~ Regarding Substantial Question Nos.1 & 2: 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: 7As regards comparable companies a)Infosys Ltd.,b)Aztec Software Ltd., Cc}Persistent Systems Ltd.,d)sSasken Communication Ltd.,e)Flextronics Software Systems Ltd.,f)tGate Global Solutions Ltd., 4/11 3.|WhetherOnlthe factsandin|thecircumstances of the case and in law the TribunalWasjustifiedin|fixingthe.relatedpartytransaction filtered at 15% of the total revenuewithout going into the specific facts in the case ofthe Tax Payer and without adducing the basis forarriving at such cut-off at 15% and recorded aperverse finding ?~ Regarding Substantial Question Nos.1 & 2: 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: 7As regards comparable companies a)Infosys Ltd.,b)Aztec Software Ltd., Cc}Persistent Systems Ltd.,d)sSasken Communication Ltd.,e)Flextronics Software Systems Ltd.,f)tGate Global Solutions Ltd., It is submitted by the learned counsel for'the assessee that the turnover filter of more than200 Crores is to be applied resulting exclusion ofthese companies from the list of comparables. Wefind that this tssue ts also covered in favour of theassessee by the decision of this Tribunal in the Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 5/11 case of M/s Genesis Microchip (I) Put. Ltd. vs.DCIT ITA No.1254/Bang/2010 which has also)been followed by the co-ordinate Bench of thisTribunal in the assessee’s own case for theassessment year 2007-08. Respectfully followingthe same, we direct the AO/TPO to exclude thesecompanies from the list of comparables. 5.|AS|regardsthe.comparablecompantes.... a)Accel Transmatics Ltd.,b)Kals Information Systems Ltd.,Cc)Lucid Software Ltd., We|findthatthese|companiesWwef’considered as comparables in the assessmentyear 2007-08 also and also this Tribinal at para-3.4.A, D & E has observed as under:a)Accel Transmacti Ltd. (Seg) XXXXXXX D.KALS Information System Ltd. (Seq) Incidentally, the selection of this company|as comparable by the TPO was rejected by theTribunal in the case of Trilogy E-Business on thepremise that the information obtained by the TPOby issuance of notice u/s 133(6) of the Act wasnot, however, available in public domain. The Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 6/11 reasons recorded, for appreciation of facts, areextracted hereunder: XNXXXXXX 3.4.1. In conformity with the findings of theco-ordinate Bench of the Tribunal in the case ofTrilogy E-Business, we are of the considered viewthat (i) Accel Transmatic Ltd. (Seg), (iu) AvantiCimcon Technologies Ltd. (ii) Celestial Labs. Ltd.,& (iv) KALS Information Systems Ltd. (Seg) cannotqualify as comparables in the case of theassessee under consideration. It is orderedaccordingly. EK.Lucid Software Limited 3.4.2. TheaboveCOTTLPAYhasbeen|rejected as comparable in the case of TelcordiaTechnologies Put. Ltd. vs. ACIT (supra). Thesubmissions and the finding of the Hon/’bleMumbai Tribunal is reproduced below: XXXXX ”9_Respectfullyfollowingtheabovedecision.ofthe co-ordinateBenchintheassessee’s own case, we direct the AO/TPO toexclude these companies also from the list ofcomparables.” 7/11 Regarding Substantial Question No.3: “6Having heard both the parties andhaving considered the rival contentions and|also material on record, we find that; a)|Aztecsoft Limited..,b)R Systems International Limited are to be rejected as comparables as they|have more than 15% of related parties|transactions. The Tribunal for the assessment|year 2007-08 had considered the issue of.RPT Filter of more than 15% at para-3.5.3 ofits order and has directed the AO/TPO to|exclude these companies from the lst of|comparables.Respectfullyfollowingthedecision of the Co-ordinate Bench in the|assessee’s own case, we direct the AO to.verify whether these two companies have|more than 15% related parties transaction in|the relevant financial year and if it is foundto |be so, these two companies are to beexcluded from the list of comparables.” “6Having heard both the parties andhaving considered the rival contentions and|also material on record, we find that; a)|Aztecsoft Limited..,b)R Systems International Limited are to be rejected as comparables as they|have more than 15% of related parties|transactions. The Tribunal for the assessment|year 2007-08 had considered the issue of.RPT Filter of more than 15% at para-3.5.3 ofits order and has directed the AO/TPO to|exclude these companies from the lst of|comparables.Respectfullyfollowingthedecision of the Co-ordinate Bench in the|assessee’s own case, we direct the AO to.verify whether these two companies have|more than 15% related parties transaction in|the relevant financial year and if it is foundto |be so, these two companies are to beexcluded from the list of comparables.” Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 8/11 4The controversy involved herein is no moreres integrain view ot the decision of this Court inI1.T.A.Nos.536/2015 c/w 537/2015dated95.06.2018[Prl. Commissioner of Income Tax & Anr. V/s.M/s.Softbrands India Pvt. Ltd.,]|wherein it has beenobserved that unless the finding of the Tribunal is foundex facie perverse, the Appeal u/s. 260-A of the Act, isnot maintainable. The relevant portion of the Judgmentis quoted below for ready reference: “Conclusion: | 05. 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 ofinterpretation ofprovisions of Double Taxation|Avoidance Treaties (DIAA), interpretation of|provisions of the Income Tax Act or Overriding|Effect of the Treaties over the DomesticLegislations or the questions like TreatyShopping, Base Erosion and Profit Shifting|(BEPS), Transfer of Shares in Tax Havens. Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 9/11 (like in the case of Vodafone etc.), if based onrelevant facts, such substantial questions|of law could be raised before the High|Court underSection 260-Aof the Act, theCourts could have embarked upon such.exercise of framing and answering such|substantial question of law. On the otherhand, the appeals of the present tenor as to|whether the comparables have been rightly|picked up or not, Filters for arriving at thecorrect list of comparables have been rightly|applied or not, do not in our considered|opinion, give rise to any substantial question|of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|lawand.theSuggested|substantial questions of law do not meet therequirements ofSection 260-A|of the Act andthus the appeals filed by the Revenue are|found to be devoid of merit and the same are.liable to be dismissed. Date of Judgment 12-07-2018, ITA No.484/2013 The Commissioner of Income Tax & another Vs. M/s 3D PLM Software Solutions Limited 10/11 57. We make it clear that the same'§yardsticks and parameters will have to beapplied, even tf 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|7s “ArmLength Price“in the case of the assesseeswith which the assessees may not be|satisfied and have filed such appeals beforethis Court. Therefore we clarify that mere|dissatisfaction with the findings of facts|arrived at by the learned Tribunal ts not at all|a sufficient reason to invoke.Section 260-Aof the Act before this Court. o8. The appeals filed by the Revenue are|therefore dismissed with no order as_ tocosts.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question oflaw arises for consideration in the present case. | o8. The appeals filed by the Revenue are|therefore dismissed with no order as_ tocosts.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question oflaw arises for consideration in the present case. | 6.Hence, the Appeal filed by the Appellants-Revenue is liable to be dismissed and is accordinglydismissed. Nocosts. — Copy of this Order be sent to the Respondent-Assessee, forthwith.Sd/-.JU DGESd/-.JU DGEAN/-|