By Sri.aravind K v. Adv

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 26 DAY OF JULY 2O18| PRESENT THR HON’BLE DR.JUSTICEK VINBET KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.477/2016 BRIWEHEN 1.THE PR. COMMISSIONER OF INCOME-TAX.$[‘T]FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BBNGALURU - 560 O95.$[‘T]FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BBNGALURU - 560 O95. oD THE INCOME-TAX OFFICKRCIRCLE-11(2) PRESENT ADDRESSDCIT, C-3(1)(1), 5[‘T]FLOOR, ~BMTC BUILDING,80 FEET ROAD, KORMANGALA, |BBNGALURU - 560 O95._. APPBLLANTS| (BY SRI.ARAVIND K V. ADV.) AND:M/S FCG SOFTWARE SERVICES (INDIA) PVT. LTD.,.(NOW MERGED WITH COMPUTER SCIENCESCORPORATION INDIA PRIVATE LIMITED)~ AND 3 FLOOR, 3 SJR [PARK,|EPIP-ZONE, 1, WHITEFIELD ROAD,BBNGALURU - 560 066|PAN: AABGP 5094 K_. RESPONDENT (BY MRS.M.R.VANAJA, ADV.) Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 2/8 THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX.ACT 1961, ARISING OUT OF ORDER DATED:08/01/2016 PASSEDIN IT(TPJA NO.1447/BANG/2010, FOR THE ASSESSMENT YEAR|I2OO06-JOO7 ANNBXURE - D. PRAYING TO: 1. FORMULATE THESUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW|THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT,|BENGALURUIN|IT(TP)ANO.|1447/BANG/2010—DATED:08/01/2016 ANNEXURE - D AND CONFIRM THE ORDER OF THE|DRP CONFIRMING THR ORDBR PASSED BY THR DEBPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BENGALURU.| THIS APPBALCOMING ON FOR HEARING, THIS DAY,Ss. SUJATHA, », DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V. Aravind,Adv. for Appellants — Revenue. |Mrs. M.R. Vanayja,Adv., for Respondent — Assessee. | This Appeal is filed by the Revenue purportedly|raising substantial questions of law arising from the.Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore inITTTPIA No.1447/Bang/2010dated08.01.2016, relating to the Assessment Year2006-07 ? ThisAppealhasbeenadmittedOTl13.12.2017|TO consider.thefollowing.substantial questions of law. Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 3/8 “1. Whether on the facts and circumstances|of the case and law, the Tribunal ts right in law in)excludingcomparablesnamely,M/s.KalsInformation Systems Ltd, M/s. Accel TransmaticLtd and M/s. Tata Elxsi Ltd on the ground offunctional dissimilarity evenwhenTransferPricing Officer has rightly chosen the sameconsidering its functions which are similar toassessee’s and has satisfied all the requiredtests and without doing an FAR analysis of thetaxpayer with those other cases? 2. Whether on the fact and circumstances|of the case and law, the Tribunal has erred indirecting the exclusion of comparable companieshaving RPT transactions more than 15% ignoringthe.TPO’S|observationthatthe.basis|for|determining the threshold limit for eliminatingcompanies having RPI transaction more than25% was through the determination of Indiancompanies with foreign shareholding greater than26% and therefore had its basis in the provisionsof the Act and the accounting standard AS-13?"| 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 4/8 Regarding Substantial Question No.1: oo19, The following were the relevantobservations of the Tribunal on the aforesaidcomparable companies in the case of Triology E-Business Software India Put. Ltd. (supra) : (d) KALS Information Systems Ltd. XXXXXXXXX| (e) Accel Transmatic Ltd., XXXXXXXX 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 4/8 Regarding Substantial Question No.1: oo19, The following were the relevantobservations of the Tribunal on the aforesaidcomparable companies in the case of Triology E-Business Software India Put. Ltd. (supra) : (d) KALS Information Systems Ltd. XXXXXXXXX| (e) Accel Transmatic Ltd., XXXXXXXX 20. The facts and circumstances underwhich the aforesaid companies were consideredas comparable is identical in the case of theAssessee as well as in the case of Triology E-BusinesssoftwareIndia.Put.Ltd.(Supra).Respectfully following the decision of the Tribunalreferred to above in the case of Triology E-Business Software India Put. Ltd. (supra), wedirect that KALS InfoSystems Ltd. and AccelTransmatic Ltd. be excluded from the list of 20comparable arrived at by the TPO.” 22. As far as comparable company chosen|by the TPO viz., Tata Elxsi Ltd., is concerned, thecomparability of the aforesaid company with thatof the software service provider such as theAssessee was considered by the Mumbai Bench|of this Tribunal in the case of Logica Put. Ltd. IT) (TP) 1129/7 Bang/ 2011 AY O7-O8) wherein on tcomparability of the aforesaid company, theTribunal held as follows:-NXXXXKXXKXX 23. In view of the aforesaid decision, we hold thatTata Elxst has to be excluded from the list ofcomparable chosen by the TPO.” Regarding Substantial Question No.2: “21. As far as comparable companies chosen by|the TPO viz., Aztec Software Limited andGeometric Software Ltd. (Seg.) and Megasoft Ltd.,are concerned, it is not in dispute before us thatthe related party transaction in the case ofcompanies exceeds 15% and in view of thedecision of the Tribunal in the case of 24 x 7Customer.Com.Put.Ltd.in|ITA|No.227/ Bang/2010, followed by this Tribunal inthe case of Logica Private Ltd. (supra) wherein itwas held that where the RPT exceeds 15%, suchcompanies should not be taken as comparablecompanies. Following the said decision, we holdthat the aforesaid companies referred to above beexcluded from the list of comparable companieswhile working out the ALP. ” Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 6/8 4The controversy involved herein is no moreTeSintegrain view of the decision of this Court inI1.T.A. Nos.536/2015 c/w 537/2015dated ~—25.06.2018[Prl.|Commissionerof|IncomeTaxODAnr.,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, is notmaintainable. The relevant portion of the Judgment isquoted below for ready reference: “Conclusion: o3. A substantial quantum of international trade|and transactions depends upon the fair and quickjudicial dispensation in such cases. Had it been acase of substantial question of interpretation ofprovisions of Double Taxation Avoidance Treaties|(DTAA), interpretation of provisions of the Income.Tax Act or Overriding Effect of the Treaties over theDomestic 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, suchsubstantial questions of law could _ be raised|before the High Court underSection 260-A.of the. Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 7/8 o3. A substantial quantum of international trade|and transactions depends upon the fair and quickjudicial dispensation in such cases. Had it been acase of substantial question of interpretation ofprovisions of Double Taxation Avoidance Treaties|(DTAA), interpretation of provisions of the Income.Tax Act or Overriding Effect of the Treaties over theDomestic 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, suchsubstantial questions of law could _ be raised|before the High Court underSection 260-A.of the. Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 7/8 Act, the Courts could have embarked upon such.exerciseofframingandanswering suchsubstantial question of law. On the other hand, theappeals 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 ourconsidered opinion, give rise to any substantialquestion of law. 56. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantialquestion of law and the suggested substantial|questions of law do not meet the requirements of|Section 260-Aof the Act and thus the appealsfiled by the Revenue are found to be devoid of merit|and the same are liable to be dismissed. 57. We make it clear that the sameyardsticks and parameters will have to be applied,even if such appeals are filed by the Assesseeés,because, there may be cases where the Tribunalgiving its own reasons and findings has foundcertain comparables to be good comparables toarrive at an‘Arm’s Length Price~ in the case of'the assessees with which the assessees may not|be satisfied and have filed such appeals before this Date of Judgment 26-07-2018, ITA No.477/2016 The Pr. Commissioner of Income-Tax & Another Vs. M/s FCG Software Services (India) Pvt. Ltd., 8/8 Court.ThereforeWE|clarifythatreredissatisfaction with the findings offacts arrived atby the learned Tribunal is not at all a sufficientreason to invokeSection 260-Aof the Act beforethis Court. 58. The appeals filed by the Revenue aretherefore dismissed with no order as to costs.” 5.In the circumstances, having heard thelearned Counsel appearing for both the parties, We are ofthe considered opinion that no substantial question of|law 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. AN/- Sd/-.JUDGE| Sd/-.JUDGE|