Date Of Judgment 01-08-2018, Ita v. M/S. Guhring India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 1 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.357/2016 BETWEEN : 1.THE PR. COMMISSIONER OF INCOME-ITAX ![‘T]FLOOR, BMTC BUILDING80 FEET ROAD, KORMANGALA|BANGALORE-560095.80 FEET ROAD, KORMANGALA|BANGALORE-560095. «|THERE DEPUTLY COMMISSIONOF INCOME-TAX.OF INCOME-TAX. CIRCLE-3]1]/2], 2 KFLOOR|BMIC BUILDING80 FEET ROAD, KORMANGALA|BANGALORE -560095.BMIC BUILDING80 FEET ROAD, KORMANGALA|BANGALORE -560095. _ APPBLLANTS| (BY SRI K.V.ARAVIND, ADV.) AND ; M/s. GUHRING INDIA PVT. LTD.,PLOT No.129, BOMMASANDRAINDL. AREA, PHASE IV,ANEKAL TALUK, HOSUR ROADBANGALORBE-560099PAN: AAABCG O789L. _. RESPONDENT. (BY SRI SANDEEP HUILGOL, ADV. FORSRI T.SURYANARAYANA, ADV.) Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 28.10.2015 PASSED IN ITA No.217/BANG/2015, FOR:THE ASSESSMENT YEAR 2010-11, ANNEXURE-D, PRAYING TO:1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAWSTATED ABOVE; 2. ALLOW THE APPEAL AND SET ASIDE THEORDER|PASSED|BYTHREITAT,BANGALOREIN|ITA|No.217/BANG/2015DATED28.10.2015,ANNEXURE-D,CONFIRMING THR ORDER OF THR DRP AND CONFIRM THRORDER PASSED BY THR DBPUTY COMMISSIONBR OF INCOMBTAX, CIRCLE-3]1]|/2}], BENGALURU; AND ETC THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V.Aravind,Adv. for Appellants — Revenue.Mr. Sandeep Huilgol,Adv. tor Mr. T.Suryanarayana,Adv. for Respondent — Assessee.| This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘A’, Bangalore, inIT[TP|A No.217/Bang/2015dated|28.10.2015, relating to the Assessment Year2010-11. a2Theappealhas|beenadmitted|OTL06.12.2017|TO consider.thefollowingsubstantialquestion of law: Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., “WhetherON.thefactsandin|thecircumstances of the case, the Tribunal ts right in|law in holding that foreign exchange gains/ losshave to be considered as operating revenue innature when as per Rule 1OB/2//d/, the net marginrealized by the assessee in its internationaltransactionsShallalone|be|computedfor|comparability analysis under TNMM and Foreignexchange gain/loss does not form part of theprofits realized from international transactions asthe billing by the assessee is done in US dollarsand the foreign exchange gain/loss is not borneby the AEP” 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: "5.3 We have heard the rival contentions|andperusedandcarefullyconsideredthematerial|OF.record; includingthejudicialdecisions cited and placed reliance upon. Weobserve that it has not been disputed that theforeign exchange gain/loss has arisen as aiCOnNSeqCuencofthe.realizationoftheconsideration in the course of business operation Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: "5.3 We have heard the rival contentions|andperusedandcarefullyconsideredthematerial|OF.record; includingthejudicialdecisions cited and placed reliance upon. Weobserve that it has not been disputed that theforeign exchange gain/loss has arisen as aiCOnNSeqCuencofthe.realizationoftheconsideration in the course of business operation Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., for|renderingsoftwaredevelopmentofthe assessee and therefore there is no reason for itsexclusion from the operating revenues for thepurpose of calculating the operating margin of the|assessee. The DRP in its order at para 2.7|thereof, following the order of the co-ordinatebench of this Tribunal in the case of SAP Labs.India Put. Ltd., [supral has held and directed theA.O to consider foreign exchange fluctuation asoperating in nature in respect of the assessee aswellas|thecomparablecompanieswhtledetermining the margins in the case on hand. We|find that this proposition has been upheld by aco-ordinate bench of this Tribunal in the case ofNXP Semi Conductors India Put. Ltd., in IT/TPIANo. 1662/ Bang/ 2014 dated 12.08.2015 whereat para 4.3 thereof it has been held as under :- KVM 5.4|Following he decision of the _ cordinate benches of this Tribunal in the cases of.sap Labs India /[Put./ Ltd., /supra/, Triology EBusiness Software India Put. Ltd., [supray,|Mindteck [India/ Ltd., /[supraf and NXP SemtConductors India Put. Ltd., /supra/, we hold that|operating TECVeChUShouldbecomputedbyincludingthe|foreignexchangegain. Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., Consequently, the grounds at S.Nos.2 & 3 raisedby revenue are dismissed.” 4The controversy involved herein is no moreres integrain view oft the decision of this Court inI1.T.A.Nos.536/2015 c/w 537/2015dated25.06.2018[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 Judgment is quoted below for ready reference: “Conclusion: 55.Asubstantial quantumof|international trade and transactions dependsupon the fair and quick judicial dispensation|in such cases. Had it been a case oOf|Substantialquestionof|interpretation|of|provisions of Double Taxation AvoidanceTreaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of the|Treaties over the Domestic Legislations or the | Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., 6/8 questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Shares|in Tax Havens (like in the case of Vodafone|etc.), uf based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-Aof the Act, the Courts could have|embarked upon such exercise offraming and|answering such substantial question of law.On the other hand, the appeals of the present|tenor as to whether the comparables have|been rightly picked up or not, Futers for|arriving at the correct list of comparables|have been rightly applied or not, do not in our|consideredopinion, giveriseTo anysubstantial question of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|Suggested|substantial questions of law do not meet therequirements ofSection 260-A|of the Act andthus the appeals filed by the Revenue are| Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., 7/8 found to be devoid of merit and the same are.liable to be dismissed. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|Suggested|substantial questions of law do not meet therequirements ofSection 260-A|of the Act andthus the appeals filed by the Revenue are| Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., 7/8 found to be devoid of merit and the same are.liable to be dismissed. 57. We make it cleqr that the sameyardsticks 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. “ArLength 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 Revenueare therefore dismissed with no order as to|costs.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, we are of Date of Judgment 01-08-2018, ITA No.357/2016 The Pr. Commissioner of Income-tax & Another Vs. M/s. Guhring India Pvt. Ltd., 8/8 the 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.| NC. Sd/-.JU DGE Sd/-.JU DGE