Date Of Judgment 01-08-2018 I.t.a v. M/S. Avnet India Pvt. Ltd.,2/7

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE O1[Ss]DAY OF AUGUST 2018| PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.358/2016 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX.5[‘T]FLOOR, BMTC BUILDING5[‘T]FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA|BANGALORE-560 O95.BANGALORE-560 O95. 2.THER DEPUTY COMMISSIONER OF INCOMBE-TACIRCLE-1(1)(1), 2 KFLOOR|CIRCLE-1(1)(1), 2 KFLOOR| BMTC BUILDING, 80 FEET ROAD KORMANGALA, BANGALORE-s60095. .. APPBLLANT (By Mr. K.V. ARAVIND, ADV.) AND: M/s. AVNET INDIA PVT. LTD.,No.402, 4 FLOOR, RMZ INFINITYTOWER B, No.3, OLD MADRAS ROADBANGALORBE-5600 1PAN: AACCA O48 1G. . RESPONDENT (By Mr. SANDEEP HUILGOL, ADV., FORMr. T. SURYANARAYANA, ADV.,) THIS L.T.A. IS FILED UNDER SEHKCIION J6O0O-A OF THEACT, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS.OF LAW. ALLOW THE APPEAL AND SET ASIDE THE ORDERS|PASSED)BYTHEINCOME-TAX.APPBRLLATBTRIBUNAL, Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd.,2/7 BENGALURU IN ITA No.79/7/BANG/2011 DATED 18-11-2015,ANNEBEXURE-D AND CONFIRM THR ORDER OF THR DRCONFIRMING|THE;ORDERPASSEDBY|THE;DEPUTY.COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(1), BENGALURU|& KTC. THIS LT.A. COMING ON FOR HEARING THIS DAY,S. SUJATHAJT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. K.V. Aravind,Adv. for Appellants-Revenue |Mr. Sandeep Huilgol,Adv. for | Mr. T. Suryanarayana, Adv. for Respondent-Assessee 1. The Appellants-Revenue have filed this appeal u/s.260Aof the Income Tax Act, 1961, raising)purportedly one substantial question of law arising from the order oft theITAT, Bangalore Bench ‘B’, Bangalore>. dated 18.11.2015passed1nIT(TP)ANo.757/Bang/20111(M/s.Avnet India Put. Ltd., vs. The| Deputy Commissioner of Income-tax )forA.Y.20077-O8 2. This appeal has been admitted on|06.12.2017to consider the following substantial question of lawframed by the learned counsel for the Appellants-Revenue: - “Whether, the Tribunal, on the facts and in|the circumstances of the case, the tribunal is rightin holding that there is no separate internationaltransaction of interest on overdue _ receivablwhen the recovery not made on such receiwableswithin the time limit Qmounts to q loqn andaccordingly interest is to be charged at ArmsLength Price?.” 3. The learned Tribunal, after discussing the rivalcontentions of both the Appellants-Revenue and theRespondent-Assessee, has given the following findings:-| « 8.|We|have.heardthe|rivalsubmissions. The assessee company reportedinternational transactions in its TP report. Onareference by the AO, the learned TPO acceptedthat the price charged by the assessee companyon these transactions are at arm’s length.However, the TPO made adjustments on accountof national interest for the excess period allowedby the assessee -—- company to its AE forealization of its dues. The TPO applied 14% ofinterest on the outstanding amount of Rs. Thelearned DRP also concurred with the finding oflearned IPO. There is no dispute that thetransaction in question falls within the ambit of Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd.,4/7 international transaction u/s 92B of the IT Act.However, this transaction ts not an independenttransaction. It is an integral part of transaction ofsale made to the AE and therefore, it has to beconsidered alongwith the main transaction. Thesimilar issue had come up for considerationbefore the Co-ordinate Bench of Mumbai in thecase of M/s Goldstar Jewellary Ltd. (Supra),wherein it was observed as under: XXXXXXXXXXXXXXNX Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd.,4/7 international transaction u/s 92B of the IT Act.However, this transaction ts not an independenttransaction. It is an integral part of transaction ofsale made to the AE and therefore, it has to beconsidered alongwith the main transaction. Thesimilar issue had come up for considerationbefore the Co-ordinate Bench of Mumbai in thecase of M/s Goldstar Jewellary Ltd. (Supra),wherein it was observed as under: XXXXXXXXXXXXXXNX Respectfully following the above decision,|WE|holdthatthere.Canbe|TLOseparateinternational transaction of ‘interest’ in theinternational transaction of sale. Early or laterealization of sale proceeds is only incidental totransaction of sale, but not a separate transactionin nature. Since we hold that the impugnedtransaction of interest on delayed realization ofsale proceeds is not international transaction, it is|not necessary to adjudicate upon the additionalgrounds raised by the assessee company.Hence, the appeal is treated as partly allowed forstatistical purposes”. 4. However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015delivered on Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd.,5/7 25.06.2018 (Pri. Commissioner of Income Tax & Anr. Vs. M/s. Softbrands India Pvt. Ltd.,)1 has heldthat 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 ot 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 TreatiesOVEeCtheDomestic.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 could Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd., 6/7 be raised before the High Court underSection260-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 if 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 which Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd., 7/7 57. We make it clear that the same|yardsticks and parameters will have to beapplied, even if 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 which Date of Judgment 01-08-2018 I.T.A.No.358/2016 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Avnet India Pvt. Ltd., 7/7 the assessees may not be satisfied and have filedsuch 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.” Oo. Having heard the learned counsels for theparties, we are therefore of the opinion that nosubstantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue isliable to be dismissed and it isaismissedaccordingly No costs. Srl. Sd/-. JUDGE Sd/-. JUDGE|