Date Of Judgment 02-07-2018, Ita v. M/S Metric Stream Infotech

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 2 DAY OF JULY 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.516/2017 BETWEEN : 1.Pr. COMMISSIONER OF INCOME TAX -4BMTC COMPLEX, KORAMANGALA, |BANGALORE,BMTC COMPLEX, KORAMANGALA, |BANGALORE, «|DEPUTY COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE-12 (1) |CENTRAL CIRCLE-12 (1) | BMTC COMPLEX, KORMANGALA, | BANGALORE_ APPBLLANTS| (BY SRI E.L.SANMATHI, ADV.) AND : M/s METRIC STREAM INFOTECHNO. KAY ARR VALKI PINEHURST, 100 FEET ROAD, |1[Si]PHASE 2 STAGE, BIM LAYOUT, BANGALORE. |_. RESPONDENT. (BY SRI CHYTHANYA K.K., ADV.) THIS [TA IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, ARISING OUT OF ORDER DATED 09.12.2016)PASSED IN I[T(TP)A NO.216/BANG/2014, FOR THE ASSESSMENTYEAR-2009-2010, ANNEXURE-A PRAYING TO: (1) DECIDE THE.FOREGOING QUESTION OF LAW AND/OR SUCH OTHER.QUESTIONS OF LAW AS MAY BE FORMULATED BY THE) Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 2/8 HON'BLKE COURT AS DEBEBMBD FIT AND SHBT ASIDE APPELLATK ORDER DATED 09.12.2016 PASSED BY THE.INCOME TAX APPELLATE TRIBUNAL, A’ BENCH, BANGALORE,AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN-APPEAL PROCEEDINGS IN IT/TP/JA NO.216/BANG/2014 FOR A.Y.2009-10 ANNBXURE-A & GRANT SUCH OTHER RELIEF AS.DBEMBD FIT. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,|Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. E.I.Sanmathi, Adv. for Appellants — Revenue.Mr. Chythanya K.K.,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,SA?Bench,Bangalore,1n [TT{TP|.No.216/Bang/14dated|09.12.2016|(M/s MetricStream Infotech —v- The DeputyCommissioneroT IncomeTax)relatingTO the.Assessment Year2009-10. 2. The proposed substantial questions of lawframed by the Revenue in the Memorandum of Appealare as under: Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 3/8 “1. Whether on the facts and in thecircumstances of the case, the Tribunal ts right|in law in directing assessing authority/TPO to exclude 7 comparable from list of comparable|chosen by TPO on the ground of turnover filter|even when sales turnover of the company does|not have any impact on the margins earned and|there is no correlation between the size of the|company and the profit margins reported and|further in the business model like that of|assessee having a cost plus markup, _ thturnover is not relevant since there is no impact|of turnover on the cost plus margin earned P| 2. Whether on the facts and in thecircumstances of the case, the Tribunal ts right|in law in directing assessing authority/TPO to exclude certain comparable on the basis of|functional dissimilarity by appreciating changes|in any filter — either qualitative or quantitative — by any appellate authority should be followed|by fresh TP study or by not selectively applying|their modified qualitative filter to only few|comparable challenged by the assessee ?" Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 4/8 3. The learned Tribunal, after discussing the rival contentionsoT|boththeAppellant-RevenueandRespondent-Assessee, has returned the § finding asunder: “ O09, We find that the Companiesmentioned from serial No.1 to serial No.7 have|been discussed in the orders of the co-ordinate|Bench in M/s Mcafee Software (India) Put. Ltd -v- DIT in IT(TP)A No.04/ Bang/ 2012 and hencto be excluded as not being comparable. Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 4/8 3. The learned Tribunal, after discussing the rival contentionsoT|boththeAppellant-RevenueandRespondent-Assessee, has returned the § finding asunder: “ O09, We find that the Companiesmentioned from serial No.1 to serial No.7 have|been discussed in the orders of the co-ordinate|Bench in M/s Mcafee Software (India) Put. Ltd -v- DIT in IT(TP)A No.04/ Bang/ 2012 and hencto be excluded as not being comparable. 10. With regard to Bodhtree ConsultingLtd., it is submitted that the company is in the|businessof|softwareproducts:andWasengaged in providing open & end to end web|solutions software consultancy and design &|development of software using latest technologywhereas the appellant is purely engaged in the|business of providing software development|services to its parent company. Therefore, the|company shall be excluded from the list of|comparables to determine the arm’s length price|in the appellant’s case.” Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 5/8 4. The 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.Commissioner of Income Tax & Anr. -v- 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: 55.Asubstantial quantumof|international trade and transactions depends|upon 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 |questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Shares| Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 6/8 in Tax Havens (like in the case of Vodafone|etc.), tf 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|found to be devoid of merit and the same are.liable to be dismissed. Date of Judgment 02-07-2018, ITA No.516/2017 Pr. Commissioner of Income Tax-4 & another Vs. M/s Metric Stream Infotech 7/8 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.” 7/8 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.” o. In the circumstances, having heard the learnedCounsel appearing for both the sides, We are of theconsidered opinion that no substantial question of lawarises for consideration in the present case. M/s Metric Stream Infotech 8/8 Hence, the Appeal filed by the Appellant-Revenue is liable to be dismissed and is accordingly dismissed. — No costs. In. Sd/-.JUDGE. Sd/-.JUDGE.