Date Of Judgment 03-07-2018, Ita v. M/S Apotex Research Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 3 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.603/2017 BETWEEN : 1.THE Pr. COMMISSIONER OF |INCOME TAX, CIT(A), 5 FLOOR, ©BMTC BUILDING, 80 FEET ROAD,INCOME TAX, CIT(A), 5 FLOOR, ©BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095. «|THERE DEPUTLY COMMISSIONER OF INCOME TCIRCLE-11(1), PRESENT ADDRESS—CIRCLE-1(1) (1), 2 FLOOR,CIRCLE-11(1), PRESENT ADDRESS—CIRCLE-1(1) (1), 2 FLOOR, BMTC BUILDING, 80 FEET ROAD,KORMANGALA,BBENGALURU-560 095. _ APPBLLANTS| (BY SRI K.V.ARAVIND, ADV.) AND : M/s APOTEX RESEARCH PVT. LTD.,.NO.1, BOMMASANDRA INDUSTRIAL AREA,*[‘T]PHASE, BOMMASANDRA INDUSTRIALESTATE (P.O), BENGALURU-560099PAN: AABCA 2791B.. RESPONDENT. (BY SRI K.MALLAHA RAO, ADV.) THIS TTA IS FILED UNDER SECIION 2J6O0-A OF INCOMTAX ACT 1961, ARISING OUT OF ORDER DATED 22.02.2017,PASSED IN IT(TP)A NO.12860/BANG/2010, ANNEXURE-D FOR Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. THEASSESSMENTYEAR2006-2007,PRAYINGI. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATEDABOVE. Il ALLOW THE APPEAL AND SEI ASIDE THE ORDERSPASSED.BYTHEINCOME-TAX.APPBRLLATBTRIBUNAL, BENGALURUIN|IT(TP)ANO.1286/BANG/2010—DATEHDID O2.29017 ANNBEXURE-D AND CONFIRM THR ORDER OF THDRP CONFIRMING THR ORDER PASSEBKED BY THR DBPUCOMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU. TO: THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,|Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. K.V.Aravind,Adv. for Appellants — Revenue. Mr. K.Mallaha Rao,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, $%&Bench, Bangalore, inIT A No.1286/Bang/2010dated 23.02.2017(Apotex Research Private Ltd., -v- TheDeputy Commissioner of Income Tax) relating to theAssessment Year2006-07. 2. The proposed substantial question of law.framed by the Revenue in the Memorandum of Appeal is"as under: Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. 3/8 “Whether on the facts and circumstancesof the case, the Tribunal is right in law in|directingtheTPOtoexcludecertaincomparables even when the TPO has rightly|chosen the said comparables considering the|functions and as the said comparables satisfies|all the required tests and even when the law P” 3. The learned Tribunal, after discussing the rivalcontentionsoT|boththeAppellant-RevenueandRespondent-Assessee, has returned a finding as under:| “ 8. With regard to Celestial Labs Ltd., itwas contended on behalf of the assessee thatthisCOllpa lprovidessoftwareproducts/services and bioinformatics services. |Profile of this company is available at page 470.of compilation, according to which, the companyhas developed a de novo drug design tool.“CELSUITE” to drug discovery in finding the.lead molecules tor drug discovery and protected|the IPR by filing under the copy right/patent,act. As per turnover given at page 486, the.turnover from bioinformatics services, data|warehousing and mining, software development, Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. product and services was 1022.18 lakhs in theFY 2005-06. since this company is alsofunctionallyditterentfromtheaSSECSSCEcompany, it can also not be compared as a goodcomparable. Accordingly, this company has tobe excluded from the list of comparables. Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. product and services was 1022.18 lakhs in theFY 2005-06. since this company is alsofunctionallyditterentfromtheaSSECSSCEcompany, it can also not be compared as a goodcomparable. Accordingly, this company has tobe excluded from the list of comparables. 9. So tar as Vimta Labs Ltd. is concerned,|it was further contended that this company isalso functionally different, as it focuses onelement that effect the total health of people 1.e.,food, water, drugs, clinical diagnostics andenvironment. However, Apotex (the assessee) isengaged in product research & developmentservices pertaining to pharmaceutical productsonly. This company also offers wide spectrumof services and in the absence of properrevenue /segmentalbreak-up,theCompanyshould not be considered as a comparable. Thebifurcation of revenue is not available and forreference, our attention was invited to page 496,where the profile and services of this companywas mentioned and from a careful perusal ofthese details of profile and services, we are ofthe view that this company is also functionally Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. different, therefore cannot be taken as a goodcomparable. We accordingly direct the TPO/AOto exclude this company from the list ofcomparables.” 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 dependsupon the fair and quick judicial dispensation|in such cases. Had it been a case oOf|substantialquestionof|interpretation of| Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. 6/8 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|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. 56. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|suggested| Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. 7/8 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. 56. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|suggested| Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. 7/8 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. 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 | “ALength 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.” Date of Judgment 03-07-2018, ITA No.603/2017 The Pr. Commissioner of Income Tax & another Vs. M/s Apotex Research Pvt. Ltd. 8/8 o. In the circumstances, having heard the learned Counsel appearing for both the sides, We are of theconsidered opinion that no substantial question of lawarises for consideration in the present case. Hence, the Appeal filed by the Appellant-Revenue is liable to be dismissed and is accordingly dismissed. —No costs. In. Sd/-.JUDGE. Sd/-.JUDGE.