Date Of Judgment 03-07-2018 I.t.a v. M/S. Amba Research (India) Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU.DATED THIS THE 3 DAY OF JULY 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs. JUSTICE S.SUJATHA|I.T.A.No.415/2016 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX, CIT{(A)k FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BANGALORE -560 095.k FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BANGALORE -560 095. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX,|CIRCLE-1(1)(1), 7 FLOOR,BMTC BUILDING, 30 FEET ROAD,CIRCLE-1(1)(1), 7 FLOOR,BMTC BUILDING, 30 FEET ROAD, KORMANGALA, BENGALURU-560 O95. .. APPBLLANT (BY Mr. K.V. ARAVIND, ADV.) AND: M/S. AMBA RESEARCH (INDIA) PVT. LTD.,#[‘T]FLOOR, ELIXIR CHANCERY BUILDING, |MUNICIPAL DOOR NO. 135/1-2, RESIDENCY ROAD, BENGALURU-560 O25.PAN: AABCA 9391H. . RESPONDENT (SERVED AND UNREPRESENTED) THIS ILT.A. IS FILED UNDER SECTION 2J6O0-A OF INCOMTAX ACT, 1961, PRAYING TO 1. FORMULATE THE SUBSTANTIAL|QUESTIONS OF LAW STATED ABOVE (2) ALLOW THE APPEALAND SET ASIDE THE ORDERS PASSED BY THE MITAT, Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., BENGALURU IN IT(TP)A No.286/Bang/2015 DATED 09/03/2016.ANNEBEXURE-D AND CONFIRM THR ORDER OF THR DRCONFIRMING|THE;ORDERPASSEDBY|THE;DEPUTY.COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU|& KTC. THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY Dr. VINEET KOTHARIJ' DRLIVBERED THR FOLLOWING:- JUDGMENT Mr. K.V. Aravind,Adv. for Appellants-Revenue The Appellants-Revenue have filed this appeal u/s.260Aot the!Income Tax Act, 1961, raising. purportedly certain substantial questions of law arisingfrom the order of the.ITAT, ‘B’ Bench, Bangalore>.dated|09.03.2016passed in IT(TP)A No.286/Bang/2015°(Amba Research (India) P. Ltd., vs. Deputy Commissioner of Income-tax) forA.Y.2010-11. 2. The proposed substantial questions of lawframed1n the Memorandum|ot appealby the.Appellants-Revenue|aTe€quotedbelowforreadyreference:-. Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 3/8 “7.Whether,Onlthefactsandin|thecircumstances of the case, the Tribunal is right inlaw in demanding comparability standards thatmay itself defeat the purpose of law relating todetermination ofALP under the Income tax Act?” aWhether,Onlthefactsandin|thecircumstances of the case, the Tribunal ts right intrying to find out exact replica of the assessee fordetermining the Arm’s Length Price (ALP) basedon such replica, even when the law and theinternational jurisdictional jurisprudence itselfrecognizethatthere.cannotbe|aT?exact.comparable to a given situation, especially withTransaction Net Margin Method as the mostappropriate method?” 3.|Whether,OF|thefactsandin|thecircumstances of the case, the Tribunal is correctin fact and law in disregarding the position oflaw that there could be difference between theenterprises compared in the Transaction NetMargin Method that are not likely to materiallyaffect the price or cost charged or the profitsaccruing to such enterprises?” Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 4/8 3.|The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue and|the Respondent-assessee, has given the following|findings against Revenue with regard to various issuesraised before it with regard to.‘Transfer Pricing’and ‘TransferPricingAdjustments’made.bytheconcerned.authorities|below. Weconsider1Tappropriate to quote the relevant portions hereunder:- Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 4/8 3.|The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue and|the Respondent-assessee, has given the following|findings against Revenue with regard to various issuesraised before it with regard to.‘Transfer Pricing’and ‘TransferPricingAdjustments’made.bytheconcerned.authorities|below. Weconsider1Tappropriate to quote the relevant portions hereunder:- €. We have perused the orders and heard the|rival contentions. No doubt Accentia TechnologiesLtd, formed a part of the list of comparablesconsidered by the assessee in its TP study.However assessee had objected to its inclusionciting functional dissimilarity before the AO aswellas|the|DRP-.Questionregarding|comparability of Accentia Technologies in the ITEsegment for A. Y. 2010-11 had come up beforethis Tribunal in the case of Novo Nordisk India P.Ltd (supra). It was held as under at paras 31 and)32 of the order at.30.07.2015: XXXXX Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 5/8 Even after exclusion ofAccentia Technologies Ltd,along with the exclusion of four comparablecompanies directed by DRP, there will be fourcompanies left in the list of comparables which, inour opinion, cannot be considered as too small asample for an effecttte TP study. In _ thcircumstances, we direct exclusion of Accentia'TechnologiesLtd also|fromthe listofcomparables. Ordered accordingly. © 4This Court in!ITA No.536/2015 C/w ITA. No.537/2015deliveredOT] 25.06.2018 | (Pri. Commissioner of Income Tax & Anr. Vs. | M/s. Softbrands India Put. Ltd.,)) has held that inthese type of cases, unless an|ex-facle-perversity in thefindings of the learned Income Tax Appellate Tribunal is"established by the appellant, the appeal at the instanceof an assessee or the Revenue under.Section 260-Aot|the Act is not maintainable and the relevant portion ofthe said judgment is quoted below for ready reference: Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 6/8 § Conclusion: 55. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|OmCaASeofSubstantialquestionofinterpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectoftheTreatiesOVECTthe|Domestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), tf based on relevantfacts, such substantial questions of law could |be raised before the High Court underSection|260-A|of the Act, the Courts could haveembarked upon such exercise of framing andanswering 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 considered|opinion that the present appeals filed by the Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 7/8 Revenue 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. | 56. We are therefore of the considered|opinion that the present appeals filed by the Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 7/8 Revenue 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 tf 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 whichthe 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.” 5Having heard the learned counsel for the appellants-Revenue, we are therefore of the opinion that Date of Judgment 03-07-2018 I.T.A.No.415/2016 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Amba Research (India) Pvt. Ltd., 8/8 no substantial question of law arises in the present case. The appeal filed by the Appellants-Revenue is)liable to be dismissed and it is.,"1,""2.accordinglyNo costs. Copy of this order be sent to the Respondent-assessee forthwith. TL Sd/-. JUDGE Sd/-|JUDGE JUDGE