Date Of Judgment 03-08-2018 I.t.a v. The Csr India Pvt. Ltd

1/11. IN THE HIGH COURT OF KARNATAKA, BENGALURUDATED THIS THE 3[rd]DAY OF AUGUST 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA I.T.A.No.12/2017 Between:| 1.The Pr. Commissioner of Income-tax, 5[th]Floor, BMTC Building, 80 Feet Road, Kormangala, Bengaluru-560 O95. 2.The Deputy Commissioner of Income-Tax,Circle-11(2), Preset Address,Circle-2(1) (1), 2[nd]Floor,BMTC Building, 80 Feet Road,Kormangala,Bengaluru-560 O95.Circle-11(2), Preset Address,Circle-2(1) (1), 2[nd]Floor,BMTC Building, 80 Feet Road,Kormangala,Bengaluru-560 O95. .. Appellant (By Mr. Aravind K.V. Advocate) And: The CSR India Pvt. Ltd.,Marthahalli,Bengaluru. ... Respondent (By Mr. Ankur Pali, forMr. K.R.Vasudevan, Advocate) Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 2/11. This I.T.A. is tiled under Section 260-A of Income Tax!Act 1961, praying to: formulate the substantial questions oflaw stated therein; Allow the appeal and set aside the orderspassed by the ITAT, Bengaluru in IT(TP)A No.1278/Bang/2012 dated 30-05-2016 Annexure —D and confirm the order|of the DRP confirming the order passed by the Deputy|Commissioner of Income Tax, Circle-2(1)(1), Bengaluru &|etc. This I.T.A. coming on tor Admission, this dayS. SujathaJ. delivered the following:- JU DBiGMENT Mr. Aravind K.V.Adv. for Appellants — RevenueMr. Ankur Pai for Mr. K.R.Vasudevan Adv. lor Respondent - Assessee 1. The Appellants - Revenue have filed this appealraising purported substantial questions of law arising from the Order of thelearned Income Tax Appellate| Tribunal Bangalore Bench “A”,Annexure Dsdated 30/05/20161nN IT(TP)A.No.1278/ Bang/201forAY|2008-09 2. The Revenue has suggested two substantialquestions of law, which are quoted below for readyreference: Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., “1. Whether on the facts and in thecircumstances of the case, the Tribunal 1isright in law in setting aside the recomputation|of income made by the Assessing Authority|by following the decision of this Honorable|High Court in the case of CIT Vs. TATA ElxstLimited (reported in 349 ITR page 98) eventhough the said decision has not reached|finality since Revenue has preferred a SLP.before Apex Court ? 2. Whether on the facts and in thecircumstances of the case, the Tribunal 1isright in law in holding that the company|namelyCelestialBiolabs.Limitedas|(Ocomparable on the ground of functional|dissimilarity by following it earlier order'which has not reached finality even though|all the required tests are satisfied in the case|of Assessee to apply the said company as|comparable Pr 3. In so far as the first substantial question of law raised in the present appeal is concerned, the same is Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 4/11. covered by the decision of the Hon’ble Apex Court in thecase ot.Commissioner of Income-tax, Central — III vs. HCL Technologies Ltd., [2018] 93 Taxmann.com33(SC). The relevant portion of the judgment of theHon'blesupremeCourtin.theCaSE€oT|HCL|Technologies Ltd. (supra),is quoted below for readyreference: - “17. The similar nature of controversy,akin this case, arose before the Karnataka|High Court inCIT v. Tata Elxsi Ltd[2012]204 Taxman321/17/taxman.com100/349 ITR 98.The issue before theKarnataka High Court was whether theTribunal was correct in holding that while|computing relief under Section 10A of the IT|Act, the amount of communication expensesShould be excluded from the total turnover tfthe same are reduced from the export|turnover? While gwing the answer to the|issue, the High Court, inter-alia, held thatwhen a particular word is not defined by the| The relevant portion of the judgment of theHon'blesupremeCourtin.theCaSE€oT|HCL|Technologies Ltd. (supra),is quoted below for readyreference: - “17. The similar nature of controversy,akin this case, arose before the Karnataka|High Court inCIT v. Tata Elxsi Ltd[2012]204 Taxman321/17/taxman.com100/349 ITR 98.The issue before theKarnataka High Court was whether theTribunal was correct in holding that while|computing relief under Section 10A of the IT|Act, the amount of communication expensesShould be excluded from the total turnover tfthe same are reduced from the export|turnover? While gwing the answer to the|issue, the High Court, inter-alia, held thatwhen a particular word is not defined by the| Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 9/11. legislature and an ordinary meaning is to be|attributed to it, the said ordinary meaning 1s to be in conformity with the context in whichtt |is used. Hence, what is excluded from ‘exportturnover’ must also be excluded from ‘total|turnover’, since one of the components of|‘total turnover is export turnover. Any other|interpretation would run counter to the|legislative intent and would be impermissible. TSB. XXXKXX X 19. In the instant case, tf the deductionson freight, telecommunication and insurance|attributable to the delivery of computer'software under Section 10A of the IT Act areallowed only in Export Turnover but not from|the Total Turnover then, it would give rise to|inadvertent,unlawful,meaninglessand.ulogical result which would cause _ graveinjustice to the Respondent which could have|never been the intention of the legislature. 20. Even in common parlance, when theobject of the formula is to arrive at the profit|from export business, expenses excluded from Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 6/11 export turnover have to be excluded from total|CTUTNOVETalso.Otherwise,anyotherinterpretation makes the formula unworkable|and absurd. Hence, we are satisfied thatsuch deduction shall be allowed from the totalturnover in same proportion as well”. 4. In so far as the second substantial question oflaw raised in the present appeal is concerned, thelearned ITAT in its Order dated|30/05/2016has giventhe findings, the relevant portion of which is quotedbelow for ready reference:-_ “7 We have consideredthe rivalsubmissions. First of all we examine theacceptability of one comparable 1.e. CelestialBiolabs Ltd., having margin of 87.94% as perthe TPO’s order because tf it is found that thiscomparable is not proper and is to beexcluded then the issue regarding remaining12 comparables for which objection is raisedby the assessee will be of academic interestin this case because if this one comparable Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., Celestial Biolabs is excluded out of total 20comparables adopted by the TPO, The ALPwill come down by around 4.4% resulting intothe ALP within +_ 5% range of the profitmargin of the assessee company. The findingof the Tribunal in the case of InfineonTechnologies Put. Ltd., (Supra) in respect ofthis comparable 1.e. Celestial Biolabs is as perpara No.9 on pages 17 to 19 of this Tribunalorder and for the sake of ready reference, thispara No.9 is reproduced below: XAXXK KXKKK KKK &. As per the above para of this Tribunal|order, it is seen that it was held by theTribunal in that case that this company isfunctionally dissimilar and different from thatassessee 1.e. Infineon Technologies India Put.Ltd. (Supra). The business profile of thatcompany is noted by the Tribunal in para 2.1of this Tribunal order as per which thatcompany is engaged in the business ofproviding of software development services ofelectronic integrated circuit to his parentcompany. Hence, it is seen that the business Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., XAXXK KXKKK KKK &. As per the above para of this Tribunal|order, it is seen that it was held by theTribunal in that case that this company isfunctionally dissimilar and different from thatassessee 1.e. Infineon Technologies India Put.Ltd. (Supra). The business profile of thatcompany is noted by the Tribunal in para 2.1of this Tribunal order as per which thatcompany is engaged in the business ofproviding of software development services ofelectronic integrated circuit to his parentcompany. Hence, it is seen that the business Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 8/11. profile of that company and the _ presenassessee company is similar and under thesefacts, we are of the considered opinion thatas per this Tribunal order, this company Le.Celestial Biolabs Ltd, cannot be taken as acomparable|because.of|functionaldissimilarity. Therefore, we hold that thiscompany Should be omitted from the list ofcomparables. The AO/TPO are accordinglydirected.” Oo. However, this Court in a recent judgment inI.T.A.No.536/2015c/w.I.T.A.No.537/2015(Pr.Commissionerof|[IncomeTax,Bangalore and Another Vs. M/s. Softbrands India P.Ltd.,) renderedon 25-06-2018,has held that in these type of cases,unless ansex-facle’ perversity in the findings of thelearned Income Tax Appellate Tribunal is established bythe appellant, the appeal at the instance of an assesseeor the Revenue under|Section 260-Aot the Act is not Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 9/11. maintainable and the relevant portion of the saidjudgment is quoted below for ready reference:| “Conclusion: 55.|Asubstantial quantumofinternational trade and transactions dependsupon the fair and quick judicial dispensationin such cases. Had it been a case ofSubstantialquestionof|interpretationofprovisions of Double Taxation AvoidanceTreaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of theTreaties over the Domestic Legislations or the |questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Sharesin Tax Havens (like in the case of Vodafoneetc.), tf based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-Aof the Act, the Courts could haveembarked upon such exercise offraming andanswering such substantial question of law. |On the other hand, the appeals of the presenttenor as to whether the comparables have Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 10/11| been rightly picked up or not, Filters forarriving at the correct list of comparableshave been rightly applied or not, do not in ourconsideredopinion,|giverisetoanysubstantial question of law. 26. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantialquestionof|lawandtheSuggestedsubstantial questions of law do not meet therequirements ofSection 260-A.of the Act and|thus the appeals filed by the Revenue arefound to be devoid of merit and the same areliable 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 caseswhere the Tribunal giving its own reasonsand findings has found certain comparablesto be good comparables to arrive at an|°“Arm’sLength Price“in the case of the assesseeswith which the assessees may not besatisfied and have filed such appeals before Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 11/11) this Court. Therefore we clarify that meredissatisfaction with the findings of factsarrived at by the learned Tribunal ts not at alla sufficient reason to invoke|Section 260-Aof the Act before this Court. o&. The appeals filed by the Revenue|are therefore dismissed with no order as tocosts.” Date of Judgment 03-08-2018 I.T.A.No.12/2017 The Pr. Commissioner of Income-Tax, & Anr. Vs. The CSR India Pvt. Ltd., 11/11) this Court. Therefore we clarify that meredissatisfaction with the findings of factsarrived at by the learned Tribunal ts not at alla sufficient reason to invoke|Section 260-Aof the Act before this Court. o&. The appeals filed by the Revenue|are therefore dismissed with no order as tocosts.” 6. Having heard the learned counsel for theparties, this Court is satisfied that no substantialquestion of law would arise in the present case and theappeal filed by the Revenue is therefore, liable to bedismissed. Accordingly, itis dismissed. No costs. BMV Sd/-. JUDGE Sd/-| JUDGE