Date Of Judgment 05-07-2018 I.t.a v. M/S. Witness Systems Software India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURUDATED THIS THE 5[th]DAY OF JULY 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA I.T.A.No.549/2016 Between:| 1.Pr. Commissioner of Income Tax-7,BMTC Complex, Kormangala,Bangalore.BMTC Complex, Kormangala,Bangalore. 2.The Deputy Commissioner of Income-Tax,Circle — 12(95),Rashtrothana Bhavan,Bangalore .. Appellant (By Mr. E.I Sanmathi. Advocate) And: No.32, AR Towers,&[th]floor, Residency Road,Bangalore.PAN: AAACW 5D5O0/# M/s. Witness Systems Software India Pvt. Ltd., ... Respondent Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 2/9) This I.T.A. is tiled under Section 260-A of Income Tax!Act 1961, praying to 1. Decide the foregoing question of law|and / or such other questions of law as may be formulated|by the Hon’ble Court as deemed fit and set aside the|appellate order dated: 30/03/2016 passed by the ITAT, ‘A”|Bench, Bengaluru, as sought for, in the respondent-assessee’s case, in appeal proceedings in IT(TP)A No.|299/Bang/2013 tor A.Y. 2008-09 Annexure-A & grant such|other relief as deemed fit in the interest of justice & etc. This I.T.A. coming on tor Admission, this day Dr. Vineet KothariJ. delivered the following:- JU DBiGMENT Mr. E.I Sanmathi.Adv. for Appellants - Revenue 1. The Appellants - Revenue have filed this appealraising purported substantial questions of law arisingfrom the Order of thelearned Income Tax Appellate| Tribunal Bangalore Bench “A”, Annexure Adated30/03/2016inIT(TP)A.No.299(B)/Bang/2013forAY|2008-09 Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 3/9) 2. The Revenue has suggested two substantial questions of law in this appeal, which are quoted belowfor ready reference: © “1. WhetherOrnthefacts:and.circumstances of the case, the Tribunal erred|in holding that M/s. Accentia Technologies|Ltd., is different from assessee — company,when it satisfies all the qualitative and|quantitative filters applied by the TPO and the.Tribunal has used a narrower functionality|futer that the TPO, but has not tested othercomparablesagainst the|narrowerfunctionality filter applied by it? D2 Whether on the facts and in the|circumstances of the case, the Tribunal was|right in not setting aside the matter to the TPO|for fresh Transfer Pricing study after taking anew view on functional matrix which 1s|narrowerethanthefunctionalitymatrixoriginally used by the TPOP” Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 4/9) 3. The learned counsel appearing for theAppellants — Revenue, Mr.E.I. Sanmathi submitted thathe does not press the second substantial question oflaw raised by him in the present appeal, but hesuggested the following question to be added:- “Whether on the facts and in thecircumstances of the case, the Tribunal 1isright in law in excluding Comparable namely,Celestial Bio Labs Ltd on the ground of|functional dissimilarity when it satisfies allthe qualitative and quantitative filters applied|by the Transfer Pricing Officer?”| 4. In so far as the first purported substantialquestion of law as also the additional proposedsubstantial question of law raised by the Revenue areconcerned, the learned ITAT in its Order dated30/03/2016has given the _ findings, the relevantportion of which is quoted below for ready reference:- Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., “7. As regards exclusion of twocomparable companies namely M/s. Avant|Cimcon Technologies Ltd., and M/s. Celestial|BiolabsLtd., the|Tribunal|decidedthe|functional comparability of the companies inpara. 13 and 14 as under.:- 4. In so far as the first purported substantialquestion of law as also the additional proposedsubstantial question of law raised by the Revenue areconcerned, the learned ITAT in its Order dated30/03/2016has given the _ findings, the relevantportion of which is quoted below for ready reference:- Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., “7. As regards exclusion of twocomparable companies namely M/s. Avant|Cimcon Technologies Ltd., and M/s. Celestial|BiolabsLtd., the|Tribunal|decidedthe|functional comparability of the companies inpara. 13 and 14 as under.:- &. When thee is no change in thebusiness activity of the assessee as well as|the comparable companies in question during|the year under consideration then in view ofthe findings of the Co-ordinate Bench of this|Tribunal these two companies namely M/s. Avant Cimcon Technologies Ltd., and M/s.Celestial Biolabs Ltd., cannot be considered|as|functionalitycomparablewiththe|assessee accordingly, by following the order|of this Tribunal in assessee’s own case for|the assessment year 2007-08, we affirm the|findings of the CUT(A) on this issue.” Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 6/9) Oo. However, this Court in a recent judgment in I.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 notmaintainable and the relevant portion of the saidjudgment is quoted below for ready reference: “Conclusion: | 55.ASubstantialquantumofinternational trade and transactions dependsupon the fair and quick judicial dispensationin such cases. Had it been a case ofsubstantial questionof|interpretationofprovisions of Double Taxation AvoidanceTreaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of the Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 7/9) Treaties 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.), if based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-4of 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 havebeen rightly picked up or not, Filters forarriving at the correct list of comparableshave been rightly applied or not, do not in ourconsideredopinion,|giverisetoAry,substantial 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|lawandthe|Suggestedsubstantial questions of law do not meet therequirements ofSection 260-A.of the Act and|thus the appeals filed by the Revenue are Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 8/9) found to be devoid of merit and the same areliable to he dismissed. | 26. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantialquestionof|lawandthe|Suggestedsubstantial questions of law do not meet therequirements ofSection 260-A.of the Act and|thus the appeals filed by the Revenue are Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 8/9) found to be devoid of merit and the same areliable to he 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 beforethis Court. Therefore we clarify that meredissatisfaction with the findings of factsarrived at by the learned Tribunal is 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 the appellant — Revenue, this Court is satisfied that no Date of Judgment 05-07-2018 I.T.A.No.549/2016 The Pr. Commissioner of Income Tax-7, & Anr. Vs. M/s. Witness Systems Software India Pvt. Ltd., 9/9) substantial question of law would arise in the present case and the appeal filed by the Revenue is thereiore,liable to be dismissed. Accordingly, it is dismissed. | No costs. The copy of this judgment be sent to theRespondent — Assessee forthwith. BM V~ Sd/-.JUDGE. Sd/-.JUDGE.