Date Of Judgment 05-07-2018 I.t.a v. M/S. Ntt Data Fa Insurance Systems (India) Private Limited

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE O5 DAY OF JULY 2ZO18 PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA|I.T.A.No.588/2016 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME TAXCHRNTRAL REVENUB BUILDINGSCHRNTRAL REVENUB BUILDINGS QUEENS ROAD, BANGALORE-560 OO1.. OoTHER DEPUTY COMMISSIONER OF INCOME TAXCIRCLE-95(1)(1), ERSTWHILE CIRCLE 11(3)BANGALORE.CIRCLE-95(1)(1), ERSTWHILE CIRCLE 11(3)BANGALORE. .. APPBLLANT (By Mr. SANMATHI E..I. ADV.) AND: M/s. NIT DATA FA INSURANCE SYSTEMS.(INDIA) PRIVATE LIMITED>OZONEK MANAY TECH PARKB BLOCK, 3 FLOOR, GARVEBHAVEPALYAHOSUR ROAD, BANGALORE-560068—PAN: AAA CE 9123A. . RESPONDENT (By Ms. TANMAYEE RAJKUMAR, ADV.) THIS I.T.A. IS FILED UNDER SECTION 260-A F INCOME|TAX ACT 1961, PRAYING TO DECIDE THE FOREGOING|QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW.AS MAY BR FORMULATBKD BY THR HON’BLE COURT AS Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 2/8 DBEMBD FIT. SHT ASIDE THR APPBLLATK ORDER DATED|20/01/2016 PASSED BY THE ITAT, ‘B’ BENCH, BENGALURU, IN.APPEAL PROCEEDINGS M.A. No.88/Bang/2015 IN I[T(TP)ANo.1311/Bang/2010 FOR ASSESSMENT YEAR 2006-07, AS.SOUGHT FOR IN THIS APPEAL; AND TO GRANT SUCH OTHER|RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. THIS LT.A. COMING ON FOR ADMISSION, THIS DAY Dr. VINEET KOTHARIJ' DRLIVBERED THR FOLLOWING:- JUDGMENT Mr. Sanmathi EI.Adv. for Appellants -.Revenue | Ms. Tanmayee Rajkumar,Adv. for Respondent-Assessee 1. The Appellants-Revenue have filed this appeal u/s.260Aof the Income Tax Act, 1961, raising)purportedly a substantial question of law arising fromthe order oft theITAT, ‘B’ Bench, Bangalore, dated 20.01.2016passed inM.A.No.88/Bang/2015[ IT(TP)A No.1311/Bang/2010](M/s.NTT Data FA InsuranceSystems Ind. Put. Ltd., vs. The Deputy Commissioner ofIncome Tax}for.A.Y.2006-07. 2. The proposed substantial questions of lawframed1n the Memorandum|ot appealby the. Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 3/8 Appellants-RevenueaTe€quotedbelowfor.ready reference: - “1.Whether on the facts and in thecircumstances of the case and in law, theTribunal was justified in holding that the size andturnover of the company are deciding factors fortreating a company as a comparable andaccordingly erred in excluding the comparables,iGate Global Solutions Ltd, Mindtree ConsultingLtd, Sasken Communications Ltd, PersistentSystems Ltd, in Software Development segment? D2 Whether on the facts and in thecircumstances of the case and in law, theTribunal was justified in excluding uncontrolledcomparables having turnover more than Rs.200)crores in the absence of Turnover criterionprescribed in Rule 1OB of Income Tax Rules and)also there being no correlation between turnoverand profit margin?| 3.|Whether on the facts and in thecircumstance of the case and in law, the Tribunalwas justified in fixing the RPTfilter at 15% of totalrevenue by superimposing the decisions ofTribunal in other cases, including those of otherbenches of Tribunal, without going into specific Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 4/8 facts in the case of the taxpayer and without|adducing the basis for arriving at the 15% cut offfor RPTfilter, in the case of taxpayer?” 3. The learned Tribunal, after discussing the rivalcontentions of both the Appellants-Revenue and theRespondent-assessee, has given the following findingsagainst Revenue with regard to various issues raisedbefore it with regard to‘Transfer Pricing’and‘Transfer| Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 4/8 facts in the case of the taxpayer and without|adducing the basis for arriving at the 15% cut offfor RPTfilter, in the case of taxpayer?” 3. The learned Tribunal, after discussing the rivalcontentions of both the Appellants-Revenue and theRespondent-assessee, has given the following findingsagainst Revenue with regard to various issues raisedbefore it with regard to‘Transfer Pricing’and‘Transfer| PricingAdjustments’made.bytheconcerned.authorities below. We consider it appropriate to quotefrom the order of Tribunal rejecting the Applicationseeking a review before Tribunal as hereunder:- It is stated in the MP that applying the ratiolaid down by this Tribunal vide para-8 to 10 ofthe impugned order that the following sixcompanies be rejected being comparable, as theturnover is more than 200 Crores. Infosys Technologies Ltd.Flextronics Software Systems Ltd.,iGate Global Solutions Ltd.,Mindatree Consulting Ltd.Sasken Communication Ltd.Persistent Systems Ltd. Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 5/8 similarly, it is stated in the MP thatparas.14 & 15 of the order may be amended toexclude the companies VIZ., M/s Geometric Software Ltd.,M/s Aztec Software LtdM/s Megasoft Ltd., applying the filter of related party transactions ofmore than 15%.| D2 We have heard the rival submissionsand perused the material on record. We find meritin the submissions of the learned counsel that theTribunal having applied the filter of more than200 Crores should be excluded, as the sameShould have been applied to all the comparablesfinally-chosen for computing the Arm’s LengthPrice (ALP). Similarly, in the case offilter of RPTmore than 15%, the same filter should be appliedfor all the comparables finally chosen forcomputing the ALP. Therefore, we remit the matterback to the file of the AO/TPO to apply theturnover filter of more than 200 Crores as well asfilter of RPT 15% to all the comparables finallychosen for the purpose of computing the ALP’. 4 This Court insITA No.536/2015 C/w ITA. No.537/2015delivered OT] 25.06.2018 | Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 6/8 (Pri. Commissioner of Income Tax & Anr. Vs. |M/s. Softbrands India Pvt. Ltd.,}1 has held that in these type of cases, unless an|ex-facteperversity in thefindings of the learned Income Tax Appellate Tribunal isestablished by the appellant, the appeal at the instanceof an assessee or the Revenue under|Section 260-Aot |the Act is not maintainable. The relevant portion of the said judgment is.quoted below for ready reference: §— Conclusion: oo. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|aCaSeofsubstantialquestion.Of|interpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectofthe TreatiesOVEeCtheDomestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), if based on relevantfacts, such substantial questions of law could Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 7/8 §— Conclusion: oo. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|aCaSeofsubstantialquestion.Of|interpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectofthe TreatiesOVEeCtheDomestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), if based on relevantfacts, such substantial questions of law could Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 7/8 be raised before the High Court underSection260-A|of the Act, the Courts could haveembarked upon such exercise of framing and)answering 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 consideredopinion that the present appeals filed by theRevenue 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 if 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 which Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited the 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.” Oo. Having heard the learned counsels for theparties, we are therefore of the opinion that nosubstantial question of law arises in the present casealso. The appeal filed by the Appellants-Revenue isliable to be dismissed and it is;-"*-"".;accordinglyNo costs. Srl. Sd/-. JUDGE Sd/-| JUDGE