Date Of Judgment 06-07-2018, Ita v. M/S Sonic Wall Infosecurity Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 6 DAY OF JULY 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.930/2017 BETWEEN : 1.THE COMMISSIONER OF INCOME TAX CIT(A)|LTU, JSS TOWERS, BSK III STAGE, BENGALURU-560 085. «|THERE DEPUTLY COMMISSIONEOF INCOME TAX, LIU, JSS TOWERS, BSK III STAGE,BBRENGALURU-560 O8 _ APPBLLANTS| (BY SRI K.V.ARAVIND, ADV.) AND : M/s SONIC WALL INFOSECURITY PVT. LTD.( FLOOR, WING A, OFFICE 1,|SALARPURIA SOFTZONE,.BELLANDUR, VARTHUR HOBLI,BBRENGALURU-560 10PAN: AAECA 3617Q_. RESPONDENT. (RESPONDENT —- SERVED.) THIS [TA IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, ARISING OUT OF ORDER DATED 21.04.2017|PASSED IN IT(TP)A NO.302/BANG/2014, FOR THE ASSESSMENTYEAR 2009-2010 ANNEXURE-D, PRAYING TO: I. FORMULATETHE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II.| Date of Judgment 06-07-2018, ITA No.930/2017 The Commissioner of Income Tax & another Vs. M/s Sonic Wall Infosecurity Pvt. Ltd. 2/9 ALLOW THR APPBAL AND SBT ASIDE THR ORDERS PASSBD BY)THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN|IT(TP)A NO.302/BANG/2014 DATED 21.04.2017 AND CONFIRM)THE ORDER OF THR DRP CONFIRMING THR ORDER PASSED BY)THEADDL.»COMMISSIONER.OF|INCOMETAX, LTU,|BENGALURU. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V. Aravind, Adv. for Appellants — Revenue. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘A’, Bangalore, in IT [TP|A No.302/Bang/2014 dated21.04.2017, relating to the Assessment Year2009-10 ?)Though the Appeal has been admitted on09.01.2018 raising the substantial question of law as.framed by the Revenue in the Memorandum of Appeal,learned Counsel for the Revenue does not press thesame, instead presses for the substantial question of 3/9 law which is now reframed by memo dated|6.7.2018>.which reads thus: “Whether on the facts and in thecircumstances of the case, the Tribunal 1isright in law in excluding certain comparables,namely,BodhtreeConsultingLimited,Accentia Technologies Ltd. and Cosmis GlobalLtd. on the basis offunctional dissimilarity by|following its earlier Judgments which has notreached finality and even when the Transfer|PricingOfficerhasconsideredthe|comparables on the basis of qualitative and|quantitative filters?” 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned a finding as under:| “8Apart from this, the assessee is alsoseekingexclusionOf|BodhtreeConsultingLimited. ll.Havingconsidered|therivalSubmissions as well as the relevant material onrecord, at the outset we find that the functional Date of Judgment 06-07-2018, ITA No.930/2017 The Commissioner of Income Tax & another Vs. M/s Sonic Wall Infosecurity Pvt. Ltd. 4/9 comparability of this company with a captivesoftware development services provider has beenexamined by the co-ordinate bench of thistribunal or the Assessment Year 2OOYS-10 in thecase OfVMware Software India Pvt. Ltd. Vs.|DCIT‘(Supra) in para 16 as under:| NXXXXX It has not been disputed before us that thefacts discussed by this Tribunal in the said casethat this company is engaged in the softwareproducts and also engaged in providing web end)to end solutions, software consultancy & designand development. Therefore in view of thedecision of the co-ordinate bench of this Tribunal,we held that this company is functionally notcomparable to the assessee and accordingly wedirect the TPO/AO to exclude this company fromthe set of comparables. 16.The assessee is also seeking exclusion ofcomparable companies namelyCosmic Global|Ltd. & Accentia Technologies Ltd. LY.Havingconsidered|therivalSubmissions as well as the relevant material onrecord, we find that the functional comparabilityof these two companies namelyCosmic Global 5/9 NXXXXX It has not been disputed before us that thefacts discussed by this Tribunal in the said casethat this company is engaged in the softwareproducts and also engaged in providing web end)to end solutions, software consultancy & designand development. Therefore in view of thedecision of the co-ordinate bench of this Tribunal,we held that this company is functionally notcomparable to the assessee and accordingly wedirect the TPO/AO to exclude this company fromthe set of comparables. 16.The assessee is also seeking exclusion ofcomparable companies namelyCosmic Global|Ltd. & Accentia Technologies Ltd. LY.Havingconsidered|therivalSubmissions as well as the relevant material onrecord, we find that the functional comparabilityof these two companies namelyCosmic Global 5/9 Ltd. & Accentia Technologies Ltd.has beenconsidered by this co-ordinate bench of thisTribunal vide order dt.18.10.2016 in the case ofFlextronics Technologies (India) Pvt. Ltd. Vs.DCIT(supra) in paras 7 to 10 as under: XXXXX It 1s clear that the Tribunal has held that|theseTWO|companiesareNOT|functionally|comparable To|the.ITESprovider-assessee.Accordingly, when the companies are notfound tobe comparable due to the nature of businessactivity and functionally are different then thereis no need for going into further analysis of assetemployed and risk involved. Following the earlierorder of this Tribunal, we direct the TPO/AO toexclude these two companies namelyCosmicGlobal Ltd. & Accentia Technologies Ltd.from the set of comparables.” 4The controversy involved herein is no moreres integrain view of the decision of this Court in 1.T.A.Nos.536/2015 c/w 537/2015dated25.06.2018iPrl.Commissioner.of|Income.TaxaAnr.V/s.M/s.Softbrands India Pvt. Ltd.,]wherein it has been! Date of Judgment 06-07-2018, ITA No.930/2017 The Commissioner of Income Tax & another Vs. M/s Sonic Wall Infosecurity Pvt. Ltd. 6/9 observed 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:| 05. A substantial quantum of international|trade and transactions depends upon the fair|and quick judicial dispensation in such cases.Had it been a case of substantial question ofinterpretation ofprovisions of Double Taxation|Avoidance Treaties (DIAA), interpretation of|provisions of the Income Tax Act or Overriding|Effect of the Treaties over the DomesticLegislations or the questions like TreatyShopping, Base Erosion and Profit Shifting|(BEPS), Transfer of Shares in Tax Havens.(like in the case of Vodafone etc.), if based on|relevant facts, such substantial questions|of law could be raised before the High|Court underSection 260-Aof the Act, theCourts could have embarked upon such|exercise of framing and answering such|substantial question of law. On the other Date of Judgment 06-07-2018, ITA No.930/2017 The Commissioner of Income Tax & another Vs. M/s Sonic Wall Infosecurity Pvt. Ltd. 7/9 hand, the appeals of the present tenor as to|whether the comparables have been rightly|picked up or not, Filters for arriving at thecorrect list of comparables have been rightly|applied or not, do not in our consideredopinion, give rise to any substantial question|of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|Suggested|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 “ArmLength Price“in the case of the assessees 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|Suggested|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 “ArmLength Price“in the case of the assessees Date of Judgment 06-07-2018, ITA No.930/2017 The Commissioner of Income Tax & another Vs. M/s Sonic Wall Infosecurity Pvt. Ltd. 8/9 with 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 Revenueare therefore dismissed with no order as to|costs.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, We are ofthe considered opinion that no substantial question oflaw arises for consideration in the present case. _ 6.Hence, the Appeal filed by the Appellants-Revenue is liable to be dismissed and is accordinglydismissed. Nocosts. 9/9A copy of this Order shall be sent to theRespondent-ASssessee.Sd/-.JUDGE|Sd/-.JUDGE|AN/-