Date Of Judgment 06-08-2018, Ita v. M/S. Broadcom India Research Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 6 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.3O8/2017 BETWEEN : 1.THE PR.COMMISSIONEROF INCOME-TAX,"[‘T]FLOOR, BMTC BUILDING,80 FEET ROAD,KORMANGALA, BENGALURU-o60095. «|THR DEPUTLY COMMISSIONER OF INCOME-TAX.CIRCLE-11(2), PRESENT ADDRESS,~ FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BENGALURU-560095.... APPELLANTS (BY SRI K.V.ARAVIND, ADV.) AND ;M/s. BROADCOM INDIARESEARCH PVT. LTD.,CAMPUS 1A, 5[‘L]FLOOR,RMZ ECOSPACE,BELLANDUR VILLAGE,VARTHUR HOBLL,BBENGALURU-560103._. RESPONDENT.(BY SRI SANDEEP HUILGOL, ADV. FOR |SRI T.SURYANARAYANA, ADV.) Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 2/9 THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 03/11/2016 PASSED IN ITA No.62/BANG/2014, FOR:THE ASSESSMENT YEAR 2009-2010, ANNEXURE-E, PRAYING|TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW|STATED THEREIN, I]. ALLOW THE APPEAL AND SET ASIDE THEORDERS PASSED BY THE ITAT, BANGALORE IN IT(TP)A.No.62/BANG/2014 DATED 03/11/2016, ANNEXURE-E ANDCONFIRM THR ORDER OF THR DRP CONFIRMING THR ORDER|PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX,|CIRCLE-1(1)(2), BENGALURU. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. Aravind.K.V,Adv. for Appellants — Revenue. Mr. Sandeep Huilgol,Adv. for Mr. T.Suryanarayana,Adv. for Respondent — Assessee. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘B’, Bangalore, inIT[TP|A No.62/Bang/2014dated03.11.2016, relating to the Assessment Year2009-10. 2.TheappealhasbeenadmittedOTL17.01.2018|TO consider.the|followingsubstantial| Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 3/9 questionsoT|lawformulatedin.theappeal memorandum: “1.Whetherin|the factsandcircumstances of the case, the Tribunal is right inlaw in excluding the comparables, namely, M/s.Bodhtree Consulting Ltd., Persistent SystemsLtd., Infosys Lte., and Larsen & Toubro InfotechLtd., on the ground offunctional dissimilarity byfollowing its earlier order which has not reachedfinality and even when the TPO had chosen thecomparables as it satisfies qualitative andquantitative filters applied by the TPO andTribunal ought to have decided the comparabilityof these companies on the basis of specific factsbrought out on record by the TPO in the case ofthe assessee? D2 Whetherinthe factsandcircumstances of the case, the Tribunal erred inexcluding the comparables, namely, in_ notconsidering the ground raised by Revenue withrespect to working capital adjustment by holdingthat the same is decided in appeal preferred byassessee even when the same was required to beadjudicated and Tribunal ought to have seen that)assessee had not been able to demonstrate that Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 4/9 the working capital differences had impacted itsprofitsP” 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: Regarding Substantial Question of Law Nos.1 & 2: “15. The ld counsel for the assessee reliedon the decision of Infinera India Pvt. Ltd., inIT/[TP/JA No.977 & 1O008/Bang/2014 for the assyear 2009-10, wherein at pages 10 and 11 it hasbeen held as under: Myer” 16.The ld counsel for the assesseeSubmittedthatPersistentsystems|Ltd.,Consulting Ltd., ts dissimilar for the followingTeCaASONn KVeVNKK” 17.The ld counselfor the assessee reliedon the decision of Infinera India Pvt. Ltd., inItlTP[A No.977 & 1O008/Bang/ 2014 for the asst 4/9 the working capital differences had impacted itsprofitsP” 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: Regarding Substantial Question of Law Nos.1 & 2: “15. The ld counsel for the assessee reliedon the decision of Infinera India Pvt. Ltd., inIT/[TP/JA No.977 & 1O008/Bang/2014 for the assyear 2009-10, wherein at pages 10 and 11 it hasbeen held as under: Myer” 16.The ld counsel for the assesseeSubmittedthatPersistentsystems|Ltd.,Consulting Ltd., ts dissimilar for the followingTeCaASONn KVeVNKK” 17.The ld counselfor the assessee reliedon the decision of Infinera India Pvt. Ltd., inItlTP[A No.977 & 1O008/Bang/ 2014 for the asst year 2009-10, wherein at pages 15 and 16 it has|been held as under: KVeVNKK” 18.The Id counsel for the assesseesubmitted that L & Tribunal Infotech is dissimilarjor the following reasons: KVeVNKK” LY.The ld counselfor the assessee reliedon the decision of Invensys Development CentreIndia Put. Ltd., in ITA No.383/Hyd/2014 for theasst. year 2009-10, wherein at para 10.3 it hasbeen held as under: KVeVNKK” 2O.The Id counsel for the assesseesubmitted that Infosys Ltd., is dissimilar for thefollowing reasons: KVeVNKK” QI.The ld counselfor the assessee reliedon the decision of Infinera India Put. Ltd., inIt{TP/A No.977 & 1O0O8/Bang/ 2014 for the asstyear 2009-10, wherein at pages 17 and 18 it hasbeen held as under: Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 6/9 KVeVNKK” DQ?We find that the DRP had erred inolding uphinclusionoffollowingadditionalcomparable companies 1e., Bodhtree ConsultingLtd.,InfosysTechnologiesLtd.,Persistentsystems Ltd., and Larsen & Turbo Infotech Ltd.We direct the TPO to exclude the same ascomparable since the above 4 companies arefunctionally dissimilar to that of assessee. ~ 4However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on25.06.2018 (Prl. Commissioner of Income Tax & Anr. —v- M/s Softbrands India Pvt. Ltd.») has held that inthese type of cases, unless an ex-facie 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 J60-A ofthe Act is not maintainable. The relevant portion of the said judgment is. quoted below for ready reference: Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 7/9 “Conclusion: 55.Asubstantialquantumof|international trade and transactions dependsupon the fair and quick judicial dispensation|in such cases. Had it been a case oOf|substantial questionof|interpretationof|provisions of Double Taxation AvoidanceTreaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of the|Treaties over the Domestic Legislations or the |questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Shares|in Tax Havens (like in the case of Vodafone|etc.), tf based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-Aof the Act, the Courts could have|embarked upon such exercise offraming and|answering such substantial question of law.On the other hand, the appeals of the present|tenor as to whether the comparables have.been rightly picked up or not, Futers for|arriving at the correct list of comparables|have been rightly applied or not, do not in our| Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 8/9 consideredopinion,|giverisetO arysubstantial question of law. Date of Judgment 06-08-2018, ITA No.308/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Broadcom India Research Pvt. Ltd., 8/9 consideredopinion,|giverisetO arysubstantial question of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|lawand.theSuggested|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 | “ALength Price“in the case of the assesseeswith 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.Havingheardthelearnedcounsels.appearing for the parties, we are therefore of the opinionthat no substantial question of law arises in the presentcase also. The Appeal filed by the Appellants-Revenueis liable to be dismissed and it is dismissed accordingly. —No costs. NC. Sd/-.JUDGE. Sd/-.JUDGE.