Date Of Judgment 06-08-2018, Ita v. M/S. Hewlett Packard Global Soft 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.362/2017 BETWEEN : 1.THE PR. COMMISSIONEROF INCOME-ITAX"[‘T]FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BENGALURU-560095.. «|THERE DEPUTLY COMMISSIONEOF INCOME-TAX, CIRCLE-11(4), |PRESENT ADDRESS|CIRCLE-3(1)(2), 2 FLOOR, ©BMTC BUILDING, 80 FEET ROAD,KORMANGALA,BBENGALURU-560095. _ APPBLLANTS| (BY SRI K.V.ARAVIND, ADV.) AND ; M/s. HEWLETT PACKARD |GLOBAL SOFT PVT.LTD.,TH CONSULTING (INDIA) PVT. LTD.,39/40, ELECTRONICS CITY,PHASE-IT, HOSUR ROAD,BBRENGALURU-560100PAN: AAACD 4078L._. RESPONDENT.(BY SRI SANDEEP HUILGOL, ADV. FORSRI T.SURYANARAYANA, ADV.) Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 2/9 THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 26/08/2016 PASSED IN IT(TP)A No.435/BANG/2013,,FORTHR ASSBSSMBENTYEAR 2008-2009,ANNEXURE-D,PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW STATED ABOVE. 2. ALLOW THERE APPKAL AND SEASIDE THE ORDERS PASSED BY THE ITAT, BENGALURU IN|IT(TP)A No.435/BANG/2013 DATED 26/08/2016, ANNEXURE-D,CONFIRMING THE ORDER OF THE APPBELLATEBE COMMISSIONANDCONEHIRMTHEORDERPASSEDBY|THEDEBPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-3(1](2), 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.Mr. Sandeep Huilgol,Adv., and Mr. T.Suryanarayana,Advs. 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.435/Bang/2013)dated|26.08.2016, relating to the Assessment Year2008-09. 2.Theappealhas|beenadmitted|OTL24.01.2018TO consider.thefollowingsubstantialquestion of law formulated in the appeal memorandum: Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 3/9 “WhetherON.thefactsandin|thecircumstances, the Tribunal in case of THConsulting |[India/ Put. Ltd., is right in law inholding that Aptico Ltd., Chowksi LaboratoriesLtd., and Wapcos Ltd are to be excluded from thelust of comparables chosen by TPO on the groundoffunctional dissimilarity without doing any FARanalysis of the assessee with those other casesand without appreciating that comparability ofthese companies on the basis of specific factsbrought on record by the TPO in the case of theassesseer” 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: “AWe|have|consideredthe|rivalsubmissions and per used the materials on recordincluding the relevant pages of the AnnualReports of these comparable companies. The firstcompany is Apitco Limited. For this company,pages 362 to 364 and 378 of the paper book were|referred. As per these pages of the paper bookbeing relevant portion of Annual report of thiscompany, this company is deriving income from Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 4/9 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: “AWe|have|consideredthe|rivalsubmissions and per used the materials on recordincluding the relevant pages of the AnnualReports of these comparable companies. The firstcompany is Apitco Limited. For this company,pages 362 to 364 and 378 of the paper book were|referred. As per these pages of the paper bookbeing relevant portion of Annual report of thiscompany, this company is deriving income from Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 4/9 Asset Reconstruction & management Services,ProjectRelatedServices,MicroEnterprisesDevelopment,InfrastructureplanningOSDevelopment, Research Studies & Tourism, SkillDevelopment,Environmentmanagement, EntrepreneurshipDevelopmentOSTraining,Cluster Development & Energy Related Servicesetc. The business profile of the assessee companyas noted by the TPO on page 2 of his orderincludesmanagementConsultancyServiceswhich includes assisting the AEs in improvingtheir performance, primarily through the analysisof existing business problems and development ofplans for improvement. In our considered opinion,the scope of services being rendered by theassessee is very narrow as compared to thescope of services being rendered by this companyue. Apitco Limited and therefore, even the riskbeing taken by that company is also high andtherefore, this company cannot be considered asa comparable in the present case because offunctional dissimilarity. We direct the AO/TPO toexclude this company from the final list ofcomparables. oS. The second comparable company indispute 1s Choksi Laboratories Limited. For thiscompany, page no.407 of the paper book is) Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 5/9 referred by the learned AR of the assessee. ASper this page of the paper book being relevantportion of Annual report of this company, thiscompany is a commercial testing house engagedin the testing of various products and also offersservices in the field of pollution control as allied|activity. . In our considered opinion, the nature &scope of services being rendered by the assesseeis very different and narrow as compared to thescope of services being rendered by this companyue. Choksi Laboratories Limited and_ therefore,this company also cannot be considered as acomparable in the present case because offunctional dissimilarity. We direct the AO/TPO toexclude this company also from the final list ofcomparables. 7. The fourth comparable company in)dispute is WAPCOS Limited (Seg.). For thiscompany, page no. 580, 587, 590,595 & 635 ofthe paper book is referred by the learned AR ofthe assessee. As per these pages of the paperbook being relevant portion of Annual report ofthis company, this company derives majority ofits revenues from consultancy and contracts andit is having three business centre being 1) Centrefor Power, 2) Centre for infrastructure and 3)Centre for water Resources. In our considered Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 6/9 opinion, the nature & scope of services beingrendered by the assessee is also very different ascompared to the scope of services being renderedby this company te. WAPCOS Limited (Seg.) andtherefore,thisCOMPA?LYalso.cannotbe|considered as a comparable in the present casebecause offunctional dissimilarity. We direct theAO/TPO to exclude this company also from thefinal list of comparables. Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 6/9 opinion, the nature & scope of services beingrendered by the assessee is also very different ascompared to the scope of services being renderedby this company te. WAPCOS Limited (Seg.) andtherefore,thisCOMPA?LYalso.cannotbe|considered as a comparable in the present casebecause offunctional dissimilarity. We direct theAO/TPO to exclude this company also from thefinal list of comparables. 8. As per above discussion, it is seen thatthere is no merit in the objection of the revenueseeking non exclusion of one comparable 1.e. RitesLimited and we have held that all threecompanies, exclusion of which is being requestedby the assessee t.e. 1) Apitco Limited, 2) Choks1Laboratories Limited and 3) WAPCOS Limited(Seg.) should be excluded from the final list ofcomparables. ~ 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" Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 7/9 established by the appellant, the appeal at the instanceof an assessee or the Revenue under Section 260-A otthe Act is not maintainable. The relevant portion of the said judgment isquoted below for ready reference: “Conclusion: 55.|Asubstantialquantumof)international trade and transactions dependsupon the fair and quick judicial dispensation insuch cases. Had it been a case of substantialquestion of interpretation of provisions ofDouble Taxation Avoidance Treaties (DTAA),interpretation of provisions of the Income TaxAct or Overriding Effect of the Treaties over theDomestic Legislations or the questions likeTreaty Shopping, Base Erosion and _ Profishifting (BEPS), Transfer of Shares in TaxHavens (like in the case of Vodafone etc.),based on relevant facts, such substantialquestions of law could be raised before theHigh Court underSection 260-A of the Act, theCourtscouldhave|embarkedUPOFrsuchexercise of framing and answering such Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 8/9 substantial question of law. On the other hand,the appeals of the present tenor as to whetherthe comparables have been rightly picked up ornot, Filters for arriving at the correct list ofcomparables have been rightly applied or not,do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the considered|opinion 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 requirementsofSection 260-Aof the Act and thus theappeals filed by the Revenue are found to bedevoid of merit and the same are liable to bedismissed. 57. We make it clear that the same'|yardsticks and parameters will have to beapplied, even tf such appeals are filed by theAssessees, because, there may be cases wherethe Tribunal giving its own reasons andfindings has found certain comparables to begood comparables to arrive at an'7s| “ArLength Price“in the case of the assessees withwhich the assessees may not be satisfied and Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 9/9 have filed such appeals before this Court.Therefore we clarify that mere dissatisfactionwith the findings of facts arrived at by thelearned Tribunal is not at all a sufficient reasonto invokeSection 260-Aof the Act before this|Court. 58. The appeals filed by the Revenue are|therefore dismissed with no order as to costs.” 5.Havingheard|the.learnedcounsels. Date of Judgment 06-08-2018, ITA No.362/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Hewlett Packard Global Soft Pvt. Ltd., 9/9 have filed such appeals before this Court.Therefore we clarify that mere dissatisfactionwith the findings of facts arrived at by thelearned Tribunal is not at all a sufficient reasonto invokeSection 260-Aof the Act before this|Court. 58. The appeals filed by the Revenue are|therefore dismissed with no order as to costs.” 5.Havingheard|the.learnedcounsels. 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. NGC. Sd/-.JUDGE. Sd/-.JU DGE