Date Of Judgment 07-08-2018 I.t.a v. M/S. Electronics For Imaging India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 7[th]DAY OF AUGUST 2018| PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.387/2017 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX,|5[‘T]FLOOR, BMTC BUILDING,5[‘T]FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA,BANGALORE-560 O95.BANGALORE-560 O95. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX,|CIRCLE-11(3), PRESENT ADDRESS,CIRCLE-2(1)(2), 2 FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA, |CIRCLE-11(3), PRESENT ADDRESS,CIRCLE-2(1)(2), 2 FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA, | BANGALORE-560095. .. APPBLLANT (By Mr. K.V. ARAVIND, ADV.) AND: M/s. ELECTRONICS FOR IMAGING INDIA PVT. LTD.,KALYANI PLATINA, 4[‘T]FLOOR, BLOCK-1-No.24, EPIP ZONE, PHASE-IIWHITEFIELD, BENGALURU-5S60066PAN: AAACG 6053BE. ~ RESPONDENT (By Mr. S. SHARATH, ADV..,) THIS I.T.A. IS FILED UNDER SBCTION 2VJO0-A OF THER ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIALQUESTIONS OF LAW. ALLOW THE APPEAL AND SET ASIDE|THE ORDERS PASSED BY THE ITAT, BANGALORE IN [T(TP)A) Date of Judgment 07-08-2018 I.T.A.No.387/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 2/7 No.180/BANG/2014 DATED 19-08-2016, ANNEXURE-E AND.CONFIRMING THE ORDER OF THE APPBELLATEBE COMMISSIONCONFIRMING|THE;ORDERPASSEDBY|THE;DEPUTY.COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), BENGALURU|& KTC. THIS LT.A. COMING ON FOR HEARING THIS DAY,S. SUJATHAJT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. K.V. Aravind,Adv. for Appellants-Revenue |Mr. S. Sharath, Adv. for Respondent -Assessee 1. The Appellants-Revenue have filed this appeal u/s.260Aof the Income Tax Act, 1961, raisingpurportedly one substantial question of law arising fromthe order of theITAT, Bangalore Bench ‘B’, Bangalore> dated19.08.2016passed1NIT(TP)A No.180/Bang/2014(M/s.Electronics for imaging IndiaPut. Ltd., vs. The Deputy Commissioner of Income-tax }forA.Y.2009-10. 2. This appeal has been admitted on|24.01.2018to consider the following substantial question of lawframed by the learned counsel for the Appellants-Revenue:- Date of Judgment 07-08-2018 I.T.A.No.387/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 3/7 “Whether,OF.thefactsandinthecircumstances of the case, the Tribunal is correctin directing assessing authority to exclude M/s.Bodhtree Consulting Ltd as comparable byfollowing its earlier decision in case of M/s.sunquest Information Systems (Ind) Put. Ltdwhich has not reached finality even when thequalitative and qualitative tests are satisfied inthe case of assessee?P”. 3. The learned Tribunal, after discussing the rivalcontentions of both the Appellants-Revenue and theRespondent-Assessee, has given the following findings:-| DWe have considered the rival submissions. | Regarding the contention of the Id. AR of theassessee that in respect of exclusion of M/sBodhtree Consulting Ltd., we reproduce para-20|of the Tribunal order cited by the ld. AR of theassessee as noted above. This para reads asunder: XXXXXXXXXXXNK As per this para this Tribunal order, it isseen that the assessee was engaged in providingsoftware development services and in the present 4/7 case also, it is noted by the TPO on page-no.2 ofhis order that the assessee company is engagedinthe.business ofprovidingsoftwaredevelopment services and marketing softwareservices to its Non-resident AF. 7. XXXXKKK| DWe have considered the rival submissions. | Regarding the contention of the Id. AR of theassessee that in respect of exclusion of M/sBodhtree Consulting Ltd., we reproduce para-20|of the Tribunal order cited by the ld. AR of theassessee as noted above. This para reads asunder: XXXXXXXXXXXNK As per this para this Tribunal order, it isseen that the assessee was engaged in providingsoftware development services and in the present 4/7 case also, it is noted by the TPO on page-no.2 ofhis order that the assessee company is engagedinthe.business ofprovidingsoftwaredevelopment services and marketing softwareservices to its Non-resident AF. 7. XXXXKKK| Respectfully following the Tribunal order,we direct the AO/TPO to exclude this companyue. M/s Bodhtree Consulting Ltd. from the finallist of comparables. The mean margin of theremainingthree|comparables M/sAkshaysoftware Technologies Ltd., 8.11%, M/s KalsInformation Systems Ltd., 15.89% and M/s R.S.software (India) Ltd., 9.97% is 10.97% whereasthe profit margin of the assessee company 1s11.37% and therefore, no TP adjustment is calledfor after exclusion of this one comparable. Underthese facts, no adjudication is calledfor in respectof any other issues because the same becomes ofacademic interest”.| 4. However, this Court in a recent judgment inITA No.536/2015 C/w ITA No.537/2015delivered on25.06.2018 (Pri. Commissioner of Income Tax & Date of Judgment 07-08-2018 I.T.A.No.387/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 5/7 Anr. Vs. M/s. Softbrands India Pvt. Ltd.,)1 has held that in these type of cases, unless anex-facleperversityin the findings of the learned Income Tax AppellateTribunal is established by the appellants, the appeal atthe instance of 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 TreatiesOVETthe|Domestic.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 couldbe raised before the High Court underSection Date of Judgment 07-08-2018 I.T.A.No.387/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 6/7 260-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 tf 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 whichthe assessees may not be satisfied and have filed Date of Judgment 07-08-2018 I.T.A.No.387/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 7/7 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 and findingshas found certain comparables to be goodcomparables to arrive at an‘Arm’s LengthPrice“in the case of the assessees with whichthe assessees may not be satisfied and have filed Date of Judgment 07-08-2018 I.T.A.No.387/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 7/7 such 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 the parties, we are therefore of the opinion that nosubstantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue isliable to be dismissed and it is.,$=,$$/.accordinglyNo costs. Sd/-. JUDGE Sd/-JUDGE| Srl.