Date Of Judgment 08-08-2018 I.t.a v. M/S. Arcot R & D Software Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE O8 DAY OF AUGUST 2018. PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.357/2017 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX,|k FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BBENGALURU-560 095.k FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BBENGALURU-560 095. 2.THE INCOME-TAX OFFICER,WARD-1(1)(2), 7 FLOOR,BMTC BUILDING, 30 FEET ROAD,WARD-1(1)(2), 7 FLOOR,BMTC BUILDING, 30 FEET ROAD, KORMANGALA, BENGALURU-560 095. .. APPBLLANT (By Mr. K.V. ARAVIND, ADV.) AND: M/S. ARCOT R & D SOFTWARE PVT. LTD., C/O IBM INDIA PVT. LTD.,LEVEL III, SUBRAMANYA ARCADE 1,BANNERGHATTA ROAD,BENGALURU-560 029.)PAN: AADCA 4367L. . RESPONDENT (By Mr. SANDEEP HUILGOL, ADV., FOR ©Mr. T. SURYANARAYANA, ADV..,)Mr. T. SURYANARAYANA, ADV..,) Date of Judgment 08-08-2018 I.T.A.No.357/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Arcot R & D Software Pvt. Ltd., 2/7 THIS I.T.A. IS FILED UNDER SECTION 260-A OF THE IT|ACT, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONSOK LAW. ALLOW THER APPEAL AND SEI ASIDE THE ORDERS|PASSED|BYTHEINCOME-TAX.APPBRLLATBTRIBUNAL, BENGALURU IN C.O.No.148/BANG/2015 DATED 04/11/2016—ANNBXURE-D CONFIRMING THR ORDER OF THR DRP AND)CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER,WARD-1(1)(2), BENGALURU & ETC. THIS LT.A. COMING ON FOR HEARING THIS DAY,S. SUJATHAJT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. K.V. Aravind,Adv. for Appellants-Revenue |Mr. Sandeep Huilgol,Adv. for |Mr. T. Suryanarayana, Adv. for Respondent -Assessee 1. The Appellants-Revenue have filed this appealu/s.260Aof the Income Tax Act, 1961, raisingpurportedly certain substantial questions of law arisingfrom the order of theITAT, Bangalore Bench ‘B’,Bangalore, dated04.11.2016passed inIT(TP)ANo.393/Bang/2015 (C.O.No.148/Bang/2015)(Income Tax Officer vs. M/s.Arcot R & D Software Put. Ltd.,)forA.Y.2010-11. 2. This appeal has been admitted on|14.11.2017to consider the following substantial question of law Date of Judgment 08-08-2018 I.T.A.No.357/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Arcot R & D Software Pvt. Ltd.,3/7 framed by the learned counsel for the Appellants-Revenue: - “Whether in the facts and circumstancesof the case, the Tribunal erred in excluding the|comparables, namely, Kals Information Systems|Ltd., Tata Elxsi Ltd., M/s.Persistent Systems|Ltd., Infosys Ltd., M/s.ICRA Techno-Analytecs|and M/s.Sasken Communication Technologies|Ltd., on the ground offunctional dissimilarity by|following its earlier order in the assessee’s own|case for earlier assessment years which has not|reached finality and even when the TPO hadchosenthecomparablesaS|itsatisfies qualitative and quantitative filters applied by|the TPO and Tribunal ought to have decided thecomparability of these companies on the basis|of specific facts brought out on record by the|TPO in the case of the assessee?.” 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:- | “8Havingconsideredthe rivalsubmissions and relevant material on record, we 4/7 found that the co-ordinate bench of this Tribunal| in the case ofDCIT Vs. Electronics for Imaging|India Pvt. Ltd.(supra) has considered thefunctional comparability of these companies in|para 13 to 33 as under:| XXXXXXKXKKXKXX Following the decisions of the co-ordinate|bench, we do notfind any reason to interfere withthe findings of the DRP in directing the A.O/ TPOto exclude the 7 companies from the set ofP comparables” 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 & contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:- | “8Havingconsideredthe rivalsubmissions and relevant material on record, we 4/7 found that the co-ordinate bench of this Tribunal| in the case ofDCIT Vs. Electronics for Imaging|India Pvt. Ltd.(supra) has considered thefunctional comparability of these companies in|para 13 to 33 as under:| XXXXXXKXKKXKXX Following the decisions of the co-ordinate|bench, we do notfind any reason to interfere withthe findings of the DRP in directing the A.O/ TPOto exclude the 7 companies from the set ofP comparables” 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 & Anr. Vs. M/s. Softbrands India Pvt. Ltd.,)1 has heldthat in these type of cases, unless anex-facleperversityin the findings of the learned Income Tax AppellateTribunal is established by the appellant, the appeal atthe instance of an assessee or the Revenue under|Section 260-Aot the Act is not maintainable. Date of Judgment 08-08-2018 I.T.A.No.357/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Arcot R & D Software Pvt. Ltd., 5/7 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 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. Date of Judgment 08-08-2018 I.T.A.No.357/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Arcot R & D Software Pvt. Ltd., 6/7 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 where)the 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 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.” Date of Judgment 08-08-2018 I.T.A.No.357/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Arcot R & D Software Pvt. Ltd., 7/7 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. Srl. Sd/-. JUDGE Sd/-|JUDGE