Date Of Judgment 08-08-2018 I.t.a v. M/S. Fair Isaac India 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.369/2017 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 DEPUTY COMMISSIONER OF INCOME-TAX,|CIRCLE-11(3), PRESENT ADDRESS,CIRCLE-3(1)(1), 2 FLOOR,BMTC BUILDING, 80 FEET ROAD,KORMANGALA, BENGALURU-560 095.CIRCLE-11(3), PRESENT ADDRESS,CIRCLE-3(1)(1), 2 FLOOR,BMTC BUILDING, 80 FEET ROAD,KORMANGALA, BENGALURU-560 095. .. APPBLLANT (By Mr. K.V. ARAVIND, ADV.) AND: M/s. FAIR ISAAC INDIA SOFTWARE PVT.LTD.,135, OLD AIRPORT ROAD, KODIHALLY,BBENGALURU-560 O17.PAN: AABCF 7670G., . RESPONDENT (By Mr. S.SANKARA NARAYANAN, ADV.) Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 2/8 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|PASSEDBY|THREITAT,BBRENGALURINIT(TP)ANO.1776/BANG/2013—DATEHR08/09/2016.ANNEXURE-DCONFIRMING THE ORDER OF THE APPBELLATEBE COMMISSIONANDCONEHIRMTHEORDERPASSEDBY|THEDEBPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), 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. Sankara Narayanan, Adv. for Respondent -Assessee | 1. The Appellants-Revenue have filed this appeal u/s.260Aof the Income Tax Act, 1961, raisingpurportedly certain substantial questions of law arisingfrom the order ot theITAT, ‘A’ Bench, Bangalore>datedO8.09.2016passed1nIT(TP)A No.1776/ Bang/2013(The Deputy Commissioner ofIncome-tax vs. M/s.Fair Isaac India Software Put. Ltd.,}forA.Y.2009-10. 2. This appeal has been admitted on|14.11.2017to consider the following substantial questions of law Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 3/8 framed by the learned counsel for the Appellants-Revenue: - “1.Whetherin|the factsandcircumstances of the case, the Tribunal ts right|in law in excluding the comparables, namely,Kals Information Systems, Bodhtree Consulting|Ltd and Tata Elxsit Ltd on the ground offunctional dissimilarity by following its earlier|order which has not reached finality and even|when the TPO has chosen the comparables as itsatisfies qualitative and quantitative ffiltersapplied by the TPO and Tribunal ought to have|decided the comparability of these companieson the basis of spectfic facts brought out on|record by the TPO in the case of the assesseeP 2. Whether in the facts and circumstancesof the case, the Tribunal is right in law in|excluding comparables namely, M/s. Sasken|Communication Technologies Ltd, Persistentsystems Ltd, Larsen & Tourbo Infotech Ltd andInfosys Ltd on the basis of high turnover by|following its earlier order in case of M/s. Yodlee|Infotech Ltd and Unisys India Put.Ltd which has|not reached finality and TPO had rightly chosenthe same after applying required tests and Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 4/8 without appreciating that the sales turnover ofthe company does not have any impact on themargins earned and there is no correlationbetween size of the company and the profitmargins reported when the said companieshave satisfiedallthequalitativeandquantitative filters?P.~ 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and theRespondent-Assessee, has given the following findings:- | :Regarding substantial question of law No.1: (dadKALS Information Systems Ltd. XXXXXXXXXXKXXKXX Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 4/8 without appreciating that the sales turnover ofthe company does not have any impact on themargins earned and there is no correlationbetween size of the company and the profitmargins reported when the said companieshave satisfiedallthequalitativeandquantitative filters?P.~ 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and theRespondent-Assessee, has given the following findings:- | :Regarding substantial question of law No.1: (dadKALS Information Systems Ltd. XXXXXXXXXXKXXKXX 11.1.3 Following the decision of the co-ordinate Bench of the Tribunal in the case of M/s.CISCO Systems (India) Put. Ltd. (supra), we directthat Kals Information Systems Ltd. be excludedfrom the final list of comparables on _ thfunctional comparability. (2) Bodhtree Consulting Ltd. 11.2.2 In view of the co-ordinate Bench ofthe Tribunal in the case of M/s. CISCO Systems Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 5/8 (India) Put. Ltd. (supra), we direct BodhtreeConsulting Ltd. to be excluded from the list of2? comparables similarly, the learned Tribunal has considered theother comparables and excluded the same. :Regarding substantial question of law No.2: “12.1We find that in the case of Yodlee|Infotech Ltd. (supra), this Tribunal at para 20 ofits order has held as under:-. XXXXXXXXXXXNXX 12.3 Followingthe decisionsof|the Tribunal in the case of Yodlee Infotech Ltd.(supra) and Unisys India Put. Ltd. (supra), wedirect that Sasken Communication TechnologiesLtd. (seg), Persistent Systems Ltd., Larsen &Toubro Infotech Ltd. and Infosys Ltd. be excludedfrom the final list of TPO’s comparables”. 4. However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015delivered on 25.06.2018 (Pri. Commissioner of Income Tax &Anr. Vs. M/s. Softbrands India Pvt. Ltd.,)1 has held Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd.,6/8 that 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. 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|OmCaASeofsubstantialquestionof|interpretation of provisions of Double TaxationAvoidance Treaties (DTAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectoftheTreatiesOVECTthe|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.), tf based on relevantfacts, such substantial questions of law could |be raised before the High Court underSection|260-A|of the Act, the Courts could haveembarked upon such exercise of framing and) Date of Judgment 08-08-2018 I.T.A.No.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 7/8 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.369/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Fair Isaac India Software Pvt. Ltd., 7/8 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 filedsuch appeals before this Court. Therefore weclarify that mere dissatisfaction with the findings 8/8 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 theparties, 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.,!B,!!/.accordinglyaccordinglyNo costs. liable to be dismissed and it is.,!B,!!/.accordinglyaccordingly Srl. Sd/-. JUDGE Sd/-|JUDGE JUDGE