Date Of Judgment 09-07-2018 I.t.a v. M/S. Infineon Technologies India Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 9[th]DAY OF JULY 2ZO18 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.731/2017 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX, CIT{(A)k FLOOR, BMTC BUILDING80 FEET ROAD, KORMANGALA|BBENGALURU-560 095.k FLOOR, BMTC BUILDING80 FEET ROAD, KORMANGALA|BBENGALURU-560 095. 2.THE ASST. COMMISSIONER OF INCOME-TAX.CIRCLE-11(4), PRESENT ADDRESSCIRCLE-3(1)(1), 2 KLOOR,BMTC BUILDING, 80 FEET ROADKORMANGALA, BENGALURU-5S60095.CIRCLE-11(4), PRESENT ADDRESSCIRCLE-3(1)(1), 2 KLOOR,BMTC BUILDING, 80 FEET ROADKORMANGALA, BENGALURU-5S60095. .. APPBLLANT (By Mr. K.V. ARAVIND, ADV.) AND: M/s. INFINEON TECHNOLOGIES INDIA LTD.,# FLOOR, PHASE-I, KALYANAI PLATINASURVEY No.6 & 24, KUNDALAHALLI VILLAGEK.R. PURAM HOBLI, BENGALURU-560 O66PAN: AABCS 696/N. .. RESPONDENT (By Ms. ANKUR PAI, ADV. FORMr. K.R. VASUDEVAN, ADV.,)Mr. K.R. VASUDEVAN, ADV.,) Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 2/8 THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIALQUESTIONS OF LAW; ALLOW THE APPEAL THE SET ASIDE THEORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,BENGALURU IN IT(TP)A No.697/Bang/2011 DATED 06/01/2017)ANNEXURE-D AND CONFIRM THE ORDER OF THE APPELLATE|COMMISSIONBR CONFIRMING THR ORDEBR PASSBKD BY THASST. COMMISSIONEROF)INCOMETAX,|CIRCLE-3(1)(1), BENGALURU & EIC. THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY |S. SUJATHA JT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. K.V. Aravind,Adv. for Appellants-AssesseeMs. Ankur Pai, Adv. tor Mr. K.R. Vasudevan,Adv. for Respondent-Revenue The appellants-Revenuehave filed this appealu/s. 260Aot theIncome Tax Act, 1961(for short ‘Act’) raising purportedly certain substantial questions of lawarising from the order of theIncome Tax Appellate. Tribunal, ‘B’ Bench, Bangalore|(for short ‘Tribunal’) dated 06.01.2017passed in I.T (TP)A No.657/ Bang/201for the |A.Y.2005-06 Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 3/8 2 |The proposed substantial questions of lawframed in the memorandum of appeal by the appellants- Revenue is quoted below for ready reference: F1.WhetherOnlthe factsandin|thecircumstances of the case, the Tribunal ts right in|law directing TPO to exclude certain comparable-companies|Onlthe.groundoffunctionaldissimilarity by relying on its earlier decisionwhich has been challenged before this Hon’bleCourtandwhenall the.qualitativeand|quantitative filters have been satisfied in the case|ofaSSCSSCECandMmoreoveTselectionofcomparables depends on specific FAR analysis?| D2 WhetherOnlthe factsandin|thecircumstances of the case, the Tribunal is right inlaw in directing the assessing authority/ transferpricing officer to exclude certain companies ascomparable as they are having RPT greater thanO% even when the company’s product revenue(software license income) is only 16% of the totalsales and the rest is attributable to the softwareSECTUICES?P Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 4/8 3.|The learned Tribunal, after discussing therival contentions of both the appellants-Revenue andthe Respondent-assessee, has given the _ followinfindings with regard to various issues raised before itwith regard to ‘Transfer Pricing’|and‘Transfer Pricing|Adjustments’made by the concerned authorities below.We consider it appropriate to quote the relevantportions of the order of the Tribunal which runs as=9&9<359&, F17. With respect to 1.11, the assessee’s contention|for rejection of the comparable company is given)below: Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 4/8 3.|The learned Tribunal, after discussing therival contentions of both the appellants-Revenue andthe Respondent-assessee, has given the _ followinfindings with regard to various issues raised before itwith regard to ‘Transfer Pricing’|and‘Transfer Pricing|Adjustments’made by the concerned authorities below.We consider it appropriate to quote the relevantportions of the order of the Tribunal which runs as=9&9<359&, F17. With respect to 1.11, the assessee’s contention|for rejection of the comparable company is given)below: Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 5/8 <SaskenNetworkSubstantialsellingSystemand|marketingCXPECTLSES>SaskenEngaged in sale ofCommunication|products;andTechnologies Ltd.,Substantialsellingand|marketingCXPeChTLSe.Tata Elxsi Ltd.,Services are in the!natureOf|productengineering|anddesiGn services.0Flextronics SoftwareHxtremehighprofit|ServicesPrivate|company; and RelatedLimited (seg)PartyTransactions|greater than O%.18. We find that 7 companies are to be) rejected/excluded from the list of comparables forthe reasons given in the chart. Hence we directthe TPO to exclude 7 companies stated in 1.11.” This Court in|ITA No.536/2015 C/w ITA. 4 No.537/2015deliveredOT] 25.06.2018 | (Pri. Commissioner of Income Tax & Anr. Vs. | M/s. Softbrands India Put. Ltd.,)| has held that inthese type of cases, unless an|ex-facle-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 260-Aot|the Act is not maintainable and the relevant portion ofthe said judgment is quoted below for ready reference: Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 6/8 § Conclusion: 55. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|OmCaASeofSubstantialquestionofinterpretation of provisions of Double TaxationAvoidance Treaties (DIAA), 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 andanswering 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 considered|opinion that the present appeals filed by the Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 7/8 Revenue 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. | 56. We are therefore of the considered|opinion that the present appeals filed by the Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 7/8 Revenue 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|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.” 5Having heard the learned counsel for the appellants-Revenue, we are therefore of the opinion that Date of Judgment 09-07-2018 I.T.A.No.731/2017 The Pr. Commissioner of Income-tax, CIT(A) & Anr. Vs. M/s. Infineon Technologies India Ltd., 8/8 no substantial question of law arises in the present case. The appeal filed by the Appellants-Revenue is) liable to be dismissed and it is/-$5-$$2/accordingly No costs. TL Sd/-.JUDGE|Sd/-.JUDGE|