Date Of Judgment 09-08-2018 I.t.a v. M/S. Electronics For Imaging India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE O0[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.401/2017 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX, k FLOOR, BMTC BUILDING,k FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BBENGALURU-560 095. OoTHE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-11(3), PRESENT ADDRESS,CIRCLE-2(1)(2), 2 FLOOR,BMTC BUILDING, 80 FEET ROAD,KORMANGALA, BENGALURU-560 095.CIRCLE-11(3), PRESENT ADDRESS,CIRCLE-2(1)(2), 2 FLOOR,BMTC BUILDING, 80 FEET ROAD,KORMANGALA, BENGALURU-560 095. .. APPBLLANT (By Mr. K.V. ARAVIND, ADV.) AND: M/s. ELECTRONICS FOR IMAGING INDIA PVT. LTD.,KALYANI PLATINA, 4 FLOOR,BLOCK-I, 24-EPIP ZONE,PHASE-II, WHITEFIELD,BBNGALURU-560 O66. .. RESPONDENT (By Mr. S.SHARATH, ADV., FOR.Mr. K.K.CHYTHANYA, ADV..,) | Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 2/7 THIS I.T.A. IS FILED UNDER SECTION 260-A OF THE IT|ACT, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONSOF LAW SITAITED. ALLOW THR APPEAL AND SHI ASIDE THORDERPASSED|BYTHREITAT,|BANGALOREIN|ITA|NO.161/BANG/2014DATEHDA24-11-JO16ANNEXURE-D,CONFIRMING THE ORDER OF THE APPBELLATEBE COMMISSIONANDCONEHIRMTHEORDERPASSEDBY|THEDEBPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), BENGALURU. 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.Mr. K.K.Chythanya,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, Bench ‘B’, Bangalore>adated24-11-2016passed inITA No.161/Bang/2014(Deputy Commissioner of Income tax vs. M/s.Electronics|for Imaging India Put. Ltd., }forA.Y.2009-1(0 2. This appeal has been admitted on|14.11.2017 to consider the following substantial questions of law Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 3/7 framed by the learned counsel for the Appellants-Revenue: - “1. Whether, on the facts and in thecircumstances of the case, the Tribunal is correctin holding that the foreign exchange transactionsare to be considered as operating in nature, whenthe Rule 10 B(2)(d) stipulates that the net profitmarginrealizedby|the taxpayerin|the international transaction shall alone be computedfor comparability analysis under TNMM? 2. Whether, on the facts and in thecircumstances of the case, the Tribunal is correctinholding thatthe appealagainstanydisturbance in any one of the criteria or filter ofthe taxpayer or the TPO is only academic innatureandhencedoesnotneed|to.be|adjudicated, when in fact, it has resulted inremoval of seven comparable companies of theTPOP 3. Whether, on the facts and in thecircumstances of the case, the Tribunal ought tohave considered the Revenue’s ground that whena new filter is introduced by the CIT(A the entireaccept/reject matrix changes resulting in a new Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 4/7 set of comparables which needs to be consideredafreshp.” 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:- | 7We have perused the orders andheard the rival contentions. The CIT(A) held withrespect to failure to include foreign exchangegains/ loss as follows: NXXXXXXKXXKXX 7We find that the issue is covered bythe decision of Co-ordinate Bench of the Tribunalintheassessee’sOWN|CASECin|IT(TP)No.8 76/Bang/ 201andCO.No.167/ Bang/ 2015 dated 30.09.2015, wherein ihas been held as follows:-| NXXXXXXKXXKXX Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 4/7 set of comparables which needs to be consideredafreshp.” 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-Assessee, has given the following findings:- | 7We have perused the orders andheard the rival contentions. The CIT(A) held withrespect to failure to include foreign exchangegains/ loss as follows: NXXXXXXKXXKXX 7We find that the issue is covered bythe decision of Co-ordinate Bench of the Tribunalintheassessee’sOWN|CASECin|IT(TP)No.8 76/Bang/ 201andCO.No.167/ Bang/ 2015 dated 30.09.2015, wherein ihas been held as follows:-| NXXXXXXKXXKXX ORespectfully following the decision ofCo-ordinateBenchoftheTribunalintheassessee’s own case for the asst. year 2004-05,we dismiss the appeal of the Revenue’. Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 5/7 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 ot 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: 038. 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 OverridingEffectofthe TreatiesOVEeCtheDomestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 6/7 (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 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 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 findings Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 7/7 has 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 findingsoffacts 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 aretherefore dismissed with no order as to costs.” Date of Judgment 09-08-2018 I.T.A.No.401/2017 The Pr.Commissioner of Income-tax & Anr. Vs. M/s. Electronics for Imaging India Pvt. Ltd., 7/7 has 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 findingsoffacts 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 aretherefore 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 casealso. The appeal filed by the Appellants-Revenue isliable to be dismissed and it is/-$<-$$0/accordinglyNo costs. Srl. Sd/-. JUDGE Sd/-| JUDGE