Date Of Judgment 1-8-2018, Ita v. M/S.ingersoll Rand (India) Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 1 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.347/2016 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME-TAX! FLOOR, BMTC BUILDING,80 FEET ROAD, KORAMANGALA,! FLOOR, BMTC BUILDING,80 FEET ROAD, KORAMANGALA, BANGALORE - 560 095. 2.THE DEPUTY COMMISSIONER OF INCOME TAX,|CIRCLE - 3 (1)(1), CIRCLE 11-(4) NO. AT)2 FLOOR BMTC BUILDING,80 FEET ROAD, KORMANGALA,BANGALORE - 560 095CIRCLE - 3 (1)(1), CIRCLE 11-(4) NO. AT)2 FLOOR BMTC BUILDING,80 FEET ROAD, KORMANGALA,BANGALORE - 560 095 ... APPBLLANTS| (BY MR.ARAVIND K V, ADV.) AND: M/S INGERSOLL RAND (INDIA) LTD.PLOT NO.35, KIADB INDUSTRIALAREA, BIDADIT,BANGALORE - 560 109,PAN: AAACIT 30990 ... RESPONDENT (BY MR.ANKUR PAI, ADV. FOR MR.K R VASUDEVAN, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED:05/11/2015 PASSED IN IT (TP) A NO.228/BANG/2015, Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. 2/8 FOR THE ASSESSMENT YEAR 2010-2011 ANNEXURE -D,|PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTION OFLAW STATED ABOVE. 2. ALLOW THE APPBAL AND SBT ASIDE|THE ORDERS PASSED BY THE ITAT, BENGALURU IN [T(TP)A.NO.228/BANG/2015 DATED:05/11/2015 ANNEXURE D AND.CONFIRM THR ORDER OF THR DRP CONFIRMING THR ORDER|PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX,|CIRCLE-3(1)(1), BENGALURU. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J©, DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V. Aravind, Adv. for Appellants — Revenue. |Mr. Ankur PaliAdv. forMr. K.R. Vasudevan,Adv., for.Respondent — Assessee. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, Bangalore‘C’ Bench, Bangalore inIT[TP|A No.228/Bang/2015dated|05.11.2015, relating to the Assessment Year2010-11 2.ThisAppealhas|beenadmitted|OTL 06.12.2017|to consider the following substantial|questions of law. Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. 3/8 “1. Whether on the facts and in_ thecircumstances of the case, the Tribunal 1isright in directing the TPO to delete the|additionsmadeOTLaccountof|COSTcontribution charges and notional interest on|outstanding receivables from AE’s by merely|following its earlier order which has _ noreached finality without considering the facts|and materials on record?| D2 WhetherOnthefactsand.inthe|circumstances of the case, the Tribunal is|right in setting aside TP adjustment on|account of notional interest on outstanding|receivables from AE’s without appreciating|that this 1s an international transaction and|as per Clause (i) (c) of Explanation to sub|section (2) of 92 of LT. Act, when a balance isoutstanding for a period of 6 months, it takes|the characterization of a loan transition and|as|suchthe|balancereceivable|fromAssociated Enterprises is treated as loantransaction for which interest ts chargeable|as per the provisions of section 92C(1) read|with Rule JOB?” Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. 4/8 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Regarding Substantial Question No.1: Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. 4/8 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Regarding Substantial Question No.1: “293. Similarly, in the case of AWB India Put.Ltd., ITA No.4454/ Del/ 2011, the Delht Bencof the Tribunal had noted that the assessee|had produced evidence and that the contentsof thereof were found to be “ amply|supportive” of the assessee’s claim. The TPOhad rejected TNMM and adopted CUP method|for determining ALP. The Tribunal held thatthe TPO remained ‘oblivious’ to the fact that|Rule 1OB(1) (a) stipulates ‘comparable’ and‘uncontrolled’ transactions while applying the|CUP method. Only a general observation was|made by the TPO that no independent party|would have made payment in uncontrolled|circumstances. 24. In view of the above decisions of the DelhiBench of the Tribunal in the case of DresserRand India Pvt. Ltd. and AWB India Pvt. Ltd. Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. 5/8 (supray,Wwedeletethe|additionof|Rs.1,53,40,000 towards TP adjustment on.account of payment of cost contributioncharges made by the assessee.” Regarding Substantial Question No.2: “99. We have heard both the parties. We find thatthe coordinate Bench of this Tribunal in theassessee’s own case for the AY 2006-07 in IT (TP)A.No. 1529/ Bang/ 20videorder|dated24.04.2015 while dealing with an identical issue,has held follows:- XXXXXXXX 36.Respectfullyfollowingtheaforesaiddecision of the coordinate Bench of this Tribunalcited supra in assessee’s own case for the AY2006-07, we are of the view that the lowerauthorities erred in making TP Adjustment onaccount of notional interest on outstandingreceivables from AEs and hence the assessee’sground(s) of appeal on this issue ts allowed.” 4The controversy involved herein is no moreres integrain view of the decision of this Court in|1.T.A. Nos.536/2015 c/w 537/2015dated25.06.2018 Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. 6/8 [Prl. Commissioner of Income Tax & Anr. V/s.M/s.Softbrands India Pvt. Ltd.,]|wherein it has beenobserved that unless the finding of the Tribunal is foundex facie perverse, the Appeal u/s. 260-A of the Act, isnot maintainable. The relevant portion of the Judgment is quoted below for ready reference: <Conclusion: 55. A substantial quantum of international tradeand transactions depends upon the fair and quick|judicial dispensation in such cases. Had it beena case of substantial question of interpretation ofprovisions of Double Taxation Avoidance Treaties(DTAA), interpretation of provisions of the IncomeTax Act or Overriding Effect of the Treaties overthe Domestic Legislations or the questions likeTreaty Shopping, 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 tenor Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. as 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 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. as 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 findingsoffacts arrived at by the learned Tribunal is not Date of Judgment 1-8-2018, ITA No.347/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.Ingersoll Rand (India) Ltd. at 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.” 5.In the circumstances, having heard the learned Counsel appearing for both the parties, We are of the considered opinion that no substantial questionof law arises for consideration in the present case. 6.Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordinglydismissed. Nocosts. AN /- Sd/-.JUDGE. Sd/-.JU DGE