Date Of Judgment 10-07-2018 I.t.a v. M/S. Tatra Vectra Motors Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 10 DAY OF JULY 2ZO18 PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.191/2012 BETWEEN: 1.COMMISSIONER OF INCOME-TAX-III, CHNITRAL REVENUE BUILDINGS QUEENS ROAD, BANGALORE-560 OO1 2.THERE DBPUTY COMMISSIONER OFINCOME-TAX, CIRCLE-12(4), BANGALOREINCOME-TAX, CIRCLE-12(4), BANGALORE _ APPBRLLANTS (By Mr.JEEVAN J. NEERALGI, ADV.) AND: M/S.TATRA VECTRA MOTORS LTD.,.(NOW KNOWN AS KAMAZVECTRA MOTORS LIMITED)C/O NANGIA & CO.,SUITE-4A, PLAZA, M-6JASOLA, NEW DELHI-110 025 ~ RESPONDENT (By MR.T.V.AJAYAN & MR.RAJESH CHANDRA KUMAR, ADVS.) THIS ILT.A. IS FILED UNDER SECTION 2J6O0-A OF INCOMTAX ACT 1961, PRAYING TO DECIDE THE QUESTION OF LAW|AND / OR SUCH OTHER QUESTIONS OF LAW; SET ASIDE THEORDER OF THE TRIBUNAL IN ITA NO.1284/BANG/2010 DATED) 2/11 31/01/2012 FOR THE ASSESSMENT YEAR 2006-07 ANNEXURE-A.| THIS LT.A. COMING ON FOR ADMISSION, THIS DAY |S. SUJATHA JT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. Jeevan J. Neeralgi,Adv. for Appellants-RevenueMr. T.V. Ajayan & Mr. Rajesh Chandra Kumar,Advs. torRespondent-assessee 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, ‘A’ Bench, Bangalore|(for short ‘Tribunal’)dated3091L.Q01Lpassed in.ITA No.1284/Bang/2010for theA.Y.2006-07 2 |Thisappealhas|beenADMITTRD.OT] 391.07.201to consider the following substantialquestions of law as framed by the Revenue in theMemorandum of Appeal: 3/11 H1.Whether tribunal is right in law in holding|that the assessee is eligible for a standarddeduction of 5% from the Arm’s Length Priceunder the proviso to section 92C(2) of the IncomeTax Act? 2.Whether the tribunal is right in law in not|considering the corrigendum dated 30.04.2010 to)the circular 5/2010 issued by the Board withregard to the applicability of the amended provisoto section 92C(2) to all cases pending before theTPO after 01.04.2009?” 3.|The learned Tribunal, after discussing therival contentions of both the appellants-Revenue andthe Respondent-assessee, has returned the findings asunder: Regarding substantial question of law No.1: “12. We have considered the submissions ofboth the parties and carefully gone through thematerial available on record. In the present case,the assessee has not disputed the adjustmentsu/s. 92CA of the Act, but challenging the workingof ALP without giving benefit of the optionavailable under the erstwhile proviso to section 4/11 92C(2) of the Act, so it becomes relevant todiscuss the provisions contained in the erstwhileproviso to section 92C(2) of the Act, which wasinserted by Finance Act, 2002 w.e.f. 1-4-2002and reads as under: “Provided,that where more than one| price1Sdeterminedbythe.most.appropriate method, the arm’s lengthpriceShall|be|takenTo|be|the arithmetical mean of such prices, or, atthe option of the assessee, a price whichmay vary from the arithmetical mean byan amount not exceeding five per cent ofsuch arithmetical mean.” Regarding substantial question of law No.2: “16. As regards to the applicability of theamended provisions in proviso to section 92C(2)of the Act which ts applicable w.e.f. 1.10.2009 isconcerned, it is noticed that this issue has beenadjudicated by the ITAT Pune Bench “A”, Pune in)ITA No.1350/PN/2010 in the case of StarnetNetworks (India) P. Ltd. v. DCIT (supra), whereinthe relevant findings has been given in paras 20to 23 of the order dated 03.10.2011 and read asunder: Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 5/11 DO. xKxx QI. xXxxx DD xXxxx Regarding substantial question of law No.2: “16. As regards to the applicability of theamended provisions in proviso to section 92C(2)of the Act which ts applicable w.e.f. 1.10.2009 isconcerned, it is noticed that this issue has beenadjudicated by the ITAT Pune Bench “A”, Pune in)ITA No.1350/PN/2010 in the case of StarnetNetworks (India) P. Ltd. v. DCIT (supra), whereinthe relevant findings has been given in paras 20to 23 of the order dated 03.10.2011 and read asunder: Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 5/11 DO. xKxx QI. xXxxx DD xXxxx YS.However, before parting we may also refer|to a Corrigendum dated 30.9.2010 by the CBDTby way of which para 37.5 of the circular No5/2010 (supra) has been sought to be modified.The Corrigendum reads as under: “ CORRIGENDUM In partial modification of Circular No. 5/2010dated 03.6.2010, | lines (i) In para 37.5 of the said Circular, for the “the qhove amendment has beenmade applicable with effect from IstApril, 2009 and will accordingly applyin respect of assessment year 2009-10and subsequent years.” the following lines shall be read; “the @Qbove amendment has beenmade applicable with effect from IstOctober, 2009 and _ shall accordinglapply in relation to all cases in whichproceedings are pending before theTransfer Pricing Officer ([PO)on or aftersuch date.” (u) In para 38.3, for the date “Ist October,2009, the following date shall be read: “Ist April,2009”. 6/11 In terms thereof, it is canvassed that the|amended proviso has been made applicable witheffect from 1.10.2009 and shall apply even tocases where proceedings were pending before theTPO on or after such date, irrespective of theassessment year involved and, therefore, in theinstant case the benefit of the erstwhile provisocannot be extended to the assessee. We have|carefully pondered over the assertion made bythe appellant that the Corrigendum is untenablein the eyes of law. Firstly, the said corrigendumdoes not bring out any preamble so as to throwlight on the circumstances and the background inwhich the same has been issued. Secondly, it iswell understood that the Explanatory Notes to theprovisions of a Finance Act passed by theParliament seeks to explain the substance of theprovisions of the Act as intended by theLegislature. In fact, the Hon’ble Supreme Court inthe case of K.P Varghese v ITO 131 ITR 597 (Ker)emphasized the sanctity of the statementscontained in the Explanatory Notes of theprovisions and stated that the interpretationplacedinsuchdocuments1Sbinding interpretation of law. The contents of theCorrigendumarequiteinexplicable.Notwithstanding the aforesaid and without going Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 7/11 Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 7/11 into the validity of the Corrigendum dated30.9.2010 (supra), we are of the view that thesame would not operate to the detriment of theassessee since at the relevant point of time thecontents of the Circular No 5/2010 (supra) werein operation. In other words, the withdrawal ofthe interpretation placed in circular No 5 /2010(supra) on the applicability of the amendedproviso is sought to be done away by theCorrigendum dated 30.9.2010 and, therefore,such withdrawal shall be effective only after30.9.2010, even if such Corrigendum is acceptedas valid. We may note here that the appellant hasassailed the validity of the Corrigendum itself onwhich we have not made any determination.Therefore, the Corrigendum dated 30.9.2010, inour considered opinion, has no bearing so as todis-entitle the assessee from its claim of thebenefit of +/-5% in terms of the erstwhile provisoto section 92C(2) of the Act. In coming to theaforesaid, we have been guided by the parity ofreasoning laid down in the judgments of theHon’ble Bombay High Court in the cases of BASF(India) Ltd. v CIT 280 ITR 136 (Bom); Shakti RajFilms Distributors v CIT 213 ITR 20 (Bom); and,Unit Trust of India & Anrs. v ITO 249 ITR 612(Bom). The Hon’ble High Court has opined in the Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 8/11 case of BASF (India) Ltd. (supra) that the circulars|which are in force during the relevant period areto be applied and the subsequent circulars eitherwithdrawing or modifying the earlier circularshave no application. Moreover, the circulars in thenatureofconcessionCanbe|withdrawn.prospectively only as held by the Hon’bleSupreme Court in the case of State Bank ofTravancore v CIT 50 CTR 102 (SC). Consideringalltheseaspects,WE|thereforefind TLOjustification in the action of the lower authoritiesin disentitling the assessee from its claim for thebenefit of +/-5% to compute ALP in terms of theerstwhile proviso to section 92C(2) of the Act. Weorder accordingly. 4The controversy involved herein is no moreres integrain view of the decision of this Court inITANo.536/2015 C/w ITA No.537/2015delivered on)25.06.2018 (Pri. Commissioner of Income Tax &Anr. Vs. M/s. Softbrands India Put. Ltd.,)|wherein ithas been observed that in these type of cases, unless an ©ex-facle' perversity in the findings of the learned IncomeTax Appellate Tribunal is established by the appellant, Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 9/11 the appeal at the instance of an assessee or the Revenue underSection 2Z60-ot the Act is not maintainable andthe relevant portion of the said judgment is quotedbelow 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 rightly 10/11 picked up or not, Filters for arriving at the correctlust of comparables have been rightly applied ornot, do not in our considered opinion, give rise toany substantial question of law. 10/11 picked up or not, Filters for arriving at the correctlust 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 theRevenue do not give rise to any substantialquestion of law and the suggested substantialquestions of law do not meet the requirements ofSection 260-Aof the Act and thus the appealsfiled by the Revenue are found to be devoid of|merit and the same are liable to be dismissed. | 57. We make it clear that the same'|yardsticks and parameters will have to _ bapplied, even tf such appeals are filed by theAssessees, because, there may be cases wherethe Tribunal giving its own reasons and findings|has found certain comparables to be goodcomparables to arrive at an'‘Arm’s LengthPrice~ in the case of the assessees with which|the assessees may not be satisfied and have filed|such appeals before this Court. Therefore we.clarify that mere dissatisfaction with the findingsoffacts arrived at by the learned Tribunal is notat alla sufficient reason to invokeSection 260-Aof the Act before this Court. Date of Judgment 10-07-2018 I.T.A.No.191/2012 Commissioner of Income-tax-III & Anr. Vs. M/s. Tatra Vectra Motors Ltd., 11/11 o8. The appeals filed by the Revenue aretherefore dismissed with no order as to costs.” 5In the circumstances, having heard thelearned Counsel appearing for both the sides, we are ofthe considered opinion that no substantial question oflaw arises for consideration in the present case. _ Hence, the Appeal filed by the Appellants-Revenueis liable to be dismissed and is accordingly|aismissed.No costs. To Sd/-.JUDGE Sd/-.JUDGE