Date Of Judgment 14-8-2018, Ita v. M/S. July Systems & Technologies Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 14 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.215/2017 BETWEEN: 1.THE PR. COMMISSIONEROF INCOME TAX - 4, OF INCOME TAX - 4, BMTC COMPLEX, KORAMANGALA BANGALORE 2.INCOME TAX OFFICEHK WARD-11 (2), BANGALORE _. APPBLLANTS| (BY SRI.SANMATHI E I, ADV.) AND: M/s. JULY SYSTEMS &TECHNOLOGIES PVT. LTD.,NO.17/9C, 4 FLOOR,MARUTHI CHAMBERS, RUPENAAGRAHARA, HOSUR ROAD,BANGALORE - 68,PAN: AABC65943.. RESPONDENT THIS INCOME TAX APPEAL IS FILED UNDER SKC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDER)DATED:18/10/2016 PASSED IN IT(TP)A NO.1574/BANG/2013,|FOR THE ASSBSSMENT YRBAR 2JOO5-2006 VIDE ANNBXURE -APRAYING TO: (1) DECIDE THE FOREGOING QUESTION OF LAW, Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 2/8 AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE.FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. (2).SETASIDETH EAPPELLATE|ORDERDATED:18/10/2016PASSED IN IT(TP)A NO.1574/BANG/2013 FOR A.Y. 2005-06 VIDEANNEXURE - A, BY THE INCOME TAX APPELLATE TRIBUNAL, 'B’BENCH, BENGALURU. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. Sanmathi E.L,,Adv. for Appellants — Revenue. © This Appeal is filed by the Revenue purportedlyraising the substantial question of law arising from theOrder of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’ in|IT [TP|A No.1574/Bang/2013dated| 18.10.2016, relating to the Assessment Year2005-06. 2.The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: oeWhether, the Tribunal, on the facts and in thecircumstances of the case, the Tribunal ts right|in law in rejecting the comparables such asExensys Software Solutions Ltd, Bodhtree|ConsultingLtd.sankhyaInfotechLtd,circumstances of the case, the Tribunal ts right|in law in rejecting the comparables such asExensys Software Solutions Ltd, Bodhtree|ConsultingLtd.sankhyaInfotechLtd, Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 3/8 ThirdtwareSolutionsLtd,Tata|ElxsiLtd,Geometric Software Solutions Co. Ltd andFoursoft Ltd, on the ground of functional|dissimilarity by relying on its earlier orderswhich has been challenged before this Hon'bleCourt and even when the TPO had rightlychosen the said comparison after applying all|the required tests in accordance with theprovisions of the Act?”| 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: “4d Wie have considered the vial submissions. Wefind that as per the functional profile of M/sMcAfee Software (Ind.) Put. Ltd., noted by theTribunal in the judgment cited by Id. AR of theassessee, this company is engaged in providingsoftware development services to its AE. In thepresent case, the functional profile of theassessee company has been noted by the TPO onpage-2 & 3 of his order as per which theassessee company is also providing softwareservices to its AE and the ld. DR of the revenuealso could not point out any difference in facts inthe present case and in the case of M/s McAfee Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 4/8 “4d Wie have considered the vial submissions. Wefind that as per the functional profile of M/sMcAfee Software (Ind.) Put. Ltd., noted by theTribunal in the judgment cited by Id. AR of theassessee, this company is engaged in providingsoftware development services to its AE. In thepresent case, the functional profile of theassessee company has been noted by the TPO onpage-2 & 3 of his order as per which theassessee company is also providing softwareservices to its AE and the ld. DR of the revenuealso could not point out any difference in facts inthe present case and in the case of M/s McAfee Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 4/8 software (Ind.)Pvt. Ltd., (Supra). Hence, weexamine this claim of the ld. AR of the assesseethat these seven comparables of which exclusionis being sought for by the assessee is covered infavour of the assessee or not. As per the chartsubmitted by the Id. AR of the assessee, Parano.10.2 to 10.8 of this Tribunal order are relevantin respect of these seven comparables and hence,we re-produce these paras of the Tribunal orderfrom pages-7 to 16 of the Tribunal order:-| XXXXXXXXXXXNXX o. As per the above paras re-produced from theTribunal order rendered in the case of M/sMcAfee Software (Ind.) Pvt. Ltd. (Supra), we findthat the Tribunal in that case has upheldexclusion of seven comparables 1.e.... 1) M/s Bodhtree Consulting Ltd., 2) M/s Exensys Software Solutions Put. Ltd., 3) M/s Sankhya Infotech Ltd., 4) M/s Thirdware Solutions Ltd., — 5) M/s Tata Elxsi Ltd., Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 5/8 6) Geometric Software Solutions Co. Ltd., | 7) M/s Four Soft Ltd., — 6. Respectfully following this Tribunal order, wedirect the AO/TPO that in the present case also,all these seven comparables should be excludedand TP adjustment, if any, should be made, onlyafter excluding these seven comparables. It wasagreed by both side that no separate adjudicationis called for in respect of any other ground raisedby the assessee.” 4However, this Court in a recent judgment inI.T.A. Nos.536/2015 c/w 537/2015delivered on25.06.2018 (Prl. Commissioner of Income Tax & Anr. —v- M/s Softbrands India Pvt. Ltd.») has held that inthese type of cases, unless an ex-facie 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 J60-A ofthe Act is not maintainable. The relevant portion of thesaid judgment is quoted below for ready reference: Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 6/8 “Conclusion: 55.Asubstantial quantumof|international trade and transactions depends|upon the fair and quick judicial dispensation|in such cases. Had it been a case of|substantialquestionof|interpretation of|provisions of Double Taxation AvoidanceTreaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of the|Treaties over the Domestic Legislations or the |questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Shares|in Tax Havens (like in the case of Vodafone|etc.), uf based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-Aof the Act, the Courts could have|embarked upon such exercise offraming and|answering such substantial question of law.On the other hand, the appeals of the present|tenor as to whether the comparables have|been rightly picked up or not, Futers for|arriving at the correct list of comparables|have been rightly applied or not, do not in our| Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 7/8 consideredopinion,|giverisetO arysubstantial question of law. Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 7/8 consideredopinion,|giverisetO arysubstantial question of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|Suggested|substantial questions of law do not meet therequirements ofSection 260-A|of the Act andthus the appeals filed 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 beapplied, even tf such appeals are filed by the|Assessees, because, there may be cases.where the Tribunal giving its own reasons|and findings has found certain comparables|to be good comparables to arrive at an|7s “ArmLength Price“in the case of the assesseeswith which the assessees may not be|satisfied and have filed such appeals beforethis Court. Therefore we clarify that mere|dissatisfaction with the findings of facts|arrived at by the learned Tribunal ts not at all| Date of Judgment 14-8-2018, ITA No.215/2017 The Pr. Commissioner of Income Tax-4 & anr. Vs. M/s. July Systems & Technologies Pvt. Ltd. 8/8 a sufficient reason to invoke.Section 260-Aof the Act before this Court. o8. The appeals filed by the Revenue are|therefore dismissed with no order as_ tocosts.” 5.Having heard the learned Counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in thepresent case also. The Appeal filed by the Appellants-| Revenue is liable to be dismissed and it is dismissed|accordingly. No costs. Copy of this order be sent to the Respondent-Assessee, forthwith. AN /- Sd/-.JUDGE| Sd/-.JUDGE|