Date Of Judgment 16-08-2018, Ita v. M/S Sonim Technologies (Ind.) Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 16 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.590/2017 BETWEEN: 1.PR. COMMISSIONBR OF INCOME TAX-6|BMTC COMPLEX,BMTC COMPLEX, KORAMANGALA, BANGALORE 2.THR DBPUTY COMMISSIONEROF INCOME TAX CIRCLEOF INCOME TAX CIRCLE 12 (3) BANGALORE _ _. APPBLLANTS (BY SRI.SANMATHI E I, ADV.)| AND:| M/S. SONIM TECHNOLOGIES(IND.) PVT. LTD., SREEGANDHA,ARCADE, 564/564-I, 9[ ]CRODS»s,J P NAGAR, 3 PHASE,BANGALORE - 560 O78PAN NO.AABCS//12A ARCADE, 564/564-I, 9[ ]CRODS»s, .. RESPONDENT THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDER)DATED:24.03.2017 PASSED IN IT/TPJA NO.252/BANG/2014, FOR:THE ASSESSMENT YEAR-2009-10 VIDE ANNEXURE - A,_PRAYING THIS HON'BLBE COURT TO: DECIDE THR FORBGOING Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. 2/8 QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW,AS MAY BR FORMULATED BY THR HON'BLBE COURT ASDHREME]RIT.(A)SETASIDETHEAPPELLATE,ORDERDATED:24.03.201/7 PASSED BY THE INCOME TAX APPELLATETRIBUNAL, 'A'’ BENCH, BANGALORE, IN APPEAL PROCEEDINGSNO.IT/ JA NO.252/BANG/2014 FOR ASSESSMENT YEAR: 20010 VIDE ANNBXURE — A. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT MrSanmathi E I, Adv. for Appellants — Revenue. | This Appeal is filed by the Revenue purportedly|raising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal,SA?Bench,Bangalore, in|IT A No.252/Bang/2014dated|24.03.2017relating to the Assessment Year2009-10. 2. The substantial question of law framed by theRevenue in the Memorandum of Appeal is as under: “Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law inexcluding certain comparable’s on the ground offunctional dissimilarity by relying on its earlier Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. order in case of Cisco Systems India Put. Ltd.which has been challenged before this Hon’bleCourt when it satisfied all the qualitative andquantitative filters applied by the TPO and theTribunal has used a narrower functionality filterthan TPO, but has not tested other comparable’sagainst the narrower functionality filter appliedby it?° | 3. The learned Tribunal, after discussing the rivalcontentions oT boththe.Appellants-Revenue|andRespondent-Assessee, has returned the findings as.under: “Hh We have considered the rival submissions.We find that as per the Tribunal order rendered inthe case f M/s Cisco Systems India Put. Ltd. VsDCIT in IT (TPJA No.271(Bang)/ 2014 (Supra), itwas noted that this company is engaged in thebusiness of rendering software developmentservices as noted by the Tribunal in para-3S of thisTribunal order. In the present case also, as perpage-2 of the order of TPO, the assessee companyprovides software development and maintenanceservices to its Associated Enterprises (AE) in USA.Hence, it is seen that functional profile of both Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. these companies are simular and therefore, in ourconsideredopinion,thisTribunal order.1S|applicable in the present case. Therefore, wereproduce para-26.1 to 26.3 of this Tribunal orderfrom pages 375 to 378 of case laws compuation.The same are aS under: XXXXXXXXXXNX Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. these companies are simular and therefore, in ourconsideredopinion,thisTribunal order.1S|applicable in the present case. Therefore, wereproduce para-26.1 to 26.3 of this Tribunal orderfrom pages 375 to 378 of case laws compuation.The same are aS under: XXXXXXXXXXNX From the above paras re-produced from the orderof the Tribunal, it is seen that in that case, theTribunal held that these two companies are to beexcluded from the list of final comparablesbecause these two companies are not functionallycomparable. Since in the present case also, thefacts are similar and the ld. DR of the revenuecould not point out any difference in facts, werespectfully follow this Tribunal order and directthe AO/TPO in the present case also to excludethese two companies from the lst of finalcomparables and then determine the ALP and)decide whether any TP adjustment is requestedto be made or not as per law.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. 5/8 25.06.2018 (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 otthe Act is not maintainable. The relevant portion of the said judgment is.quoted below for ready reference: “Conclusion: 55.Asubstantial quantumof|international trade and transactions depends|upon the fair and quick Judicial dispensation|in such cases. Had it been a case oOf|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 Erosion|and Profit Shifting (BEPS), Transfer of Shares| Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. 6/8 in Tax Havens (like in the case of Vodafone|etc.), tf 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|consideredopinion, giveriseTo anysubstantial 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. Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. 7/8 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|a sufficient reason to invoke.Section 260-Aof the Act before this Court. Date of Judgment 16-08-2018, ITA No.590/2017 Pr. Commissioner of Income Tax-6 & another Vs. M/s SONIM TECHNOLOGIES (IND.) PVT. LTD. 7/8 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|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.” Oo. Having heard the learned counsel for theAppellants-Revenue, we are therefore of the opinion thatno substantial question of law arises in the present casealso. The Appeal filed by the Appellants-Revenue is 8/8 liable to be dismissed and it is dismissed accordingly. — No costs. Copy of this order be sent to the Respondent- Assessee forthwith. In. Sd/-.JUDGE. Sd/-.JU DGE