Date Of Judgment 17-07-2018, Ita v. M/S Aptean Software India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 1/ DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A.No.111/2015 BETWEEN : 1.THERE COMMISSIONER OF [INCOME-I C.R. BUILDING, QUEENS ROAD,| BANGALORE. «|THE INCOME TAX OFFICER,WARD-11(1),|WARD-11(1),| RASHTROTHANA BHAVAN, NRUPATHUNGA ROAD, BANGALORE -560 OO1. _ APPBLLANTS| (BY SRI K.V.ARAVIND, ADV.) AND : M/s APTEAN SOFTWARE INDIA PVT. LTD.,(FORMERLY KNOWN AS CDC SOFTWAREINDIA PVT. LTD.)LEVEL-5 (8[‘L]FLOOR), “GOLDEN HEIGHTS” |NO.1/2, 99 ‘C’ CROSS ROAD,|. ‘M’ BLOCK, RAJAJI NAGAR, |BANGALORE -560 010.PAN: AACGCP 7154 M_. RESPONDENT. (BY SRI A.SHANKAR & SRI M.LAVA, ADVS.) Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 31/10/2014 PASSED IN IT(TP)A NO.1285/BANG/2010,FORTHEASSEKSSMENTYRAR2006-2007ANNEBEXURE-DPRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW STATED ABOVE. 2. ALLOW THERE APPKAL AND SEASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE IN|IT(TP)A NO.1285/BANG/2010 DATED 31/10/2014 ANNEXURE-D>AND CONFIRM THR ORDER OF THR DRP CONFIRMING THE!ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(1),.BANGALORE. 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. A.Shankar & Mr. M.Lava,Advs. 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 Bench ‘B’, Bangalore, inITA No.1285/Bang/2010dated|01.10.2014, relating to the Assessment Year2006-07. 2.Theappealhas|beenadmitted|OTL18.08.2015TO consider.thefollowingsubstantialquestions of law framed in the memorandum of appeal: Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 3/9 aWhether the Tribunal, on the facts and in|the circumstances of the case was right inexcluding Accel Transmatics Ltd., Lucid SoftwareLtd., KALS Information Systems Ltd. and TataElxst Ltd., from the list of comparables holdingthat they are functionally different withoutappreciating that the comparables satisfy all thequalitative and quantitative filters applied by theTPO and that selection of comparables in a casedepends on assessee specific FAR analysis? D2 Whether, the Tribunal on the facts and|circumstances of the case right in excluding AccelTransmatics Ltd., Lucid Software Ltd., KALSInformation Systems Ltd. and Tata Elxsi Ltd., byrelying on various decisions of the Tribunal andnot deciding the selection of the comparables onthe basis of specific facts brought on record bythe TPO? 3.|Whether, the Tribunal on the facts and in|the circumstances of the case right in consideringthe comparables as engages in software productsbusiness, merely because it has developedsoftwareproductsbyfollowingsoftwaredevelopment process, development services for itsdevelopment, without have legal ownership onsoftware products?” Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 4/9 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law Nos.1 to 3: “QThefollowingWeTretherelevant|observations of the Tribunal on the aforesaidcomparable companies in the case of Trilogy E-Business Software India Put. Ltd., [supray:-| KVeVNKK” Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 4/9 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law Nos.1 to 3: “QThefollowingWeTretherelevant|observations of the Tribunal on the aforesaidcomparable companies in the case of Trilogy E-Business Software India Put. Ltd., [supray:-| KVeVNKK” 10.The facts and circumstances under which|the aforesaid companies were considered ascomparable is identical in the case of theAssessee as well as in the case of Trilogy E-Business Software India Pvt. Ltd., [supraj.Respectfully following the decision of the Tribunalreferred to above in the case of Trilogy E-Business Software India Pvt. Ltd., /supra/, wedirect that the following companies be excludedfrom the list of 14 comparable arrived at by theTPO. al|KALS Information Systems LimitedbfAccel Transmatic Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 5/9 ll.As far as the comparable chosen by the|TPO viz., TATA Elxsi [Seg./ [Sl.No.8 of the final listof comparable chosen by TPO/ ts concerned, thisTribunal in the case of Logica Put. Ltd., /supra/held that this company is not functionallycomparable with a software development serviceprovider.ThefollowingWwef&therelevantobservations of the Tribunal in this regard. KVeVNKK” 12.In view of the above, the aforesaidcompany should also be excluded for the purpose|of comparison while determining the ALP of theinternational transaction in question. 13.As far as the comparable chosen by theTPO viz., M/s. Lucid Software Limited [Sl.No.9 ofthe final list of comparable chosen by TPO/ isconcerned, this Tribunal in the case of M/s.SDPLM Software Solutions Ltd., held that thiscompany is not functionally comparable with asoftwaredevelopmentSeCTUVICprovider.Thefollowing were the relevant observations of theTribunal in this regard. Myer” Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 6/9 14.In view of the above, the aforesaid|company should also be excluded for the purpose|of comparison while determining the ALP of theinternational transaction in question.” 4The controversy involved herein is no moreres integrain view oft the decision of this Court inI1.T.A.Nos.536/2015 c/w 537/2015dated25.06.2018[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 Judgmentis 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 of Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 7/9 the 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 underSection260-4of 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 arysubstantial question of law. 7/9 the 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 underSection260-4of 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 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|lawand.theSuggested|substantial questions of law do not meet therequirements ofSection 260-A|of the Act and Date of Judgment 17-07-2018, ITA No.111/2015 The Commissioner of Income-tax & Another Vs. M/s Aptean Software India Pvt. Ltd. 8/9 thus 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 cleqr that the sameyardsticks 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|7¢§ “Ar Length 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. 58. The appeals filed by the Revenueare therefore dismissed with no order as to|costs.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, we are of 9/9 the considered opinion that no substantial question of 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.| NC. Sd/-.JU DGE Sd/-.JU DGE