Date Of Judgment 18-07-2018, Ita v. M/S Marlabs Software Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 18 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.202/2015 BETWEEN : 1.THE COMMIssIONER OF INCOME TAX,C.R.BUILDINGS, QUEENS ROAD, ©BANGALORE-1, «|THERE DEPUTLY COMMISSIONEOF INCOME TAX, CIRCLE -12(1), BANGALORE._ APPBLLANTS| (BY SRI E.I.SANMATHI, ADV.) AND : M/s MARLABS SOFTWARE PVT. LTD.,.14[‘L]FLOOR, BAGMANE CITRINE,BAGMANE WORLD TECHNOLOGY CENTRE,|K.R.PURAM, MARATHALLI ORR,MAHADEVAPURA VILLAGE,K.R.PURAM HOBLLI BANGALORE-560 048,PAN: AACCM 6627 QO .. RESPONDENT. (BY SRI S.SHARATH, ADV. FOR SRI CHYTHANYA K.K., ADV.) THIS [TA IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, ARISING OUT OF ORDER DATED 10/12/2014.PASSED IN IT(TP)A NO.72/BANG/2014, FOR THE ASSESSMENTYREAR 2JOO9-2010 ANNEXURE-A. PRAYING TO: 1. DECIDE TH Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 2/9 FOREGOING QUESTION OF LAW AND/OR SUCH OTHER,QUESTIONS OF LAW AS MAY BE FORMULATED BY THE)HON BLE COURT AS DEEBKBMED FI. 2. SEI ASIDE THAPPELLATE ORDER DATED 10/12/2014 PASSED BY THE ITAT,.‘AC!BENCH,BANGALORE,AS|SOUGHTFOR, IN|THERESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN|IT(TP)A NO.72/BANG/2014 FOR ASSESSMENT YEAR 2009-2010)ANNBXURE-A. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. E.I. Sanmathi,Adv. for Appellants — Revenue. ©Mr. S.Sharath,Adv., for)Mr. Chythanya K.K.,,Adv. —ASS@ESSEE. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘A’, Bangalore in)IT|TP|IA No.72/Bang/201dated|10.12.2014, relating to the Assessment Year2009-10 2.This Appeal has been admitted on)92.2016 to consider the following substantial questions of law as.framed by the Revenue in the Memorandum of Appeal. | Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 3/9 aWhether on the facts and in thecircumstances of the case, the Tribunal ts right in|law in directing the TPO to exclude M/s BodhtreeConsulting Ltd., as comparable holding it asfunctionally different by relying on the decision in|the case of M/s Mindteck (India) Ltd., eventhough the said comparable is applicable to caseof assessee and decision relied upon by Tribunalhas not reached finalityP D2 Whether on the facts and in thecircumstances of the case, the Tribunal ts right in|law in applying turnover filter limit of Rs.200Crores for selecting comparables by relying on itsearlier decision even though the said decisionshave not reached finality? 3.|Whether on the facts and in thecircumstances of the case, the Tribunal ts right in|law in directing the TPO to exclude M/s InfosysBPO Ltd., M/s Accentia Technologies Ltd., andM/s Eclerx Services Ltd., by relying on its earlierdecision which have not reached finality andwithout taking note of the facts recorded by TPOwhichclearlydemonstratesthattheSaidcomparables are clearly to applicable to case ofassesseer” 4/9 Regarding Substantial Question No.1: 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: “9.3. We have heard both parties andperused and carefully considered the material onrecord, including the judicial decision § cite(supra). We find that the co-ordinate bench of thisTribunal in the case of Mindteck (India) Ltd., inIT(TPJANo. 70/Bang/ 201at.21.8.2014|forAssessment Year 2YOO9-10 has excluded thiscompany form the final list of comparablecompanies. the relevant portion of this order atpara 16 thereof is extracted hereunder: XXXXXX 4/9 Regarding Substantial Question No.1: 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: “9.3. We have heard both parties andperused and carefully considered the material onrecord, including the judicial decision § cite(supra). We find that the co-ordinate bench of thisTribunal in the case of Mindteck (India) Ltd., inIT(TPJANo. 70/Bang/ 201at.21.8.2014|forAssessment Year 2YOO9-10 has excluded thiscompany form the final list of comparablecompanies. the relevant portion of this order atpara 16 thereof is extracted hereunder: XXXXXX Following the above decision of the co-ordinate bench of this Tribunal in the case ofMindteck (India) Ltd., (supra), we direct that this|companybe|excludedfromthelistofcomparables. ” Regarding Substantial Question No.2: “10.3.1.|We have heard both parties|andperusedandcarefullyconsideredthematerial on record, including the judicial decisioncited. The seven companies that the assessee toexclude from the TPO’s final list of comparablesare as under: XXXXX 10.3.2.We find that the co-ordinate|bench of this Tribunal, in the case of Mindteck(India) Ltd. (supra) has excluded the above 7companies from the list of comparables, byapplying the turnover filter of Rs.200 Crores. Therelevant portion of the order of the co-ordinatebench in the case of Mindteck (India) Ltd. (supra),at paras 17 and 18 of its order are extractedhereunder: XXXXX 10.3.3.Following the above decision ofthe co-ordinate bench in the case of Mindteck(India) Ltd. (supra), we hold that the comparableschosen by the TPO at S.Nos.5 to 11 of the final listof comparables, listed at para 10.3.1 of this order (supra), have to be excluded as comparables byapplying the turnover filter of Rs.200 Crores, forthe purpose of determining the ALP of theinternationaltransactioninthe softwaredevelopment services segment in this appeal. It isordered accordingly.” Regarding Substantial Question No.3: “713.Infosys BPO Ltd. 13.1. The comparability of this companywith an ITES company was considered by the co-ordinate bench of this Tribunal in the case of.Mindteck (India) Ltd. (supra). The relevant portionof the above order at paras 30 and S31 areextracted hereunder: NXXXXX 13.2. Following the above decision of the)co-ordinate bench of this Tribunal, we hold thatInfosys BPO Ltd., chosen by the TPO as a|comparable is to be excluded from the lst ofcomparables.” 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 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 7/9 [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: oo. A substantial quantum of international tradeand transactions depends upon the fair and quickjudicial 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.), | 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 tenor Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 8/9 Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 8/9 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 at all a sufficient reason to invokeSection 260-Aof the Act before this Court. 58 The appeals filed by the Revenue aretherefore dismissed with no order as to costs.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, We are ofthe considered opinion that no substantial question oflaw 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/-.JUDGE|