Date Of Judgment -19-07-2018 I.t.a v. M/S. Kodiak Networks India Private Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 19 DAY OF JULY 2ZO18 PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.535/2015 BETWEEN: 1.PR. COMMISSIONER OF INCOME-TAX,C.R.BUILDING, QUEENS ROAD,C.R.BUILDING, QUEENS ROAD, BANGALORE - 560 OO]. 2.DEPUTY COMMISSIONER OF INCOME-TAX,|CIRCLE -11(5),CIRCLE -11(5), BANGALORE.» .. APPBLLANT (By Mr. E.I. SANMATHI, ADV.) AND: M/S. KODIAK NETWORKS INDIA PRIVATE LTD.,|NO.410, 4 FLOOR, “PRESTIGE SIGMA,,VITTAL MALLYA ROAD,BANGALORE -560 OO1.PAN: AAACK 0978 J. _ RBSPONDENT (By Mr. S SHARATH, ADV.for Mr. CHYTHANYA K.K, ADV.,) | THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, PRAYING TO DECIDE THE FOREGOING| Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd., 2/8 QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF.LAW AS MAY BR FORMULATBED BY THR HON’BLE COURT ASDEEMED HIT AND SEI ASIDE THE APPELLATE ORDER DATED|10/04/2015 PASSED BY THE ITAT, ‘C’ BENCH, BENGALURU, IN.APPEAL PROCEEDINGS NO.LT. (TP)A NO. 1348/BANG/2014 FOR,ASSEKEMENT YEAR 2JOO06-07 ANNEXURE THIS I.T.A. COMING ON FOR ORDERS, THIS DAY |S. SUJATHA JT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. E.I.Sanmathi,Adv. for Appellants-RevenueMr. S Sharath,Adv. tor |Mr. Chythanya K.KkAdv. for Respondent/Assessee The appellants-Revenuehave filed this appealu/s. 260Aof theIncome Tax Act, 1961(for short ‘Act’ raising purportedly certain substantial questions of lawarising from the order of theIncome Tax Appellate. Tribunal, ‘C’ Bench, Bangalore|(for short ‘Tribunal’)38:6310.04.2015passed1nI.T(TP)ANo.1348/ Bang/2014for the A.Y.2006-07 OoThisappealhas|beenADMITTEDOTL 11.03.2016to consider the following substantialquestions of law framed by the learned counsel for theAppellants-Revenue: Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd., 3/8 “(1)Whether,ON.the factsand|inthecircumstances of the case, the Tribunal erred inholding that the comparables, namely, (a) KalsInformation Systems Ltd. (c) Lucid Software Ltd (b)Accel Transactions Ltd (da) Tata Elsxit Ltd (eMegasoft Ltd, cannot be taken as comparable,being functionally different when it satisfies allthe qualitative and quantitative filters adopted bythe TPOP (2)Whether,OFTthe factsandin|the circumstances of the case, the Tribunal was rightin Super-imposing the decision of other Benches ofTribunal in the case of the assessee to reject these|comparables when selection of comparables in acase depends in transfer pricing on assesseespecific FAR analysis? (3)Whether,OFTthe factsandin|the circumstances of the case, the Tribunal was rightin relying on the decision of other Benches ofTribunal, ought to have decided the comparabilityof these companies on the basis of specific factsbrought on record by the TPO in the case of theassesseer” Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd., 4/8 3.|The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Regarding substantial question of law Nos.1to 3:| (3)Whether,OFTthe factsandin|the circumstances of the case, the Tribunal was rightin relying on the decision of other Benches ofTribunal, ought to have decided the comparabilityof these companies on the basis of specific factsbrought on record by the TPO in the case of theassesseer” Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd., 4/8 3.|The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Regarding substantial question of law Nos.1to 3:| “716We have considered the rival submissions.|In the light of the submissions made by the ld.counsel for the assessee, we are of the view thatit is no longer necessary for us to go into questionregarding affording the assessee opportunity tocross-examine|allthe|PeEFfsoOwhohaveinformation in response to TPO's notice wu/s.133(6Jof the Act. We are also of the view that 4out of the 5 comparable companies pointed out bythe ld. counsel for the assessee before us, havealready been held to be not comparable with acompany engaged in the provision of softwaredevelopment services such as the assessee.Following were the relevant observations of theTribunal in this regard (in respect of comparablecompanies viz., Kals Information Systems Ltd.,Accel Transmatics Ltd., Lucid Software Ltd. andTata Elxsi Ltd.) in the case of M/S. Sys ArrissoftwarePut.Ltd.VS.DCIT| 5/8 IT(TP)A.No.1621/ Bang/ 2012 dated 16.5.2014 foAY 06-07:- XXXX KALS Information Systems Ltd. XXXX Accel Transmatic Ltd.| XXXX Tata Elixsi Limited XXXX I 7.In view of the aforesaid decisions, we areof the view that the following companies viz., (1)KALS Infosystems Ltd. (2) Tata Elxsi Ltd. (3)Lucid Software Ltd. , and (4) Accel TransmaticsLtd., have to be excluded from the final list of 14)comparables chosen by the TPO for determiningthe ALP.” | 4The controversy involved herein is no moreres integra)in view of the decision of this Court in | I.T.A.Nos.536/2015c/w537/2015dated 25.06.2018[Prl. Commissioner of Income Tax &| Anr. V/s. M/s.Softbrands India Pvt. Ltd.,|wherein ithas been observed that unless the finding of theTribunal is found ex facie perverse, the Appeal u/s. Date of Judgment -19-07-2018 I.T.A.No.535 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Kodiak Networks India Private Ltd., 6/8 260-A of the Act, is not maintainable. The relevant,portion of the Judgment is quoted below for ready"606"69?6+ “§ 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 TreatiesOVEeCtheDomestic.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 rightlypicked up or not, Filters for arriving at the correctlist of comparables have been rightly applied or 7/8 not, 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. | 7/8 not, 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 where)the 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 notat all a sufficient reason to invokeSection 260-Aof the Act before this Court. 8/8 o8. The appeals filed by the Revenue aretherefore dismissed with no order as to costs.” 5In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the 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.No costs. | TL Sd/-. JUDGE Sd/-|JUDGE JUDGE