Date Of Judgment -19-07-2018 I.t.a v. M/S. Lam Research (India) Private Limited

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.538/2015 BETWEEN: 1.PR. COMMISSIONER OF INCOME-TAX,C.R.BUILDING, QUEENS ROAD,BANGALORE - 560 OO].C.R.BUILDING, QUEENS ROAD,BANGALORE - 560 OO]. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX,|CIRCLE -12(2),BANGALORE.» .. APPBLLANT (By Mr. E.I. SANMATHI, ADV.) AND: M/S. LAM RESEARCH (INDIA) PRIVATE LTD., ‘A’ BLOCK, 11/1 & 12/1,|AMARJYOTHI LAYOUT,INTERMEDIATE RING ROAD,BANGALORE -560 071.PAN: AABCB 20630. .. RESPONDENT. (RESPONDENT SERVED) Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 2/9 THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, PRAYING TO DECIDE THE FOREGOING|QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF.LAW AS MAY BRB FORMULATBD BY THR HON’BLE Court ASDBEMBD FIT AND SHIT ASIDE THE APPELLATE ORDER DATED30/04/2015 PASSED BY THE ITAT, ‘C’ BENCH, BENGALURU, IN.APPEAL PROCEEDINGS NO.IT (TP)A NO. 1437/BANG/2014 FOR:ASSEBE MENT YRBAR 2009-10 ANNBXURE THIS LT.A. COMING ON FOR HEARING, THIS DAY | S. SUJATHA JT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. E.I.Sanmathi,Adv. for Appellants-Revenue The appellants-Revenuehave filed this appealu/s. 260Aot the.Income Tax Act, 1961(for short ‘Act’) raising purportedly certain substantial questions of law arising from the order of theIncome Tax Appellate| Tribunal, ‘C’ Bench, Bangalore|(for short ‘Tribunal’)4:28430.04.2015passed1nI.T(TP)A No.1437/ Bang/2014for theA.Y.2009-10 2 |ThisappealhasbeenADMITTED0;11.03.2016to consider the|substantial question oflaw Nos.2 to 4framed by the learned counsel for the)Appellants-Revenue. Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 3/9 “(1)Whether,ON.the factsand|in|thecircumstances of the case, the Tribunal ts Justifiedin confirming the order of Commissioner relatingto computation of deduction under section 1OA byrelying up on the decision of this Hon’ble Court inthe case of Tata Elxsi Ltd., to exclude the foreigntravel both from the total turnover and the exportturnover even when the same is not permissiblein law and the decision relied upon by Tribunalhas not reached finality? (2)Whether,Orthefactsandin|thecircumstances of the case, the Tribunal was right|in super-imposing the decisions of other benchesof the Tribunal in the case of the assessee to rejectthese comparables when selection of comparables|in a case depends on pricing on assessee specific.FAR analysis?| (3)Whether the Tribunal erred in holding that|the comparables used by the Transfer PricingOfficer were functionally different even thoughthey satisfied all the qualitative and quantitativefilters adopted by the Transfer Pricing Officer? (4)WhetherON.thefactsandin|thecircumstances of the case, the Tribunal ts right inlaw in excluding comparables such as (i) Accentia Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 4/9 Technologies Ltd (it) Cosmis Global Ltd., (it) Eclerxservices Ltd (tv) Infosys BPO Ltd and (tl) Tata Elxs1Ltd (wu) Infosys Technologies Ltd (ut) Bodhtree|Consulting Ltd (iw) Persistent System Ltd (v)sasken Communication Technologies (vi) Zylogsystem (vu) Mindtree Ltd (vil) L&T Infotech Ltdeve when the TPO has rightly chosen them as|comparablesconsideringthefunctionsandapplicability of the same in respect of facts ofpresent case?” 3.|Thesubstantial question of law No.1WaS not pressed by the learned counsel for the appellants-Revenue and the same has been recorded by this Courton 11.03.2016. a |The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: 4/9 Technologies Ltd (it) Cosmis Global Ltd., (it) Eclerxservices Ltd (tv) Infosys BPO Ltd and (tl) Tata Elxs1Ltd (wu) Infosys Technologies Ltd (ut) Bodhtree|Consulting Ltd (iw) Persistent System Ltd (v)sasken Communication Technologies (vi) Zylogsystem (vu) Mindtree Ltd (vil) L&T Infotech Ltdeve when the TPO has rightly chosen them as|comparablesconsideringthefunctionsandapplicability of the same in respect of facts ofpresent case?” 3.|Thesubstantial question of law No.1WaS not pressed by the learned counsel for the appellants-Revenue and the same has been recorded by this Courton 11.03.2016. a |The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: Regarding substantial question of law Nos.2, 3 and 4: ¢13;We have heard the rnvual contentions and.perused the material on record. In the case of.Yodlee Infotech Put. Ltd., (supra), it was held as|under: Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 5/9 XXXX XXXX 14,No doubt, we find that some of thecompanies for which exclusion is now sought by|the assessee, namely, Tata Elxsit Ltd (seg),sasken Communication Technologies Ltd., andMindtree Ltd (seg), were there in assessee’s own|list of comparables. However, we find thatassessee had sought exclusion of these before the|CIT (A), based on upper band turnover limit ofRs.200 crores, which was not accepted. In view ofthe various decisions of this Tribunal referred atpara 13 above we are of the opinion, that|assessee 1s Justified in seeking the exclusion ofcompanies having turnover in excess of Rs.200crores, from the comparables. 15,We, therefore, direct the AO to exclude TataElxs1Ltd(seg),SaskenCommunicationTechnologies Ltd., Persistent Systems Ltd., Zylogsystems Ltd., Mindtree Ltd (seg), L & T infotechand Infosys Ltd., from the list of comparables,|considered for the software development segment. 16.With regard to Bodhtree Consulting Ltd., Ld.AR submitted that in the above referred decision|of Yodlee Infotech Pvt. Ltd., (supra), where also| Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 6/9 BodhtreeConsultingWasconsideredaS|Omcomparable by the TPO, this Tribunal had|directed exclusion of the same on a finding thatthe said company was functionally different andnot a software development company. 17. Per contra, learned DR supported the orders|of lower authorities. 18.We have perused the orders and consideredthe rival contentions. It is not disputed that YodleeInfotech Put Ltd., (supra) was also a software|development company. Assessment year involvedthere was also A.Y.2009-10. With respect to|Bodhtree Consulting Ltd., it was held by the|Tribunal as under: XXXX XXXX Accordingly,WwedirectthatBodhtreeConsulting Ltd., be excluded from the list ofa comparables, here also. 5The controversy involved herein is no moreres integra)in view of the decision of this Court in 1.T.A.Nos.536/2015|c/w537/2015dated25.06.2018[Prl. Commissioner of Income Tax &| Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 7/9 Anr. V/s. M/s.Softbrands India Pvt. Ltd.,|wherein it| has been observed that unless the finding of theTribunal is found ex facie perverse, the Appeal u/s.260-A of the Act, is not maintainable. The relevantportion of the Judgment is quoted below for ready#868#8;?8, § Conclusion: XXXX XXXX Accordingly,WwedirectthatBodhtreeConsulting Ltd., be excluded from the list ofa comparables, here also. 5The controversy involved herein is no moreres integra)in view of the decision of this Court in 1.T.A.Nos.536/2015|c/w537/2015dated25.06.2018[Prl. Commissioner of Income Tax &| Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 7/9 Anr. V/s. M/s.Softbrands India Pvt. Ltd.,|wherein it| has been observed that unless the finding of theTribunal is found ex facie perverse, the Appeal u/s.260-A of the Act, is not maintainable. The relevantportion of the Judgment is quoted below for ready#868#8;?8, § Conclusion: 55. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|OmCaASeofSubstantialquestionofinterpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectoftheTreatiesOVECTthe|Domestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), tf based on relevantfacts, such substantial questions of law could |be raised before the High Court underSection|260-A|of the Act, the Courts could haveembarked upon such exercise of framing andanswering such substantial question of law. On Date of Judgment -19-07-2018 I.T.A.No.538 /2015 Pr.Commissioner of Income Tax & Anr., Vs. M/s. Lam Research (India) Private Limited., 8/9 the 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 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. o8. The appeals filed by the Revenue are)therefore dismissed with no order as to costs.” 6. In the circumstances, having heard the learned Counsel appearing for the appellants-Revenue, We are of the considered opinion that no substantialquestion of law arises for consideration in the presentCase. | [|Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed.No costs. | Copy of this order be sent to the Respondent-assessee|forthwith. TL Sd/-. JUDGE Sd/-| JUDGE|