Date Of Judgment 2-8-2018, Ita v. M/S. H & M Mauritz India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 2 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.337/2017 BETWEEN : 1.THE PR. COMMISSIONER OF. INCOME TAX [‘T]FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BBENGALURU — 560 095 oD THERE DBPUTY COMMISSIONER O INCOME-TAX, CIRCLE — 3/1]/1], 2 FLOOR,BMTC BUILDING, 80 FEET ROAD,BMTC BUILDING, 80 FEET ROAD, KORMANGALA BBNGALURU — 560 095 |_ APPBRLLANTS) (BY SRI K.V. ARAVIND, ADV.) AND : M/s. H & M MAURITZ INDIA PVT. LTD.,No.1102, 1104 AND 1105, 11[‘L]KFLOOR|WORLD TRADE CBNTREBBENGALURU — 560 ODDPAN: AABCH 6109F _ RESPONDENT (BY SRI K.G. SIDDAREDDY, ADV.) THIS TTA IS FILED UNDER SECIION 2J6O0-A OF INCOMTAX ACT 1961, ARISING OUT OF ORDER DATED 19.08.2010PASSED IN IT|TPJA No.282/BANG/2015, FOR A.Y. 2010-11, ANN- Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., 2/8 D, PRAYING THIS HON’BLE COURT TO |I| FORMULATE THE)SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; ALLOW THE APPEAL AND SEI ASIDE THERE ORDER PASSED BTHE ITAT, BENGALURU IN IT A No.282/BANG/2015 DATED)19.08.2016 ANN-D AND CONFIRM THR ORDER OF THERE DRCONFIRMINGTH EORDERPASSEDBY|TH EDEBPUTYCOMMISSIONEROF|INCOMETAX, CIRCLE3} 1}{ 1]BRHNGALURU AND BIC. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. K.V. Aravind, Adv. for Appellants — Revenue. |Mr. K.G. Siddareddy,Adv. for Respondent — Assessee. This Appeal is filed by the Revenue purportedlyraising substantial question of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘B’, Bangalore inIT|TPIA No.282/Bang/2015dated|19.08.2016, relating to the Assessment Year2010-11. 2.ThisAppealhasbeenadmittedOT) 07.11.2017|to consider the following substantial|question of law. Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., “Whether in the facts and circumstances of|the case, the Tribunal is right in law in|excluding the comparables, namely, M/s. ApticoLtd., M/s.GlobalProcurementConsultants Ltd., and M/s. TSR Darashaw|Ltd., on the ground offunctional dissimilarity|by following its earlier order which has_ notreached finality and even when the TPO had|chosen the comparablesas it satisfiesqualitative and quantitative filters applied bythe TPO and Tribunal ought to have decided|the comparability of these companies on the|basis of specific facts brought out on record|by the TPO in the case of the assesseeP” 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: 10.We|haveconsideredtherivalsubmissions. We find that as per para-135 ofthe TPO’s order, he has considered six|companies as good comparables having|average profit of 27.74%. On page-3 of the|TPO’s order, the assessee’s profit margin has| Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., been noted as 12.06%. Now as per arguments|of the ld. AR of the assessee, two companies|M/s Aptico Ltd., (Supra) and M/s GlobalProcurement Consultants Ltd., (Supra) should|be excluded from the list offinal comparables|on the basis offunctional dissimilarity in view|of the Tribunal order rendered in the case of|M/s Adidas Technical Services Puvt.Ltd.,(Supra) . 11. The ld. DR of the revenue could not point|out any difference in facts in the present case|and in that case 1.e. ofM/s Adidas Technical|Services Put.Ltd., (Supra). Para-8.3 of this|Tribunal order is reproduced below. The|Tribunal in that case held to exclude three|companies t.e. M/s Aptico Ltd., M/s Global|Procurement Consultants Ltd., and M/s TSR.Darashaw Ltd., NXXX XXXX XXXX been noted as 12.06%. Now as per arguments|of the ld. AR of the assessee, two companies|M/s Aptico Ltd., (Supra) and M/s GlobalProcurement Consultants Ltd., (Supra) should|be excluded from the list offinal comparables|on the basis offunctional dissimilarity in view|of the Tribunal order rendered in the case of|M/s Adidas Technical Services Puvt.Ltd.,(Supra) . 11. The ld. DR of the revenue could not point|out any difference in facts in the present case|and in that case 1.e. ofM/s Adidas Technical|Services Put.Ltd., (Supra). Para-8.3 of this|Tribunal order is reproduced below. The|Tribunal in that case held to exclude three|companies t.e. M/s Aptico Ltd., M/s Global|Procurement Consultants Ltd., and M/s TSR.Darashaw Ltd., NXXX XXXX XXXX 12. Respectfully following this Tribunal order,and the absence of any difference in facts|having been pointed out by the ld. DR of the Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., 5/8 revenue, we direct the AO/TPO to exclude|these three companies t.e. M/s Aptico Ltd.,M/s Global Procurement Consultants Ltd.,_and M/s TSR Darashaw Ltd. from the list of|final comparables and since, the averageprofit of the remaining three comparable 1.e.M/s Cyber Media Research Ltd.,14.85%, M/s.HCCA Business Services Put. Ltd., 20.05%and M/s Quadrant Communications Ltd.,1.11% 1s around 16% which 1s within += 5%)range of the assessee’s profit margin of|12.06%, no TP adjustment is required to be|made. We hold accordingly. 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 [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: Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., 6/8 <Conclusion: 55. A substantial quantum of international tradeand transactions depends upon the fair and quick|judicial 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.), 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. 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 ornot, do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantial Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., 7/8 question 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. | 56. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantial Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., 7/8 question 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 findings|offacts arrived at by the learned Tribunal is notat 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.” 5.In the circumstances, having heard the learned Counsel appearing for both the parties, We are Date of Judgment 2-8-2018, ITA No.337/2017 The Prl. Commissioner of Income-tax & Another Vs. M/s. H & M Mauritz India Pvt. Ltd., 8/8 of 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 accordingly dismissed. Nocosts. All the pending applications stand disposed ofaccordingly.| AN /- Sd/-.JUDGE. Sd/-.JU DGE