Date Of Judgment 20-07-2018, Ita v. M/S.unisys India Private Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 20 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.715/2015 BETWEEN : 1.PR. COMMISSIONER. OF INCOME TAX, C.R. BUILDING, QUEENS ROAD,| BANGALORE — 560 OO1. «|THERE DEPUTLY COMMISSIONER OF INCOME TCIRCLE — 12 (5),CIRCLE — 12 (5), BANGALORE.... APPELLANTS| (BY SRI.E I SANMATHI, ADV.) AND:| M/S UNISYS INDIA PRIVATE LTD.,PURVA PREMIER, 1395/1,RESIDENCY ROAD,|BANGALORE - 560 O25.PAN: _. RESPONDENT (BY MS. MANASA ANANTHAN, ADV. FOR. ORLT. SURYANARAYANA, ADV.) THIS [TA IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, ARISING OUT OF ORDER DATED:19/06/2015.PASSED IN IT(TP) NO.8/BANG/2011, FOR THE ASSESSMENT.YREAR 2OO6-2007. PRAYING TO: 1. DECIDE THR FORBKGOING Date of Judgment 20-07-2018, ITA No.715/2015 Pr. Commissioner of Income Tax & another Vs. M/s.Unisys India Private Ltd., 2/9 QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW,AS MAY BR FORMULATED BY THR HON'BLBE COURT ASDEEMED FIT. 2. TO SEI ASIDE THE APPELLATE ORDER)DATED:19/06/2015|PASSED|BY|THREITAT,"B'BENCH,BENGALURU,IN|APPEALPROCHBDINGSNO.|IT(TP)ANO.8/BANG/2011 FOR A.Y. 2006-07 ANNEXURE- A. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. E.I. Sanmathi,Adv. for Appellants — Revenue. ©Ms.ManassaAnanthan,Adv.,forMr.T.suryanarayana,Adv., for Respondent-Assessee This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, “‘B’ Bench, Bangalore|1nIT[TP|ANo.8/Bang/2011dated19.06.2015, relating to the Assessment Year2006-07. ? ThisAppealhasbeenadmittedOT)23.06.2016to consider the substantial questions of lawNo.1 as framed by the Revenue in the Memorandum ofAppeal. | Date of Judgment 20-07-2018, ITA No.715/2015 Pr. Commissioner of Income Tax & another Vs. M/s.Unisys India Private Ltd., 3/9 F1. Whether on the facts and in thecircumstances of the case, the Tribunal ts right in|Super imposing the decision of other benches ofTribunal min the case of assessee to reject thesecomparables when selection of comparables in acase depends in transfer pricing on assessee'specific Far analysis and without deciding intransferpricingOFTaSSCSSCEspecificHARanalysis and without deciding the comparabilityof these companies on the basis of specific factsbrought on record by the Transfer Pricing Officerin the case of assesseeP” However, learned Counsel for the Appellants-Revenuesubmits that substantial question No.2 may also beconsidered which is quoted below for ready reference. 2. Whether on the facts and in_ thecircumstances of the case, the Tribunal ts right in|excluding Allsec Technologies Ltd., and othercompanies as a comparable based on wrongfinding that it has super normal profits. Thefactual position is OP/Transferor Company isonly 28.73% which is not supernormal profits?’| 4/9 Regarding Substantial Question No.1: 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: “10. We have heard the submissions of theld. counsel for the assessee and the ld. DR on theTP adjustment made in respect of softwaredevelopment services segment. The ld. counsel forthe assessee prayed that Infosys TechnologiesLtd., which was a comparable chosen by the TPOand which is at Sl.No.3 of the list of comparablesdrawn by the TPO should be excluded. In thisregard, the ld. counsel for the assessee placedreliance on the decision of the ITAT Delhi Bench inAgnity India Technologies Put. Ltd. v. ITO, ITANo.3856Del/ 2000 for A.Y. 2006-07. In theaforesaid decision, the Delhi Bench of theTribunal in the case of a software developmentservices company such as the assessee, observed|in para 5.2 of its order as follows:-| XXXXX Respondent-Assessee, has returned findings as under: “10. We have heard the submissions of theld. counsel for the assessee and the ld. DR on theTP adjustment made in respect of softwaredevelopment services segment. The ld. counsel forthe assessee prayed that Infosys TechnologiesLtd., which was a comparable chosen by the TPOand which is at Sl.No.3 of the list of comparablesdrawn by the TPO should be excluded. In thisregard, the ld. counsel for the assessee placedreliance on the decision of the ITAT Delhi Bench inAgnity India Technologies Put. Ltd. v. ITO, ITANo.3856Del/ 2000 for A.Y. 2006-07. In theaforesaid decision, the Delhi Bench of theTribunal in the case of a software developmentservices company such as the assessee, observed|in para 5.2 of its order as follows:-| XXXXX 11. The aforesaid decision of the Delhi Bench ofthe Tribunal has since been confirmed by theHon'ble Delhi High Court in the case of Agnity Date of Judgment 20-07-2018, ITA No.715/2015 Pr. Commissioner of Income Tax & another Vs. M/s.Unisys India Private Ltd., 5/9 India Technologies Put. Ltd., ITA No.1204/2011,|judgment dated 10.7.2013. We are of the viewthat the decision of the Delhi Bench of theTribunal as confirmed by the Hon’ble Delhi HighCourtreferredToabove|willbe|SquarelyapplicableTo|theCASECoftheaASSCSSCECAccordingly, we direct Infosys Technologies Ltd.be excluded from the final list of comparablecompanies chosen by the TPO.” Regarding Substantial Question No.2: “2/. Before us, the ld. counsel for the|assessee brought to our notice the decision ofITAT Hyderabad Bench in the case of CES Put.|Ltd. v. ACIT, ITA No.1445/Hyd/2010 for AY2006-07. In the aforesaid decision, the objectionby a company engaged in the business ofproviding ITES to regard it as a comparable wasas follows:- XXXXX 28. The ITAT Hyderabad Bench acceptedthe claim of the assessee in this regard in para17 of its order, which reads as follows:- XXXXX Date of Judgment 20-07-2018, ITA No.715/2015 Pr. Commissioner of Income Tax & another Vs. M/s.Unisys India Private Ltd., 6/9 29. In light of the decision of the ITATHyderabad Bench in the case of a companysimilar to that of the assessee in the presentcase, we are of the view that Allsec TechnologiesLtd. should be excluded from the lst ofcomparable companies. ~ 4The controversy involved herein is no moreres integrain view of the decision of this Court in|I.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. 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 7/9 (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.), if based on relevantfacts, such substantial questions of law couldbe 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. 7/9 (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.), if based on relevantfacts, such substantial questions of law couldbe 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 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. | Date of Judgment 20-07-2018, ITA No.715/2015 Pr. Commissioner of Income Tax & another Vs. M/s.Unisys India Private Ltd., 8/9 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. 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 of law arises for consideration in the present case. | Date of Judgment 20-07-2018, ITA No.715/2015 Pr. Commissioner of Income Tax & another Vs. M/s.Unisys India Private Ltd., 9/9 6.Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordinglydismissed. Nocosts. AN /- Sd/-.JUDGE| Sd/-.JUDGE|