Date Of Judgment -20-07-2018 I.t.a v. M/S. At & T Global Business Services India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 20 DAY OF JULY 2ZO18 PRESENT THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA|I.T.A.No.663/2015 BETWEEN: 1.THE COMMIssIONER OF INCOME-TAX, |5 FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BANGALORE - 560 095.OoTHE INCOME-TAX OFFICER,WARD-11(1), 2 FLOOR, BMTC BUILDING.80 FEET ROAD, KORMANAGALA,BANGALORE - 560 095... APPBLLANT(By Mr. K.V. ARAVIND, ADV.) AND: M/s. AT & T GLOBAL BUSINESS SERVICESINDIA PVT. LTD.,.BLOCK A, GROUND FLOOR,SALARPURIA, SOFTZONE,BELLANDUR POST,|BANGALORE.»PAN: AACCA 93602N _ RBSPONDENT Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 2/12 THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEALANT)SETASIDE.TH EORDERPASSEDBY|TH EITAT,BENGALURU IN ITA NO. 1604/BANG/2012 DATED 11/06/2015.ANNEXURE-C CONFIRM THRE ORDER OF THE APPELLAIECOMMISSIONBR CONFIRMING THR ORDEBR PASSBKD BY THINCOME TAX OFFICER, WARD-11(1), BENGALURU. THIS LT.A. COMING ON FOR ADMISSION, THIS DAY | S. SUJATHA JT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. K.V.Aravind,Adv. for Appellants-Revenue The appellants-Revenuehave filed this appealu/s. 260Aot theIncome Tax Act, 1961(for short ‘Act’)raising purportedly certain substantial questions of lawarising from the order of theIncome Tax Appellate| Tribunal, Bangalore Bench ‘A’(for short ‘Tribunal’|/684/11.06.2015passed1nI.T(TP)A No.1604/ Bang/2012for theA.Y.2008-09 Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 3/12 2 |Thisappealhas|beenADMITTED27 23.06.2016to consider the following substantialquestions of law framed by the learned counsel for theAppellants-Revenue: “7.Whether, the Tribunal, on the factsand in the circumstances of the case was right inexcluding 1) Celestial Biolabs Ltd.; wu) InfosysTechnologies Ltd.; wt) Tata Elxsi Ltd.; tv) WiproLtd.; v) Kals Information Systems Ltd.; vi)PersistentsystemsLtd.;VIL)AvantCincomTechnologies Ltd.; vii) Thirdware Solutions Ltd.;wx) Lucid Software Ltd.; x) Quintegra SolutionsLtd.; xt) E-zest Solutions Ltd. and xt) Softsol IndiaLtd.; from the list of comparables, holding thattheyarefunctionally|different, withoutappreciating that the comparables satisfy all thequalitative and quantitative filters applied by theTPO and that selection of comparables in a casedepends on assessee specific FAR analysis? 2. Whether, the Tribunal, on the facts and inthe circumstances of the case was right inexcluding it) Celestial Biolabs Ltd.; wt) InfosysTechnologies Ltd.; tt) Tata Elxsi Ltd.; w) WiproLtd.; uv) Kals Information Systems Ltd.; vt Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 4/12 PersistentoystemsLtd.;Vu)AVaniCincomTechnologies Ltd.; vii) Thirdware Solutions Ltd.;x) Lucid Software Ltd.; x) Quintegra SolutionsLtd.; xi) E-zest Solutions Ltd. and xt) Softsol India|Ltd.; from the list of comparables, by relying onvarious decisions of Tribunal Benches and notdeciding the selection of comparables on the basisof specificfacts brought on record by the TPOP| +Whether, the Tribunal, on the facts and inthe circumstances of the case was right inexcluding 1) M/s.Avant Cimcon Technologies Ltd.,uw) M/s.Quintegra Solutions Ltd., wt) Thirdwaresolutions Ltd., and iv) Lucid Software Ltd., fromthe list of comparables, by disregarding theposition of law that there could be differencesbetween the enterprises compared under TNMMmethod that are not likely to materially affect theprice or cost charged or the profits accruing tosuch enterprises?| +Whether, the Tribunal, on the facts and inthe circumstances of the case was right inexcluding 1) M/s.Avant Cimcon Technologies Ltd.,uw) M/s.Quintegra Solutions Ltd., wt) Thirdwaresolutions Ltd., and iv) Lucid Software Ltd., fromthe list of comparables, by disregarding theposition of law that there could be differencesbetween the enterprises compared under TNMMmethod that are not likely to materially affect theprice or cost charged or the profits accruing tosuch enterprises?| 4. Whether, the Tribunal, on the facts and inthe circumstances of the case was right inexcluding i) M/s.Avani Cimcon Technologies Ltd.,u) M/s.Quintegra Solutions Ltd., wt) Thirdwaresolutions Ltd., and w) Lucid Software Ltd., fromthe list of comparables, by concluding that thecompaniesselectedbytheTPOareNOT| Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 5/12 comparable to the assessee, overlooking the factthat reasonably accurate adjustments could be.made to eliminate the material effects of thedifferences between them? 5S. Whether the Tribunal was justified in fixingthe RPT filter at 15% of total revenue andexcluding Softsol India Ltd., as comparable, by|superimposing the decisions of Tribunal in other|cases, including those of other benches of|Tribunal, without going into specific facts in the)case of the assessee and without adducing the|basis for arriving at the 15% cut offfor RPTfilter,in the case of assessee?r 6. Whether, on the facts and circumstances ofthe case, the Tribunal was correct in not|appreciating the facts that if any filter or criteria|appliedbythe|aSSCSSCECforsearch.ofcomparables is accepted or any filter or criteria|applied by the TPO i1s_ relaxed, the _ entaccept/reject matrix changes resulting in a new|comparable set including those companies which|are neither taken by the assessee nor by the TPO}in his final comparable set and which may not befinding place in the TP order u/s.92CAP”| Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 6/12 3.|The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: “4, Having regard to the rival contentions and the|material on record, we find that the assessee 1schallengingthefollowingcompaniesas|comparables: i) Celestial Biolabs Ltd.u) Infosys Technologies Ltd.ut) Tata Elxsi Ltd.w) Wipro Ltd.v) Kals Information Systems Ltd.vi) Persistent Systems Ltd.vi) Avant Cimcon Technologies Ltd. |vi) Thirdware Solutions Ltd. ix) Lucid Software Ltd. x) Quintegra Solutions Ltd. xi) E-Zest Solutions Ltd.xu) Softsol India Ltd. All|thesecomparableschallengedbytheassessee were also taken as comparables in the|case of 3DPLM Software Solutions Ltd., and this|Tribunal has held these companies to _ b Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 7/12 “4, Having regard to the rival contentions and the|material on record, we find that the assessee 1schallengingthefollowingcompaniesas|comparables: i) Celestial Biolabs Ltd.u) Infosys Technologies Ltd.ut) Tata Elxsi Ltd.w) Wipro Ltd.v) Kals Information Systems Ltd.vi) Persistent Systems Ltd.vi) Avant Cimcon Technologies Ltd. |vi) Thirdware Solutions Ltd. ix) Lucid Software Ltd. x) Quintegra Solutions Ltd. xi) E-Zest Solutions Ltd.xu) Softsol India Ltd. All|thesecomparableschallengedbytheassessee were also taken as comparables in the|case of 3DPLM Software Solutions Ltd., and this|Tribunal has held these companies to _ b Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 7/12 functionally dissimilar with the said company|and has directed them to be excluded from thelust of comparables. In order to apply the saiddecision to the case before us, it is necessary toexamine whether the nature of services renderedby both the companies under the respectiveinternationaltransactionsareSimilar.Theassessee herein is the subsidiary of VSit ServicesHoldings Put. Ltd., Mauritius and is engaged in|providing software support solutions to VSI group|companies. The international transaction whichhas been considered for ALP adjustment is|software support or development services. In thecase of 3DPLM also, the international transactionconsidered for ALP adjustment is in respect ofsoftware development services and the relevantassessment year is 2008-09. Therefore, in ouropinion, the decision of the Tribunal in the caseof S3DPLM Software Solutions Ltd., is applicableto the case before us. Therefore the relevantparagraphs of the above referred decision are|reproduced hereunderfor ready reference: l) Celestial Biolabs Ltd. XXXX uw) Infosys Technologies Ltd. XXXX Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 8/12 ui) Tata Elxsi Ltd. XXXX w) Wipro Ltd. XXXX Vv) Kals Information Systems Ltd. XXXX vl Persistent Systems Ltd. | XXXX vu) Avant Cimcon Technologies Ltd. XXXX vi) Thirdware Solutions Ltd. XXXX ix) Lucid Software Ltd. XXXX x) Quintegra Solutions Ltd. XXXX xi) E-Zest Solutions Ltd. XXXX xu) Softsol India Ltd. XXXX Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 9/12 Respectfullyfollowingthedecisionoftheco-ordinate bench of this Tribunal in the case of|OSDPLM Software Solutions Ltd.,(cited supra) onsimilar set offacts, we direct the AO to exclude|these companies from the list of comparablesand re-compute the ALP in accordance with law.” 4The controversy involved herein is no moreres integrain view ot the decision of this Court inI1.T.A. Nos.536/2015 c/w 537/2015dated95.06.2018[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 facieperverse, the Appeal u/s. 260-A of the Act, is.not maintainable. The relevant portion of the Judgment is quoted below for ready reference: “§ Conclusion: oo. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|aCaSeofsubstantialquestion.Of| Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 10/12 4The controversy involved herein is no moreres integrain view ot the decision of this Court inI1.T.A. Nos.536/2015 c/w 537/2015dated95.06.2018[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 facieperverse, the Appeal u/s. 260-A of the Act, is.not maintainable. The relevant portion of the Judgment is quoted below for ready reference: “§ Conclusion: oo. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|aCaSeofsubstantialquestion.Of| Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 10/12 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.), | 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 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 appeals 11/12 filed by the Revenue are found to be devoid of|merit 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 findings|has found certain comparables to be goodcomparables to arrive at an'‘Arm’s LengthPrice~ in the case of the assessees with which|the assessees may not be satisfied and have filedsuch appeals before this Court. Therefore we.clarify that mere dissatisfaction with the findingsoffacts arrived at by the learned Tribunal is notat all a sufficient reason to invoke|Section 260-Aof the Act before this Court. 58. 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 the appellants-Revenue,We are of the considered opinion that no substantialquestion of law arises for consideration in the presentCase. | Date of Judgment -20-07-2018 I.T.A.No.663 /2015 The Commissioner of Income Tax & Anr., Vs. M/s. AT & T Global Business Services India Pvt. Ltd., 12/12 6. Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordinglydismissed.No costs. | Copy of this order be sent to the Respondent-assessee forthwith. TL Sd/-. JUDGE Sd/-.JUDGE| JUDGE|