Date Of Judgment 21-08-2018, Ita v. M/S. Dhanya Agroindustrial Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 21 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.689/2017 BETWEEN : 1.THE PR. COMMISSIONER OF INCOME-ITAX ![‘T]FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA| BENGALURU-560095.. «|THERE DEPUTLY COMMISSION OF INCOME-TAX, CIRCLE-2]1]/2]. ~ FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA| BENGALURU-560095.. . APPELLANTS| (BY SRI ARAVIND.K.V., ADV.) AND ; M/s. DHANYA AGROINDUSTRIAL PVT. LTD.,No.489/11, ECOM HOUSEBOREWELL ROAD, WHITEFIELDBBNGALURU-560066PAN: AACCD 8919J... RESPONDENT. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 08.03.2017, PASSED IN ITITP]JA No.240/BANG/2016,FOR THE ASSESSMENT YEAR 2011-2012, VIDE ANNEXURE-D,PRAYING TO: i} FORMULATE THE SUBSTANTIAL QUESTIONS OF) Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., LAW STATED ABOVE. 11] ALLOW THE APPEAL AND SET ASIDE.THR ORDERS PASSED BY THR [NCOMB-TAX APPELLATE|TRIBUNAL, BENGALURU IN IT|TPJA No.240/BANG/2016 DATED)08.03.2017, VIDE ANNEXURE-D AND CONFIRM THE ORDER OFTHER DRP CONFIRMING THR ORDER PASSED BY THR DBPUTYCOMMISSIONER OF INCOME TAX, CIRCLE-2{|1]/2], BENGALURU. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V.Aravind,Adv. for Appellants — Revenue. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore, inIT[TP|A No.240/Bang/2016 dated08.03.2017, relating to the Assessment Year2011-12. 2.The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “WhetherON.thefactsandin|thecircumstances of the case, the Tribunal ts right in|law in directing the assessing authority to re-compute operating profit/cost of the assessee fordetermination ofALP by treating foreign exchange Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., 3/7 loss/gainas|operatinginnaturewithoutappreciating that foreign exchange fluctuations isnothing to do with the business operations of thetax payers and foreign exchange gain/loss is notdependent upon the operations carried out by thecompany but is a result of various extraneousfactors on the international transactions?”| 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: “17. We have heard the learned Authorised|representative as well as learned DepartmentalRepresentativeand consideredthe relevantmaterial on record. There is no quarrel on theissue that uf the foreign exchange fluctuation gainor loss is arising from the sales realization then itwill be operating in nature. However, it would beconsidered as part of the operating revenue orcost only when such gain or loss is arising fromthe realization of the sale made during the year.Accordingly, the TPO/A.O. ts directed to verify the|relevant details and then treat the foreignexchange gain/loss as operating in nature and) Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., 4/7 recomputed operating profit/cost of the assesseefor the purpose of determining the ALP. ~| 4However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. —v- M/s Softbrands India Pvt. Ltd.») has held that inthese type of cases, unless an ex-facie perversity in thefindings of the learned Income Tax Appellate Tribunal is"established by the appellant, the appeal at the instanceof an assessee or the Revenue under Section J60-A otthe Act is not maintainable. Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., 4/7 recomputed operating profit/cost of the assesseefor the purpose of determining the ALP. ~| 4However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. —v- M/s Softbrands India Pvt. Ltd.») has held that inthese type of cases, unless an ex-facie perversity in thefindings of the learned Income Tax Appellate Tribunal is"established by the appellant, the appeal at the instanceof an assessee or the Revenue under Section J60-A otthe Act is not maintainable. The relevant portion of the said judgment is.quoted below for ready reference: “Conclusion: 55.|Asubstantialquantumof|international trade and transactions dependsupon the fair and quick Judicial dispensation|in such cases. Had it been a case oOf|substantial questionof|interpretationof|provisions of Double Taxation Avoidance Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., 5/7 Treaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of the|Treaties over the Domestic Legislations or the |questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Shares|in Tax Havens (like in the case of Vodafone|etc.), uf based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-Aof the Act, the Courts could have|embarked upon such exercise offraming and|answering such substantial question of law.On the other hand, the appeals of the present|tenor as to whether the comparables have|been rightly picked up or not, Futers for|arriving at the correct list of comparables|have been rightly applied or not, do not in our|consideredopinion, giveriseTo anysubstantial question of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|law.andthe|Suggested|substantial questions of law do not meet the Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., 6/7 requirements ofSection 260-A|of the Act andthus the appeals 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 the|Assessees, because, there may be cases.where the Tribunal giving its own reasons|and findings has found certain comparables|to be good comparables to arrive at an|7s | “A Length Price“ in the case of the assesseeswith which the assessees may not be|satisfied and have filed such appeals beforethis Court. Therefore we clarify that mere|dissatisfaction with the findings of facts|arrived at by the learned Tribunal ts not at all|a sufficient reason to invoke.Section 260-Aof the Act before this Court. o8. The appeals filed by the Revenueare therefore dismissed with no order as to|costs.” Date of Judgment 21-08-2018, ITA No.689/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. Dhanya Agroindustrial Pvt. Ltd., 7/7 5.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellants-|Revenue is liable to be dismissed and it is dismissed|accordingly. No costs. Copy of this Order be sent to the Respondent-Assessee forthwith. NGC. Sd/-.JUDGE. Sd/-.JUDGE|