Date Of Judgment 21-08-2018, Ita v. M/S.flextronics Technologies India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 21 DAY OF AUGUST! 2018 PRESENT THR HON’BLE DR.JUSTICK VINEBT KOTHARI AND THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.936/2017 BETWEEN: 1.THE PR. COMMISSIONER OF INCOMB TAX FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BBNGALURU — 560 095. 2.THR DBEPUTY COMMISSIONBR OF INCOME-TAXCIRCLE - 3(1)(2),2 FLOOR, BMTC BUILDING, |80 FEET ROAD,KORMANGALA,BBNGALURU — 560 095._ APPBRLLANTS) (BY SRI.ARAVIND K V, ADV.) AND M/S.FLEXTRONICS TECHNOLOGIESINDIA PVT. LTD.,.PLOT NO.3, PHASE-II, SIPCOT INDUSTRIAL PARK,SANDAVELLURE C VILLAGE,SRIPEMBUDUR TALUK,KANCHEEPURAM DISTRICT,TAMIL NADU —- 602 106PAN: AAACEF 5248E_. RESPONDENT THIS INCOME TAX APPEAL IS FILED UNDER SKC.260-A| OF INCOME TAX ACT 1961, ARISING OUT OF ORDER Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd. 2/7 DATED:21.06.2017 PASSED IN IT(TP)A NO.649/BANG/2015, FOR.THE ASSESSMENT YEAR-2010-2011 VIDE ANNEXURE - E,PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OFLAW STATED ABOVE. Il. ALLOW THR APPEAL AND SKIT ASIDETHR ORDERS PASSED BY THR [NCOMB-TAX APPELLATE|TRIBUNAL,|BBRENGALURIN|IT(TP)ANO.649/BANG/2015DATED:21.06.201/7 VIDE ANNEBEXURE - KE AND CONFIRM ORDER OF THERE DRP CONFIRMING THR ORDER PASSED BY THDEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2),.BENGALURU. THIS APPEAL COMING ON FOR ADMISSION, 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,SA?Bench, Bangalore, in|IT A No.649/Bang/2015dated| 21.06.2017relating to the Assessment Year2010-11. 2. The substantial question of law framed by theRevenue in the Memorandum of Appeal is as under: Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd. 3/7 aeWhether on the facts and in the circumstancesof the case, the Tribunal ts right in law directingthe TPO/AO to exclude certain comparable’s onthe ground of functional dissimilarity when theTPO has _ rightly chosen the same as_ tqualitative and quantitative filters/tests aresatisfied and functions of the said company aresimilar to that of assessee?’| 3. The learned Tribunal, after discussing the rival contentions oT boththeAppellant-RevenueandRespondent-Assessee, has returned the findings as.under: “21. We heard rival submissions and perusedthe material on record. The comparability of thecompanies viz., Accentia Technologies Ltd., andInfosys BPO Ltd., had come up for discussionbeforeco-ordinatebench intheCaASeof|M/s.Scancafe Digital Solutions Put. Ltd. (supra)which is also ITeS company wherein the Tribunal,after referring to earlier decision in the case ofTesco Hindustan Service Centre Pvt. Itd. inIT(TP)A No.569/ Bang/ 2015 and 191/Bang/ 20held that these companies are not comparablewith ITeS company. The relevant observation ofthe Tribunal are as under: Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd. 4/7 XXXXXXXXXX Respectfully following the decision of the co-ordinate bench, to which one of us viz., theHon’ble AM is the author, we direct the AO toexcludethesecompaniesfromthe list.ofcomparables.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on25.06.2018 (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 isestablished 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. 4/7 XXXXXXXXXX Respectfully following the decision of the co-ordinate bench, to which one of us viz., theHon’ble AM is the author, we direct the AO toexcludethesecompaniesfromthe list.ofcomparables.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on25.06.2018 (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 isestablished 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: Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd. 5/7 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 AvoidanceTreaties (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.), tf 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. Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd. 6/7 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 therequirements 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 cleqr that the sameyardsticks 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 “Arm 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. Date of Judgment 21-08-2018, ITA No.936/2017 The Pr. Commissioner of Income Tax & another Vs. M/s.Flextronics Technologies India Pvt. Ltd. 7/7 o8. The appeals filed by the Revenue are|therefore dismissed with no order as_ tocosts.” Oo. Having heard the learned counsel for the appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellants-Revenue isliable to be dismissed and it is dismissed accordingly. —No costs. Copy of this order be sent to the respondent-Assessee, forthwith. Sd/-.JUDGE| Sd/-.JUDGE|