Date Of Judgment 24-07-2018, Ita v. M/S.aci World Wide Solutions Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE: 2 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.36/2016 BETWEEN : 1.THE PR. COMMISSIONER OF INCOME -TAAX, "[‘T]FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA, BANGALORE — 560 095. OoTHERE DBPUTY COMMISSIONER OF INCOME —- TAX, CIRCLE 12 (5) ~ FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA, BANGALORE —- 560 O95. .. APPELLANTS| (BY SRI.ARAVIND K V, ADV.) AND:| M/S. ACI WORLD WIDE SOLUTIONS PVT. LTD.(FORMERLY KNOWN AS M/S. VISHAL WEBSOLUTIONS PRIVATE LIMITED)NO.9, SALARPURIA CAMBRIDGE MALL, ULSOOR,BANGALORE — 560 O38.PAN NO .AAACV/566R_. RESPONDENT (BY SRI.ANDRE PETER, ADV. FORSRI.MURALI ANANTHASIVAN, ADV.) Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 2/8 THIS [TA IS FILED UNDER SECTION 260-A OF INCOME|TAX ACT 1961, ARISING OUT OF ORDER DATED:19/06/20195PASSED IN ITA NO.1089/BANG/2012, FOR THE ASSESSMENTYRAR2003-2004.PRAYINGTO:1.RFORMULATETHESUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2.|ALLOW THR APPBAL AND SBT ASIDE THR ORDERS PASSBD BY)THEITAT,BENGALURUIN|ITA|NO.1089/BANG/2012.DATED:19/060/2015 AND CONFIRM THE ORDER OF THEAPPELLATE COMMISSIONER CONFIRMING THE ORDER PASSEDBY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12(5), BENGALURU.| THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J©, DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V. Aravind, Adv. for Appellants — Revenue. |Mr. Andre Peter,Adv. for.Mr. Murali Ananthasivan,|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[TPIANo.1089/ Bang/201dated19.06.2015, relating to the Assessment Year2003-04.2.ThisAppealhasbeenadmittedOT) 20.09.2017to consider the following substantial Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 3/8 questions of law as framed by the Revenue in theMemorandum of Appeal. “1. Whether, on the facts and in thecircumstances of the case, the Tribunal is correctin directing the TPO to allow working capital andrisk adjustment on an adhoc basis, when therewas no difference in risk assumed between thetax payer and comparable company? 2. Whether, on the facts and in _ thcircumstances of the case, the Tribunal is correctin excluding M/s. Vrincht Technologies Ltd., as acomparable, when the company’s annual reportexplicitly provides for revenue recognition fromsoftware segment?” 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: Regarding Substantial Question No.1: “6. Having considered the rival contentions:andcarefullyperusedthe|relevant.record.available before us. On perusal of the record, wenote that for the assessment year 2004-05, the Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 4/8 TPO in para 2.5 has allowed the adjustment onaccount of working capital and risk difference asunder: NXXXXKXXXX 7. Accordingly, the TPO/AO is directed toallow the risk adjustment at the rate of 2% whilecomputing the ALP.” Regarding Substantial Question No.2: “11. We have heard the ld. DR as wellas ld. AR and considered the relevant materialavailable on record. The facts recorded by the|ld. CIT(A) to arrive at the conclusion that thiscompany is not comparable with IT productcompany are reproduced below:XXXXXXXXXXX Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 4/8 TPO in para 2.5 has allowed the adjustment onaccount of working capital and risk difference asunder: NXXXXKXXXX 7. Accordingly, the TPO/AO is directed toallow the risk adjustment at the rate of 2% whilecomputing the ALP.” Regarding Substantial Question No.2: “11. We have heard the ld. DR as wellas ld. AR and considered the relevant materialavailable on record. The facts recorded by the|ld. CIT(A) to arrive at the conclusion that thiscompany is not comparable with IT productcompany are reproduced below:XXXXXXXXXXX 12. The ld. DR did not bring out any material orfacts on record to controvert the findings of the|ld.CIT(A) that M/s Vrincht Technologies Ltd hasa multt stream revenue from product sales,|product maintenance and other IT Services.|Further, there is no segmental break up|available in respect of sales of product or'services, therefore, the revenue earned from the|multiple activities including the sale of product Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 5/8 cannot be compared with the internationaltransaction of the assessee in respect ofsoftware development services. Accordingly, we|do not find any error or ulegality in the order ofld.CIT(A) qua this issue.” 4The controversy involved herein is no moreres integrain view of the decision of this Court in|L.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 facie perverse, the Appeal u/s. 260-A of the Act, isnot maintainable. The relevant portion of the Judgment is quoted below for ready reference: “Conclusion: 03. 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 Income Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 6/8 Tax 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 underSection260-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 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 7/8 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 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 7/8 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. o8. 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 parties, We areof the considered opinion that no substantial questionof law arises for consideration in the present case. _ Date of Judgment 24-07-2018, ITA No.36/2016 The Pr. Commissioner of Income Tax & another Vs. M/s.ACI World Wide Solutions Pvt. Ltd. 8/8 6.Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordinglydismissed. Nocosts. AN / Sd/-.JUDGE| Sd/-.JUDGE|