Date Of Judgment 24-07-2018, Ita v. M/S. Nxp Semi Conductors India 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.390/2015 BETWEEN : 1.Pr. COMMISSIONER OFINCOME TAXC.R. BUILDINGS, QUEENS ROAD,BANGALORE SOO0OO0O «|DEPUTY COMMISSIONER ~OF INCOME TAX,CIRCLE 12-(2), |BANGALORE.» . APPELLANTS| (BY SRI E.L.SANMATHI, ADV.) AND : M/s. NXP SEMI CONDUCTORS.INDIA PVT. LTD.,I.T. PARK, NAGAWARA VILLAGEKASABA HOBLI, BANGALORE 560045PAN: AADCP 9454H.._. RESPONDENT. (BY SRI MALLAHARAO.K., ADV. FOR SRI NAGESWAR RAO, ADV.) THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 05/03/2015 PASSED IN IT(TP)A NO.1560/BANG/2012,.KOR.THEASSESSMENTYKAR|2008-2009,ANNEXURE--A, Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 2/10 PRAYING TO: DECIDE THE FOREGOING QUESTION OF LAW|AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE.KHORMULAITEKED BY THK HON BLE COURIT AS DEEMED FITSET ASIDE THE APPELLATE ORDER DATED: 05/03/2015.PASSED BY THE ITAT, 'A’ BENCH, BENGALURU, IN APPEAL|PROCHBDINGS~NO.LT(TP)ANO.1560/BANG/2012—KORASSESSMENT YEAR 2008-2009, ANNE XURE-A, AS SOUGHT FORIN THIS APPEAL; AND TO GRANT SUCH OTHER RELIEF ASDEEMED FIT, IN THE INTEREST OF JUSTICE. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. E.I.Sanmathi,Adv. for Appellants — Revenue.Mr. Mallaharao K.,Adv. for Mr. Nageswar Rao,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, BangaloreBench ‘A’, Bangalore, inIT[TP|A No.1560/Bang/2012dated05.03.2015, relating to the Assessment Year2008-09. 2.Theappealhas|beenadmitted|OTL12.02.9016|TO consider.the|followingsubstantial|questions of law: Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 3/10 aWhether on the facts and in thecircumstances of the case, the Tribunal ts right in|law in directing the assessing authority/ TPO toomit the companies such as Celestial BiolabsLtd., KALS Information Systems Ltd, InfosysTechnologies Ltd., Wipro Ltd., Tata Elxsi Ltd., E-Zest Solutions Ltd., Thirdware Solutions Ltd.,Lucid Software Ltd., Persistent Systems Ltd.,Quintegra Solutions Ltd., Softsol India Ltd., fromfinal list of comparables as it is functionallydifferent form the assessee, by relying on thedecision of the co-ordinate bench of the Tribunalin the case of S3DLPM Software Solutions/ Currasoftware International Put. Ltd/Yodlee InfotechPut. Ltd., even when the TPO in the order hasrightly selected a set of comparable companies toarrive at the average mean margin of thesoftware development segment and_ therebyarriving at the TP adjustment to the ALPinternational transactions entered into by theassessee?r D2 Whether on the facts and in thecircumstances of the case, the Tribunal is right inlaw in remanding the matter to assessingauthority to reconsider the comparables e.,Indium Software, VMF Softech Ltd and KPIT Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 4/10 Cummins Infosystems Ltd., even when the samewas not required?’| 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings asunder: Regarding Substantial Question of Law No.1:“10.Celestial Biolabs Ltd. D2 Whether on the facts and in thecircumstances of the case, the Tribunal is right inlaw in remanding the matter to assessingauthority to reconsider the comparables e.,Indium Software, VMF Softech Ltd and KPIT Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 4/10 Cummins Infosystems Ltd., even when the samewas not required?’| 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings asunder: Regarding Substantial Question of Law No.1:“10.Celestial Biolabs Ltd. 10.4.1 We have heard both parties andperused and carefully considered the material onrecord; including the judicial decisions cited andplaced reliance upon. We find that a co-ordinatebench of the Tribunal in the case of M/s. 3DPLMsoftware Solutions Ltd. (supra), for AssessmentYear 2008-09 has held that this company beexcluded from the list of comparables; holding asunder at paras 9.4.1 and 9.4.2 of its order :- XXXXX 10.4.2 Following the above decision ofthe co-ordinate bench of this Tribunal in the caseof SDPLM Software Solutions Ltd. (supra), wedirect the Assessing Officer / TPO to omit this Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 5/10 company from the final set of comparables as it isfunctionally different from the assessee in thecase on hand, who is purely a provider ofsoftware development services. Ill.KALS Information Systems Ltd. 11.4.1 We have heard both parties andperused and carefully considered the material onrecord; including the judicial decisions cited andplaced reliance upon. We find that a co-ordinatebench of the Tribunal in the case of M/s. 3DPLMsoftware Solutions Ltd. (supra), for AssessmentYear 2008-09 has excluded this company asa |comparable, observing that it was developingsoftware products and was not purely a softwareservice provider and at para 10.4 thereof it washeld as under :- XXXXX 11.4.2 Following the above decision of|the co-ordinate bench of this Tribunal in the caseof SDPLM Software Solutions Ltd. (supra), wedirect the Assessing Officer / TPO to omit thiscompany from the final set of comparables as it isfunctionally different from the assessee in thecase on hand, who is purely a software serviceprovider.” Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 6/10 Regarding Substantial Question of Law No.2: 699 3 We have heard both the learned|AuthorisedRepresentativeandthelearnedDepartmental Representative in the matter. Fromthe material on record, we find that the TPO in hisorder under Section 92CA of the Act has notexplained how these companies fail the filtersadopted by him. In view of this being theposition, the co-ordinate bench of this Tribunal inassessee's own case for Assessment Year 2007-O8 in IT(TPJA No.1174/Bang/ 2011 dt.14.11.2014has remanded the issue to the file of the TPO forfresh examination in the cases of (it) Indiumsoftware (India) Ltd. and (iu) VMF Software Ltd. —The same reasoning applies for this year underconsideration t.e. for Assessment Year 2008-09also for these two companies (Supra) and also forKPIT Cummins Infosystems Ltd. In this view ofthe matter, we deem it fit to restore the issue ofthe comparability of the above three companiesback to the file of the TPO to examine thecomputation given by the assessee in this regardand to decide the issue afresh after affording theassessee adequate opportunity of being heardand to make submissions in the matter, whichShall be duly considered before a decision istaken. It is ordered accordingly.” Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 7/10 4The controversy involved herein is no moreres integrain view of the decision of this Court in|1.T.A. Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 7/10 4The controversy involved herein is no moreres integrain view of the decision of this Court in|1.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.Asubstantial quantumof|international trade and transactions dependsupon the fair and quick judicial dispensation|in such cases. Had it been a case oOf|Substantialquestionof|interpretation|of|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| Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 8/10 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. 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. Date of Judgment 24-07-2018, ITA No.390/2015 Pr. Commissioner of Income Tax & Another Vs. M/s. NXP Semi Conductors India Pvt. Ltd., 9/10 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 “ArmLength 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.” 5.In the circumstances, having heard the learned Counsel appearing for both the sides, we are ofthe considered opinion that no substantial question oflaw arises for consideration in the present case. 10/10 6.Hence, the Appeal filed by the Appellants-Revenue is liable to be dismissed and is accordinglydismissed. Nocosts.| NC. Sd/-.JUDGE. Sd/-.JUDGE.