Date Of Judgment 24-07-2018, Ita v. M/S.novo Nordisk 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.83/2016 BETWEEN: 1.PR. COMMISSIONER OF INCOME TAX.CHRNTRAL REVENUB BUILDINGSCHRNTRAL REVENUB BUILDINGS QUEENS ROAD, BANGALORE - 560 OO] 2.DBPUTY COMMISSIONEROF INCOME TAX,OF INCOME TAX, CIRCLE-95 (1) (2), BANGALORE_. APPBLLANTS| (BY SRI.E I SANMATHI, ADV.) AND M/S.NOVO NORDISK INDIAPVT. LTD.,PLOT NO.32, 47-50,EPIP AREA, WHITE FIELD,|BANGALORE — 560 066.PAN NO .AAACN 7425M_. RESPONDENT (BY SRI.MALLAHA RAO K, ADV. FOR| SRIL.K.NAGESWAR RAO, ADV. ) THIS [TA IS FILED UNDER SBKBCTION 260-A OF [INCOTAX ACT 1961, ARISING OUT OF ORDER DATED:30/07/2015—PASSED IN ITA NO. 146/BANG/2015, FOR THE ASSESSMENT. Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd. 2/8 YEAR - 2010-11, PRAYING TO: (1) DECIDE THE FOREGOINGQUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW,AS MAY BK FORMULAITED BY THRE HONBLE COUR! ASDEEMED FIT. (2) SET ASIDE THE APPELLATE ORDER DATED.30-07-2015PASSED|BYTHREINCOMETAXAPPELLATE,TRIBUNAL 'C'’ BENCH, BANGALORE, IN APPEAL PROCEEDINGSNO. LT.A NO.146/BANG/2015 FOR ASSESSMENT YEAR: 2010-11, AS SOUGHT FOR IN THIS APPEAL, AND TO GRANT SUCH.OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OFJUSTICE. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. E.I. Sanmathi, Adv. for Appellants — Revenue. |Mr. Mallaha Rao,Adv. forMr. K. 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, ‘C’ Bench,Bangalore|in.IT[TP|ANo.146/Bang/2015dated| 30.07.2015, relating to the Assessment Year2010-11. ?)ThisAppealhasbeenadmittedOTL 22.07.2016to consider the following substantialquestions of law as framed by the Revenue in theMemorandum of Appeal. 3/8 “~1) Whether on the facts and in thecircumstances of the case, the transaction ofsupply of raw material excipient/insulin crystalby Novo Nordisk A/S to the assessee can bebenchmarked for the purpose of determining theALP together with the International transactionsof import of products directly from M/s.NovoNordisk A.S and selling the same in India ( whichis purely distribution function performed by theassessee on behalf of Novo Nordisk A/S) on theplea that both the transactions are interlinkedand therefore have to be benchmarked together?| 2) Whether on the facts and in thecircumstances of the case, if the answer to theabove question is in the negative, how the ALP ofthe transactions has to be determined?| 3) Whether on the facts and in thecircumstances of the case, the determination ofALP as direct by the DRP ts correct? 4) Whether on the facts and in thecircumstances of the case, the Tribunal ts justified|in holding that the size and turnover of thecompany are deciding factors for treating acompany as a comparable and in excluding’ 4/8 M/s.Infosys BPO Limited as a comparable of theTaxpayer?” 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: “31. We deal with the comparable companies|which the Assessee seeks exclusion. 1.)Accentia Technology Ltd., 2. Infosys BPO Ltd.The comparability of these company with a|ITES company was considered by thisTribunal in the case of Paraxel International|(India) Put. Ltd. (supra) and the Tribunal heldas follows on the comparability of the|aforesaidcompanieswithaCOIMlLPaproviding ITES in the following manner:-NXXXXXXXXKXKX 32. As far as Accentia Technology Ltd., isconcerned, even during the previous year|relevanttoAY2010-11,there|Was amalgamation of Ascent Infoserve Private|Limited with Accentia Technology Ltd., andconsequent thereto the assets and liabilities| 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: “31. We deal with the comparable companies|which the Assessee seeks exclusion. 1.)Accentia Technology Ltd., 2. Infosys BPO Ltd.The comparability of these company with a|ITES company was considered by thisTribunal in the case of Paraxel International|(India) Put. Ltd. (supra) and the Tribunal heldas follows on the comparability of the|aforesaidcompanieswithaCOIMlLPaproviding ITES in the following manner:-NXXXXXXXXKXKX 32. As far as Accentia Technology Ltd., isconcerned, even during the previous year|relevanttoAY2010-11,there|Was amalgamation of Ascent Infoserve Private|Limited with Accentia Technology Ltd., andconsequent thereto the assets and liabilities| Date of Judgment 24-07-2018, ITA No.83/2016 Pr. Commissioner of Income Tax & another Vs. M/s.Novo Nordisk India Pvt. Ltd. 5/8 and accumulated reserves and the financial|results for the year ended 3][Sf]~ March, 2010,of|theamalgamatingCOMmpPpaLwveLincorporated in the amalgamated company. —As far as Infosys BPO Ltd., is concerned, theobservations made by the Tribunal in the|decision referred in the earlier paragraph will|hold good for the present AY 2010- 11 also.Respectfully following the decision of theTribunal referred to above, we direct that the|aforesaid 2 companies be excluded from the|list of comparable companies for the purpose|of|computingarithmetic.meanforcomparability purpose. The TPO ts directed|to give effect accordingly.” 4.The 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, is 6/8 not maintainable. The relevant portion of the Judgment is quoted below for ready reference: “Conclusion: oo. A substantial quantum of international tradeand transactions depends upon the fair and quickjudicial 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 IncomeTax 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.), | based on relevantfacts, such substantial questions of law couldbe raised before the High Court underSection 260-A|of the Act, the Courts could haveembarked upon such exercise of framing and)answering 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. 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. | 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 findings|offacts arrived at by the learned Tribunal is notat all a sufficient reason to invokeSection 260-Aof the Act before this Court. 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 findings|offacts 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 are)therefore dismissed with no order as to costs.” 8/8 5.In the circumstances, having heard the learned Counsel appearing for both the parties, We areof the considered opinion that no substantial question of law arises for consideration in the present case. _ 6.Hence, the Appeal filed by the Appellants-Revenue is liable to be dismissed and is accordinglydismissed. Nocosts. — AN/- Sd/-.JUDGE| Sd/-.JUDGE|