Date Of Judgment 26-07-2018, Ita v. M/S. Sysarris Software Private Limited

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 26 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A.No.500/2016 BETWEEN : «|DEPUTY COMMISSIONER ~OF INCOME TAX, CIRCLE-12(3)BANGALORE.OF INCOME TAX, CIRCLE-12(3)BANGALORE. _ APPBLLANTS| (BY SRI E.L.SANMATHI, ADV.) AND ; M/s. SYSARRIS SOFTWAREPRIVATERH LIMITEOKR TOWER, 19/2, 19 CROSS,+ PHASE, JP NAGARDOLLARS COLONY|BANGALORBE-560078PAN: AABC P2952 J._. RESPONDENT. (BY SRI S.SHARATH, ADV. FOR SRI CHYTHANYA.K.K, ADV.) THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 22/01/2016 PASSED IN IT(TP)A No.85/BANG/2012, FOR:THE ASSESSMENT YEAR 2005-2006, ANNEXURE-A, PRAYINGTO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND / OR: Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 2/8 SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED|BY THE HONBLE COURT AS DEEMED FIT. (2) SET ASIDE THE.APPELLATE ORDER DATED:22/01/2016 PASSED BY THE ITAT,'A’ BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. IT(TP)A)NO.89/BANG/2012 FOR THE ASSESSMENT YEAR 2005-2006,ANNEXURE-A, AS SOUGHT FOR IN THIS APPEAL; AND TO)GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE)INTKBREST 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. S.Sharath,Adv. forMr. Chythanya.K.K.,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.85/Bang/2012dated|22.01.2016, relating to the Assessment Year2005-06. a2Theappealhas|beenadmitted|OTL13.12.2017|TO consider.thefollowingsubstantialquestionsoT lawformulated1nthe.appealmemorandum: Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 3/8 aWhether, on the facts and in thecircumstances of the case, the Tribunal ts right in|law in directing the TPO to exclude BodhtreeConsultingLtd.,sankhyaInfotechLtd.,Thirdware Solutions Ltd., Tata Elxsi Ltd., SatyamComputers Ltd., as comparables in the case oftaxpayer on the ground offunctional dis-similarityeven with the TPO has rightly chosen the sameconsidering the functions, FAR analysis andapplying the required test? D2 Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin directing the TPO to exclude comparable,namely, M/s. Foursoft Ltd., which has relatedparty transaction or controlled transactions inexcess of 15% of total revenue by following itsearlier order in the case of 24 X 7 Customer.comPrivate Ltd., even when proper RPTfilter ts 25% ofsale and not 15%?| 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 4/8 Regarding Substantial Question of Law No.1: “20. We have perused the orders andheard the rival contentions. Decision of thecoordinate bench in M/s. Kodiak Networks IndiaPut.Ltd.,/supra]has|consideredthe comparability of M/s. Bodhtree Consulting Ltd.,with M/s. Kodiak Networks India Pvt. Ltd.,/supraj. M/s. Kodiak Networks India Put. Ltd.,/Supraj was also providing software developmentservices and its revenue came to Rs.16.23 crores.Concerned assessment year was also 2005-06.VIS-G-UIS|comparabilityOf|M/s.|BodhtreeConsulting Ltd, this Tribunal has held as under atpara 32 to 34 of its order: XXXKKX. Regarding Substantial Question of Law No.2: 4/8 Regarding Substantial Question of Law No.1: “20. We have perused the orders andheard the rival contentions. Decision of thecoordinate bench in M/s. Kodiak Networks IndiaPut.Ltd.,/supra]has|consideredthe comparability of M/s. Bodhtree Consulting Ltd.,with M/s. Kodiak Networks India Pvt. Ltd.,/supraj. M/s. Kodiak Networks India Put. Ltd.,/Supraj was also providing software developmentservices and its revenue came to Rs.16.23 crores.Concerned assessment year was also 2005-06.VIS-G-UIS|comparabilityOf|M/s.|BodhtreeConsulting Ltd, this Tribunal has held as under atpara 32 to 34 of its order: XXXKKX. Regarding Substantial Question of Law No.2: “28. Wealso find that M/s.Foursoft Ltd.,had a RPT of 19.89% of its sales and this hasbeen clearly mentioned by the TPO in the lst ofcomparables complied by him at page 91 of hisorder. By virtue of the order of the order ofcoordinate bench in the case of M/s. 24/7Customer.Com P. Ltd., /supra/ RPT filter of 15%can be considered as threshold level of filter.Accordingly we are of the opinion that M/s. Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 5/8 Foursoft Ltd., could not be considered as a propercomparable. We therefore direct exclusion of M/s.Foursoft Ltd., from the list of comparables.” 4The controversy involved herein is no moreres integrain view oft the decision of this Court inI1.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 depends|upon 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| Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 6/8 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. 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| Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 7/8 found to be devoid of merit and the same are.liable to be dismissed. 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| Date of Judgment 26-07-2018, ITA No.500/2016 Principal Commissioner of Income Tax-6 & Another Vs. M/s. Sysarris Software Private Limited. 7/8 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. “ArLength 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 of 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.| NC. Sd/-.JU DGE Sd/-.JU DGE