Date Of Judgment 27-08-2018, Ita v. M/S. Csr India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 27 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.1011/2017 BETWEEN : 1.THE PR. COMMISSIONER OF INCOME-ITAX "[‘T]FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA| BENGALURU-560095.. «|THE INCOME-TAX OFFICER WARD-11{1], PRESENT ADDRESS WARD-2]1]} 1], KFLOOR| BMTC BUILDING, | 80 FEET ROAD, KORMANGALA| BENGALURU-560095.. . APPELLANTS| (BY SRI DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.) AND : M/s. CSR INDIA PVT. LTD., No.4/1, 11[‘L]FLOOR, TOWER-C|IBC KNOWLEDGE PARKBANNBRGHAITIA ROADBBENGALURUPAN: AABCU 47145. _. RESPONDENT. (BY SRI ANKUR PAI, ADV.) THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER| Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., DATED 06.04.2017 PASSED IN IT/TP|A No.241/BANG/2014, FOR.THE ASSESSMENT YEAR 2009-2010 VIDE ANNEXURE-D,|PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS)OF LAW STATBKD ABOVE. 2. ALLOW THR APPBAL AND SBTASIDE THR ORDERS PASSED BY THR INCOME TAX APPELLATETRIBUNAL, BENGALURU IN IT/TPJA No.241/BANG/2014 DATED)06.04.2017 VIDE ANNEXURE-D AND CONFIRM THERE ORDER OTHER DRP CONFIRMING THR ORDER PASSED BY THR INCOMETAX OFFICER, WARD-2/1]/1], BENGALURU AND ETC.| THIS APPEAL COMING ON FOR ORDERS, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. Dilip,Adv. forMr. K.V.Aravind,Adv. for’Appellants — Revenue.|Mr. Ankur Pai,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, Bangalore Bench ‘B’, Bangalore, inIT[TP|A No.241/Bang/2014dated06.04.2017, relating to the Assessment Year2009-10. a2The substantial questions of law framed bythe Revenue in the Memorandum of Appeal are asunder: 3/10 aWhether on the facts and in thecircumstances of the case, the Tribunal ts right in|law in excluding certain comparable on theground offunctional dissimilarity even when thequalitative and quantitative filters are satisfied in|case of assessee?| D2 Whether on the facts and in thecircumstances of the case, the Tribunal has erredin not following its own decision in the case ofM/s. Societe General Global Solution Centre [P/Ltd., Vs. DCIT, Cuircle-12/3/, Bangalore videIT/TP/[A No. [Bang] the jurisdictional TribunalBangalore has opined that the turnover cannot berelevant criteria in a service sector where fixedoverheads are nominal and the cost of service isin direct proportion to the services rendered? 3.|Whether on the facts and in thecircumstances of the case, the Tribunal is right inconfirming the directions of DRP with regard toinclusion of comparable namely FCS Softwaresolutions and Think Soft Global Services Ltd., ascomparables by following its earlier order whichhas not reached finality and even when thetransfer pricing officer had rightly rejected thesaid comparable’s on the basis of working capital Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., adjustment in those cases exceeded 4% and theDRP had erroneously held that there should notbe capping and WCA should be on actual? ~ 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 Nos.1 & 2: “OS. Now let us take up the assessee’s|appeal. The assessee placed reliance on the’decision of the Bengaluru Tribunal, in the case ofAirbusIndia.OperationsP|Ltd.,HTA.35/ Bang/ 2014) and McAfee Software IndiaP. Ltd., TA.O4/Bang/2012, wherein 9 out of theI1 comparables selected by the TPO wererejected. The AR’s submissions are extracted asunder: I.BodhtreeConsultingLimited[“Bodhtree” or “the Company” KVeVNKK” adjustment in those cases exceeded 4% and theDRP had erroneously held that there should notbe capping and WCA should be on actual? ~ 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 Nos.1 & 2: “OS. Now let us take up the assessee’s|appeal. The assessee placed reliance on the’decision of the Bengaluru Tribunal, in the case ofAirbusIndia.OperationsP|Ltd.,HTA.35/ Bang/ 2014) and McAfee Software IndiaP. Ltd., TA.O4/Bang/2012, wherein 9 out of theI1 comparables selected by the TPO wererejected. The AR’s submissions are extracted asunder: I.BodhtreeConsultingLimited[“Bodhtree” or “the Company” KVeVNKK” The Appellant wishes to submit that in caseofBodhtree,extraordinaryvariationsin Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., profitability are indicators of the extra edge the|Company has received on introduction of the|Ssaas. Hence, Bodhtree should not be consideredas a comparable. Therefore, as the company was engaged in|providing ITeS services in FY 2008-09, the|company cannot be taken as comparable to theappellant. The appellant relies on the case of AirbusIndia Operations, wherein this company has beenrejected on functional dissimilarity. The relevantextract is annexed herewitth:- KVM 16.|Respectfully following the decision ofthe Tribunal referred to above and taking note of|the fact that the facts and circumstances under|which the aforesaid company was considered by the TPOascomparablewithasoftwaredevelopmentSECTUICEprovidersuch|as|theassessee for identical reasons, we direct the TPO.to exclude the aforesaid company from the list.|Hence, Bodhtree should be rejected. 2.|Tata Elxsi Limited [“Tata Elxst’] Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., KVeVNKK” The Appellant also wishes to submit thatthe Hon’ble Tribunal has rejected this companyas comparable in the case of SDPLM Softwaresolutions Limited for the same AY 2008-09. Based on the above, Tata Elxsi ought to berejected as a comparable. ~ considered the other comparables and excluded theSaIne. Regarding Substantial Question of Law No.3: “Tt 1s seen that the TPO excluded them onthe basis that the working capital adjustment inthose cases exceed 4%. The DRP held thereShould not be capping and the working capitaladjustment should be on actual and accordingly|directed to include these comparable. Since, theDRP directions are in accordance with thisTribunal’s decision in the case of Moog Controls [India]Private Limited[IT/TPIANo.551/Bang/2015/ it needs to be_ upheld.Further,thisTribunalfoundthem.TO be| Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., 7/10 comparables, supra, and hence we reject theRevenue’s appeal.” 5.However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on 25.06.2018 (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 is"established 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: 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 Avoidance Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., —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 is"established 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: 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 Avoidance Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., Treaties (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.), uf 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 the Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., 9/10 requirements 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 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 | “A 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. o8. The appeals filed by the Revenueare therefore dismissed with no order as to|costs.” Date of Judgment 27-08-2018, ITA No.1011/2017 The Pr. Commissioner of Income-tax & Another Vs. M/s. CSR India Pvt. Ltd., 10/10 6.Havingheardthelearnedcounsels. appearing for the parties, we are therefore of the opinionthat no substantial question of law arises in the present case also. The Appeal filed by the Appellants-Revenueis liable to be dismissed and it is dismissed accordingly. —No costs. NC. Sd/-.JUDGE. Sd/-.JUDGE|