Date Of Judgment 27-08-2018, Ita v. M/S. Scancafe Digital Solutions 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.886/2017 BETWEEN : 1.PR. COMMISSIONER OFINCOME TAX-6BMTC COMPLEX.INCOME TAX-6BMTC COMPLEX. KORMANGALA BANGALORE.» «|INCOME [TAX OFFICER WARD-6(1)(1), BANGALORE. _ APPBLLANTS| (BY SRI. SANMATHI.E.I, ADV.) AND: M/s. SCANCAFEDIGITAL SOLUTIONS PVT. LTD.,GROUND FLOOR, NELLRAO TOWERS, PLOTNO.1138, ROAD NO.O8HPIP PHASE-1WHITKFIBLD MAIN ROADBBNGALURU - 560 066|PAN: AAKCS5S3985E. . RESPONDENT THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 12.04.2017 PASSED IN IT(TP)A NO.502/BANG/2015, FOR. Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 2/8 THR ASSHSSMENT YBAR 2010-2011 VIDE ANNEXURE - APRAYING TO DECIDE THE FOREGOING QUESTION OF LAW ANDJOR)SUCHOTHEBRQUESTIONSOF.LAWAS|MAYBE|RFORMULATBED BY THR HON’BLBE COURT AS DBBMED FIT ASET ASIDE THE APPELLATHK ORDER DATED: 12.04.2017 PASSEBY THE INCOME TAX APPELLATE TRIBUNAL, “‘B’ BENCH,BENGALURU,IN|APPEALPROCHBDINGSNO.|IT(TP)ANO.5902/BANG/2015 FOR ASSESSMENT YEAR 2010-11 VIDEANNEXURE - A, AS SOUGHT FOR IN THIS APPEAL; AND TO.GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THEINTKBREST OF JUSTICE. THIS APPEAL COMING ON FOR ADMISSION, THIs DAY,S. SUATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. E.I. Sanmathi,Adv. for Appellants — Revenue. 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.502/Bang/2015 dated12.04.2017, relating to the Assessment Year2010-11. Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 3/8 a2The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and in the circumstancesof the case, the Tribunal is right in law inexcluding certain comparable on the basis offunctional dissimilarity by not acknowledging itsown decision in Narus Network Put. Ltd., where ithas held that comparable can’t be excluded thebasis offunctional different and when it satisfiesall the qualitative and quantitative filters appliedby the TPO. The Tribunal has used a narrowerfunctionality filter than TPO, but has not testedothercomparables againstthe|narrowerfunctionality filter applied by itr ~ 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings asunder: Regarding Substantial Question of Law: “10. As regards exclusion of the comparables,learned AR of the assessee submitted that thesecompanies had come up for consideration beforethe co-ordinate bench of this Tribunal in Tesco Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 4/8 HindustanService CentrePut.Ltd.UQIT(TPJA.569/ Bang/2015 and 191/Bang/201wherein it was held as follows: NXXXXKXXKXX ll.Furtherin|theCASECofM/s.Stemens|Technology & Services Put. Ltd. vs. ACIT (IT(TPJANo.1601/Bang/2012 dated 16/12/2016, thecomparability of Accentia Technologies Ltd.,Acropetal Tech. Ltd. (Seg.) E-Clerx Services Ltd.,and Infosys BPO was considered by the co-ordinate bench of this Tribunal. The relevantpara. is extracted below: XXXXXXXXXXXNK 12. Learned DR has not brought any evidence onrecord controverting the above submission. | 13. Therefore, respectfully following the decisionof the co- ordinate bench, we hold that the abovecompanies may be excluded for the reasons givenby the Tribunal in the aforesaid decision.” 4However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on NXXXXKXXKXX ll.Furtherin|theCASECofM/s.Stemens|Technology & Services Put. Ltd. vs. ACIT (IT(TPJANo.1601/Bang/2012 dated 16/12/2016, thecomparability of Accentia Technologies Ltd.,Acropetal Tech. Ltd. (Seg.) E-Clerx Services Ltd.,and Infosys BPO was considered by the co-ordinate bench of this Tribunal. The relevantpara. is extracted below: XXXXXXXXXXXNK 12. Learned DR has not brought any evidence onrecord controverting the above submission. | 13. Therefore, respectfully following the decisionof the co- ordinate bench, we hold that the abovecompanies may be excluded for the reasons givenby the Tribunal in the aforesaid decision.” 4However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 5/8 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 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 Erosion|and Profit Shifting (BEPS), Transfer of Shares Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 6/8 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 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital 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 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.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in thepresent case also. The Appeal filed by the Appellants-| Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 8/8 o8. The appeals filed by the Revenueare therefore dismissed with no order as to|costs.” 5.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in thepresent case also. The Appeal filed by the Appellants-| Date of Judgment 27-08-2018, ITA No.886/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 8/8 Revenue is liable to be dismissed and it is dismissed|accordingly. No costs. Copy of this Order be sent to the Respondent- Assessee forthwith. PMR Sd/-.JUDGE. Sd/-.JUDGE.