Date Of Judgment 28-08-2018, Ita v. The Deputy Commissioner Of Income-Tax

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 28 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.589 /2017 BETWEEN : MINDTECK (INDIA) LTD (ADDRESS AS PER THE TRIBUNAL ORDER)PRESTIGE ATLANTA, NO.10,INDUSTRIAL LAYOUT, 7 MAIN,80 FT ROAD, 3 BLOCK, KORAMANGALA|BBNGALURU- 560 034.| (PRESENT ADDRESS)A.M.R. TECH PARK, BLOCK-1, 3 FLOOR,NO.064, 23/24, HOSUR ROAD, BOMMANAHALLI,BENGALURU, KARNATAKA —- 560 068 _ APPBLLANT| (BY SRI.S.SANKARA NARAYANAN, ADV. (ABSENT)) AND ; THER DEPUTY COMMISSIONER OF INCOME TAXCIRCLE-4 (1) (2), 2 FLOOR, BMTC BUILDING, |SOFT ROAD, KORAMANGALA, VI TH BLOCK,BENGALURU — 560 034.. RESPONDEN (BY SRI.K.V.ARAVIND , ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER| 2/8 DATED 24.03.2017 PASSED IN I[T(TP)A NO.1834/BANG/2016,FOR THE ASSESSMENT YEAR 2012-2013 ANNEXURE - K,|PRAYING TO 1. FORMULATE THE SUBSTANTIAL QUESTIONS OFLAW. 2. ALLOW THR APPBAL AND SBT ASIDB THR ORDER|PASSEDBY|THREITAT,BENGALURUINIT(TP)ANO.1834/BANG/2016 DATED 24 MARCH 2017 ANNEXURE -K. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. S Sankara Narayanan,Adv. for Appellants -|Assessee. |Absent| Mr. K.V.Aravind,Adv. for Respondent — Revenue. This Appeal is filed by the Assessee purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘A’, Bangalore, inIT[TP|IA No.1834/Bang/2016 dated|24.03.2017(M/s Mindtech (India) Ltd., Vs. TheDeputy Commissioner of Income-Tax) relating to theAssessment Year.2012-13. 2.Theappealhas|beenadmitted|OTL95.10.2017.TO consider.thefollowingsubstantialquestions of law framed by the Appellants-Assessee: 3/8 aWhether the order passed by ITAT sufferingfrom perversity with regard to considering theturnover range of 1/10 to 10 times of the turnoverof the Appellant., when the Appellant was notasking for the same? D2 Whether ITAT is correct in so far as it|consideredTurnover|TFAPLGofcomparablecompaniesas|aStandalonecriteria.whtleeliminating these comparables?| 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Assessee andthe Respondent-Revenue, has given the _ followinfindings:-_ Regarding substantial questions of law No. 1 & 2; “12. We deal with suitability of the comparableson the basis of settled principle of law, functionalsimilarity and other parameters. It is mentionedthat the TPO has provided the total turnover ofthe assessee as well as the comparables inannexure B of the order. The Total turnover of the|7 comparable mentioned in annexure B 1s asunder: Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 14. If we compare the total sales of the|assessee te. Rs.5199,74,151/- with thesecomparable companies, than we notice thesecompanies are not comparable with that of|the assessee on the basis of turnover except|GenesySInternationalCorpn.,Ltd.Andsasken Communication. As turnover of these|five companies is either less than 1/10[th]ofthe turnover of the assessee or 1s more than|1O times of the turnover sales of_ theassessee. This tribunal is taking a consistentStand of excluding the comparable tf turnoveris not falling between the range of 1/10 to 10|times of the turnover of the assessee.| Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 5/8 Accordingly we direct deletion of these 5.companies form the list of comparables.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on25.06.2018 (Prl. Commissioner of Income Tax & Anr. Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 5/8 Accordingly we direct deletion of these 5.companies form the list of comparables.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on25.06.2018 (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.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| 6/8 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|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. 56. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|lawand.theSuggested| 7/8 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. 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 | “ALength 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.” Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 8/8 5Having heard the learned counsel appearing for the Respondent-Revenue, we are therefore of theopinion that no substantial question of law arises in thepresent case also. The Appeal filed by the Appellant-Assessee is liable to be dismissed and it is dismissed|accordingly. No costs. PSG. Sd/-.JU DGE Sd/-.JUDGE.