Date Of Judgment 29-06-2018, Ita v. M/S Uae Exchange & Financial Service Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 29 DAY OF JUNE 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.73/2016 BETWEEN : 1.PR. COMMISSIONER OF INCOME TAX.C.R. BUILDING,C.R. BUILDING, QUEENS ROAD, BANGALORE —- 560 OO1. 2.THR DBEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7(1)(1),.BANGALORE.BANGALORE. _. APPBLLANTS (BY SRI.SANMATHI E I, ADV.) AND: M/S UAE EXCHANGE &|FINANCIAL SBRVICEK LTDNO.12 & 13, GROUND FLOOR,NORTH BLOCK, MANIPAL CENTRE,DICKENSON ROAD,BANGALORE.PAN: AAACU2ZO4OP. _. RESPONDENT (BY SRI.TATA KRISHNA, ADV.) Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 2/9 THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED:29/06/2015 PASSED IN IT(TP)A NO.213/BANG/2015,.FOR THR ASSESSMENT YEAR 2010-2011. PRAYING TO: 1.DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH.OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THEHON'BLE COURT AS DEEMED FIT. 2. TO SET ASIDE THE.APPELLATE ORDER DATED:29/06/2015 PASSED BY THE ITAT,'C’ BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. IT(TP)A.NO.213/BANG/2015 FOR A.Y.2010-11. THIS APPEAL COMING ON FOR HEARING, THIS DAY,Dr. VINEET KOTHARI, J©, DELIVERED THE FOLLOWING: JU DBiGMENT Mr. E.I. Sanmathi, Adv. for Appellants - RevenueMr. Tata Krishna, 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 ‘C’, Bangalore, inIT|TPIA No.213/Bang/2015dated29.06.2015, relating to the Assessment Year2010-11. Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 3/9 a2The proposed substantial question of law|framed by the Revenue in the Memorandum of Appeal isas under: “WhetherOnthefactsandinthe|circumstances of the case, the Tribunal 1isright in applying first and second proviso ofsection 92C of the Act and allowing +/- 5%|range in the case where there is only one|reference rate of RBI as a benchmarking rate|for determining Arms’ Length Price andTribunal cannot go into issue as to how RBIdecides a reference rate ofprice of a currency|which was not an tissue before Tribunal?” 3.The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned a finding as under:| “05. We have perused the orders and heardthe rival contentions. Question before us iswhether second proviso to Section 92C (2)which allows +/- 5% range to an assesseecould be applied even in a case where thetransactions involved were on account of Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 4/9 trading in foreign exchange, where RBI rateswere considered to be a bench-mark for thearms length study. In the case of DevelopmentBank of Singapore v. DDIT (supra) the MumbatTribunal considered the question whetherthet/-5% range would be available when liborrate was considered for bench marking thearms length pricing with respect to interestcharges on loans. At para 11 to 13 of its order,the coordinate bench held as under: XXXXXXXXXXXXXXXX 06. Mumbai Bench had held that libor rateswere also an averaging of rate of interestcharged or paid on inter-bank deposits by anumber ofpanel banks. Of course, here for theALP analysis what has been considered wasthe RBI exchange rates. However, we find thatRBI in its press release dt.06.08.2008 hasmentioned as under: “August 6, 2008Computationand.Disseminationof|RBIReference Rate Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 5/9 XXXXXXXXXXXXXXXX 06. Mumbai Bench had held that libor rateswere also an averaging of rate of interestcharged or paid on inter-bank deposits by anumber ofpanel banks. Of course, here for theALP analysis what has been considered wasthe RBI exchange rates. However, we find thatRBI in its press release dt.06.08.2008 hasmentioned as under: “August 6, 2008Computationand.Disseminationof|RBIReference Rate Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 5/9 The Reserve Bank of India complies on a dailybasis and publishes reference rates for SpotUSD/INR and Spot EUR/INR. The rates arearrived at by averaging the mean of thebid/ offer rates polled from a few select banksamong 12 noon every week day (excludingSaturdays). The contributing banks areselected on the basis of their standing, marketshare in the domestic foreign exchange marketand representative character. The ReserveBank periodically reviews the procedure forselecting the banks and the methodology ofpolling so as to ensure that the reference rate is"a true reflection of the market activity. G.Raghuray] Deputy General Manger|Press Release : 2008-2009/ 163” It is clear from the above that the RBI rates offoreign exchange|WweTealsobasedOnaveraging.Therefore|In|OUTopinion,|theprinciple evolving out of the decision ofcoordinate bench of Mumbai in DevelopmentBank of Singapore (supra) will apply here as Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 6/9 well. Assessee was therefore well justified in.claiming the benefit available to it underproviso to section 92C(3) of the Act. DRP, in ouropinion,|Was justifiedin|holding that|assessee’s prices were within +/- 5% range ofthe RBI rates and therefore there was nonecessity for transfer pricing adjustment.” 4The controversy involved herein is no moreres integrain view ot the decision of this Court inI1.T.A. Nos.536/2015 and 537/2015dated.25.06.2018>wherein it has been observed that unless the finding ofthe Tribunal is found ex facie perverse, the Appeal u/s.260-A of the Act, is not maintainable. The relevant,portion of the Judgment is quoted below for readyreference: “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| Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 7/9 Substantialquestionof|interpretation|of|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, Filters 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 substantial Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 8/9 questionof|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. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantial Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 8/9 questionof|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. 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 “Arm 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 Revenue are|therefore dismissed with no order as_ tocosts.” Date of Judgment 29-06-2018, ITA No.73/2016 Pr. Commissioner of Income tax & another Vs. M/s UAE Exchange & Financial Service Ltd. 9/9 5.In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question oflaw 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|