Date Of Judgment 29-08-2018, Ita v. M/S.support.com India Private Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 29 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.259/2016 BETWEEN : Ll.]PR. COMMISSIONER OF INCOME TAX -O6, BMTC COMPLEX, KORAMANGALA, BANGALORE «|INCOME TAX OFFICER, WARD —- 12(2), BANGALORE... APPELLANTS (BY SRI.E.IL.SANMATHI, ADV.) AND ; M/S. SUPPORT.COM INDIA PRIVATE LTD., (FORMERLY KNOWN AS SUPPORTSOFT INDIA PVT. LTD.,)) FLOOR, SALARPURIA SENATE,* CROSS, 5 BLOCK,KORAMANGALA INDUSTRIAL LAYOUT,BANGALORE — 560 095.PAN: AAHCS 3902 R|_ RESPONDENT (BY SRI.S.SHARATH, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:|04/11/2015 PASSED IN ITA NO.1340/BANG/2010, FOR THE.ASSESSMENT YEAR:2006-07, PRAYING TO: (1) DECIDE THE.FOREGOING QUESTION OF LAW AND/OR SUCH OTHER, Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. 2/8 QUESTIONS OF LAW AS MAY BE FORMULATED BY THE)HON'BLE COURT AS DEEMED FIT. 2. SEIT ASIDE JHEAPPELLATE ORDER DATED: 04/11/2015 PASSED BY THE.INCOME TAX APPELLATE TRIBUNAL, 'A'’ BENCH, BENGALURU,IN APPEAL PROCEEDINGS NO.IT(TP)A NO.1340/BANG/2010—FOR ASSESSMENT YEAR 2OO0O6-O7. THIS APPEAL COMING ON FOR HEARING, THIS DAY,|S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. E.Y. Sanmathi,Adv. for Appellants — Revenue.Mr. S Sharath,Adv. for Respondent — Assessee. This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘A’, Bangalore, inIT[TP|IA No.1340 /Bang/2010 dated04.11.2015, (M/s. Support.com India Private|Ltd., Vs. The Income Tax Officer) relating to theAssessment Year2006-07. ? TheappealhasbeenadmittedOT)03.10.2017|CO consider.the|followingsubstantial|questions of law raised in the Memorandum of appeal Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. 3/8 by the Appellants-Revenue is quoted below for readyreference: “1. Whether on the facts and in the circumstancesof the case, the Tribunal was justified in holdingthatfew companies are functionally differentfromthe assessee when it satisfied all the qualitativeand quantitative filters applied by the TPO. TheTribunal has used a narrower functionality filterthantheTPO,buthasNOT|tested.othercomparables against the narrower functionalityfuter applied by it? 2) Whether on the facts and circumstances of thecase, the Tribunal is right in law in directing theexclusion of comparable companies having RPTtransactions more than 25% without asking theTPO to make a fresh study since a qualitativefilter, viz RPT filter has been changed whichresults in changing filter criteria altogether andmandates a fresh TP study using updatedfiltersP~ 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue and 4/8 Respondent-Assessee, has returned the findings as under: Regarding Substantial Question of Law No.1: “14. With respect to KALS Information SystemsLtd., and Accel Transmatics Ltd. (Seg), it wascontended that they have to be rejected asfunctionally different, following the decision ofITAT Bangalore Bench in the case of M/s. HuawetTechnologies India Put. Ltd.(surpa) where it washeld as follows:-_ NXXXXXXKXXKXX 15. |Respectfully following the decision of the|coordinate Bench of this Tribunal in the case ofM/s. Huawei Technologies India Put. Ltd. (Supra),we direct that KALS Information Systems Ltd.,and Accel Transmatics Ltd. (Seg) be excludedfrom the list of comparables.” Regarding Substantial Question of Law No.2: “10. Ground No.9 is with respect to the TPanalysis of the TPO. The ld. Counsel for theassessee pointed out that the comparables viz.,Aztech Software Ltd., Geometric Software Ltd. NXXXXXXKXXKXX 15. |Respectfully following the decision of the|coordinate Bench of this Tribunal in the case ofM/s. Huawei Technologies India Put. Ltd. (Supra),we direct that KALS Information Systems Ltd.,and Accel Transmatics Ltd. (Seg) be excludedfrom the list of comparables.” Regarding Substantial Question of Law No.2: “10. Ground No.9 is with respect to the TPanalysis of the TPO. The ld. Counsel for theassessee pointed out that the comparables viz.,Aztech Software Ltd., Geometric Software Ltd. Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. (Seg) and Megasoft Ltd. chosen by the TPO andsubmitted that undisputedly the related partytransactions of these comparables was more than15%. He relied on the decision of this Tribunal inthe case of M/s. Huawei Technolgies India Put.Ltd. V. ITO in IT (TPJA No. 1338/ Bang/ 2010 dat30.04.2013, wherein it was held as under: XXXXXXXXXXNX Ill.Respectfully following the decision of thecoordinate Bench of this Tribunal in M/s. HuawetTechnologies India Put. Ltd. (Supra), we hold thatthe.companiesVIZ., AztechsoftwareLtd.,Geometric Software Ltd. (Seg) and Megasoft Ltd.are to be excluded from the list of comparableschosen by the TPO.” 4However, this Court in a recent judgment inI.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 instance Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. 6/8 of an assessee or the Revenue under Section 260-A otthe Act is not maintainable. The relevant portion of the said judgment isquoted 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 of|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 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. Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. 7/8 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 arysubstantial question of law. 06. Weare therefore of the consideredopinion that the present appeals filed by the|Revenue do not give rise to any substantialquestionof|lawand.theSuggested|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 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 assessees Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. 8/8 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 assessees Date of Judgment 29-08-2018, ITA No.259/2016 Pr. Commissioner of Income Tax-6 & Another Vs. M/s.Support.com India Private Ltd. 8/8 with 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.Havingheard|the.learnedcounsels. 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. Pse* Sd/-.JUDGE. Sd/-.JUDGE.