Date Of Judgment 29-08-2018, Ita v. M/S. Misys Software Solutions [India] Pvt. 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.929/2017 BETWEEN : 1.PR. COMMISSIONEROF INCOME TAX-4BMTC COMPLEXKORAMANGALA>BANGALORE.» «|DY. COMMISSIONEROF INCOME TAX.CIRCLE-4|1]/2]BANGALORE.» . APPELLANTS| (BY SRI E.L.SANMATHI, ADV.) AND : M/s. MISYS SOFTWARESOLUTIONS PVT. LTD.,BAGMANB CONSTRLLATIONBUSINESS PARK, 4 TO 6[‘L]KFLOORSVIRGO BUILDING, OBRDODDANEKUNDI, MARATHAHALLITBANGALORE -56003 7 _. RESPONDENT. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 19.05.2017 PASSED IN IT/TP|A No.174/BANG/2015, FOR:THE ASSESSMENT YEAR 2010-2011, PRAYING TO [a}| DECIDE Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 2/8 THE FOREOING QUESTION OF LAW AND/OR SUCH OTHER,QUESTIONS OF LAW AS MAY BE FORMULATED BY THE)HON’BLKE COURT AS DEBMBED FIT & SKIT ASIDE TAPPBKELLATK ORDER DATHBRD 19.05.2017 PASSKHD BYINCOME TAX APPELLATE TRIBUNAL, “B’ BENCH, BANGALORE,|IN APPEAL PROCEEDINGS No.IT/TP|A No.174/BANG/2015 FOR:ASSESSMENT YRBAR 2010-2011 AS SOUGHT FOR IN THISAPPEAL AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT,IN THE INTEREST OF JUSTLICE. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT 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.174/Bang/2015 dated|19.05.2017, relating to the Assessment Year2010-11. 2.The substantial questions of law framed by the Revenue in the Memorandum of Appeal are asunder: “1.Whether on the facts and in thecircumstances of the case, the Tribunal was Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 3/8 justified in holding that the functions of taxpayerare not comparable to the functions of certaincomparable’sevenwhenqualitativeandqualitative tests are satisfied in case of allcomparable’s? aWhether on the facts and in thecircumstances of the case, the Tribunal was.justified in directing the exclusion of comparablescompanies having RPI transactions more than15% ignoring the TPO’s observation that the basis|for determining the threshold limit for eliminatingcompanies having RPI transactions more than25% was through the determination of Indian|companies with foreign shareholding greater that26% and therefore had its basis in the provisions|of the Act and accounting standards AS-18?” 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 No.1: “17.We|have.consideredthe|rivalSubmissions as well as the relevant material on Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 4/8 record. We find that for the Assessment Year2006-07, the Tribunal in assessee's own casevide.order|at.23.9.2015'inIT(TP)ANo. 1425/Bang/2010 has held that this companyis not a good comparable and directed to beexcluded from the list of comparables. Further theco-ordinate bench of this Tribunal in the case ofDCIT Vs. Electronics for Imaging (India) Put.Ltd.(supra) has held in paras 30 to 33 as under : KVeVNKK” In view of the earlier order of this Tribunal|in assessee's own case as well as the decision inthe case of DCIT Vs. Electronics for Imaging(India) Pvt. Ltd. (supra), we hold that thiscompany is functionally not comparable with theassessee and accordingly we direct the TPO/A.O.to exclude this company from the _ set ocomparables. ” 4/8 record. We find that for the Assessment Year2006-07, the Tribunal in assessee's own casevide.order|at.23.9.2015'inIT(TP)ANo. 1425/Bang/2010 has held that this companyis not a good comparable and directed to beexcluded from the list of comparables. Further theco-ordinate bench of this Tribunal in the case ofDCIT Vs. Electronics for Imaging (India) Put.Ltd.(supra) has held in paras 30 to 33 as under : KVeVNKK” In view of the earlier order of this Tribunal|in assessee's own case as well as the decision inthe case of DCIT Vs. Electronics for Imaging(India) Pvt. Ltd. (supra), we hold that thiscompany is functionally not comparable with theassessee and accordingly we direct the TPO/A.O.to exclude this company from the _ set ocomparables. ” Regarding Substantial Question of Law No.2: 95. |HavingconsideredtherivalSubmissions as well as the relevant material onrecord on this issue, we find that the Tribunal hastakena}consistentVIEWthatin|normalcircumstances 15% RPI tolerance is a propercriteria for selection of comparable companies. Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 5/8 Accordingly, by applying the said criteria of 15%RPT as a tolerance range, this company ICRA)Online Ltd. having 16% RPT is required to beexcluded from the set of comparables. We furthernote that the Tribunal in the case of Goldmansachs Services Put. Ltd. Vs. DCIT (supra) in paras6 & 7 held that this company is not a goodcomparable of ITES captive service provider. Inview of the above facts when this company ishaving RPT of more than 15% as well as byfollowing the decision of this Tribunal, we directthe TPO/A.O. to exclude this company from theset of comparables.” 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 instanceof an assessee or the Revenue under Section J60-A otthe Act is not maintainable. Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 6/8 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 insuch cases. Had it been a case of substantialquestion of interpretation of provisions ofDouble Taxation Avoidance Treaties (DTAA),interpretation of provisions of the Income TaxAct or Overriding Effect of the Treaties over theDomestic Legislations or the questions likeTreaty Shopping, Base Erosion and _ Profishifting (BEPS), Transfer of Shares in TaxHavens (like in the case of Vodafone etc.), ifbased on relevant facts, such substantialquestions of law could be raised before theHigh Court underSection 260-Aof the Act, theCourtscouldhave|embarkedUpor”suchexercise of framing and answering suchsubstantial question of law. On the other hand,the appeals of the present tenor as to whetherthe comparables have been rightly picked up ornot, Fulters for arriving at the correct list of Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 7/8 comparables have been rightly applied or not,do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantialquestion of law and the suggested substantialquestions of law do not meet the requirements ofSection 260-Aof the Act and thus theappeals filed by the Revenue are found to bedevoid of merit and the same are liable to bedismissed. Date of Judgment 29-08-2018, ITA No.929/2017 Pr. Commissioner of Income Tax4 & Another Vs. M/s. Misys Software Solutions [India] Pvt. Ltd., 7/8 comparables have been rightly applied or not,do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantialquestion of law and the suggested substantialquestions of law do not meet the requirements ofSection 260-Aof the Act and thus theappeals filed by the Revenue are found to bedevoid of merit and the same are liable to bedismissed. 57. We make it clear that the same'|yardsticks and parameters will have to beapplied, even tf such appeals are filed by theAssessees, because, there may be cases wherethe Tribunal giving its own reasons andfindings has found certain comparables to begood comparables to arrive at an'7s| “ArLength Price“in the case of the assessees withwhich the assessees may not be satisfied andhave filed such appeals before this Court.Therefore we clarify that mere dissatisfactionwith the findings of facts arrived at by thelearned Tribunal is not at all a sufficient reason 8/8 to invokeSection 260-Aof the Act before this|Court. 58. The appeals filed by the Revenue are|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 the present case also. The Appeal filed by the Appellants-|Revenue is liable to be dismissed and it is dismissed|accordingly. No costs. Copy of this Order be sent to the Respondent- Assessee forthwith. NC. Sd/-. JUDGE. Sd/-.JU DGE