Date Of Judgment 31-07-2018 I.t.a v. M/S. Rambus Chip Technologies (India) Pvt.ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 31[Ss]DAY OF JULY 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA| I.T.A.No.56/2016 BETWEEN: 1.PR. COMMISSIONER OF INCOME TAX,| CENTRAL REVENUE BUILDINGS, QUEENS ROAD, BANGALORE -560001. 2.THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12(4), BANGALORE. .. APPBLLANT (By Mr. E.I. SANMATHI, ADV.) AND: M/S. RAMBUS CHIP TECHNOLOGIES (INDIA) PVT. LTD,(Rambus India)12 FLOOR, TOWER C & D, IBC KNOWLEDGE PARK,4/1, BANNERGATTA ROAD,BANGALORE.PAN: . .. RESPONDENT (By Mr. SANDEEP HUILGOL, ADV. FOR Mr. T.SURYANARAYANA, ADV.,) THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T. ACT|1961, PRAYING TO DECIDE THE FOREGOING QUESTION OFLAW AND/OR SUCH OTHER QUESTIONS OF LAW AND / ORSUCH QUESTIONS OF LAW AS MAY BE FORMULTED BY THE|HON’BLKB COURT AS DEBEBMBD FIT AND SHBT ASIDE Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 2/11 APELLATE ORDER DATED 22/07/2015 PASSED BY THE ITAT,.‘CC’ BENCH, BENGALURU, IN APPEAL PROCEEDINGS IN ITANo.23/BANG/2015 FOR ASSESMENT YEAR 2009-10 ANNEXUREA AS SOUGHT FOR IN THIS APPBAL & TO GRANT SUCH OTHER|RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. | THIS LT.A. COMING ON FOR HBARING THIS DAYS. SUJATHAJT DRBLIVERBD THE FOLLOWING : JUDGMENT Mr. Sanmathi EI.Adv. for Appellants -.Revenue |Mr. Sandeep Huilgol and Mr. T.Suryanarayana,Advs. tor Respondent -Assessee 1. The Appellants-Revenue have filed this appeal u/s.260Aof the Income Tax Act, 1961, raising) purportedly certain substantial questions of law arising from the order of the.ITAT, ‘B’ Bench, Bangalore>.dated|22.07.2015passedin.IT(TP)ANo.23/Bang/2015(M/s.RambusChipTechnologies:(India) Put.Ltd., us. Deputy Commissioner of Income-tax)forA.Y.2009-10. 2. This appeal has been admitted on|20.09.2017. to consider the following substantial questions of law Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 3/11 framed by the learned counsel for the Appellants-Revenue: - “1.WhetherOTLthefactsand|circumstances of the case, the Tribunal ts justifiedin setting aside the addition made by theassessing authority in respect of amount ofincome-taxOf|Rs. 14,85,677/-paidbythe assessee-company on behalf of an expatriateemployee Mr. Prakash Bare when the taxpayment on the salary was lability of theemployee and not that of the assesseep? D2 Whether on the facts and in thecircumstances of the case, the Tribunal ts right inexcludingcomparables suchaS|BodhtreeConsulting Ltd, Tata Elxst, Infosys TechnologiesLtd, when the assessee itself had included thesaid companies in its TP study and the ordersrelied upon by the Tribunal have not reachedfinality P~ 3. In so far as the first substantial question of lawraised by the Revenue is concerned, the learned ITAThas given the findings, the relevant portion of which isquoted below for ready reference:- Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 4/11 D2 Whether on the facts and in thecircumstances of the case, the Tribunal ts right inexcludingcomparables suchaS|BodhtreeConsulting Ltd, Tata Elxst, Infosys TechnologiesLtd, when the assessee itself had included thesaid companies in its TP study and the ordersrelied upon by the Tribunal have not reachedfinality P~ 3. In so far as the first substantial question of lawraised by the Revenue is concerned, the learned ITAThas given the findings, the relevant portion of which isquoted below for ready reference:- Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 4/11 “18. Having regard to the rival contentions|and the material on record, we find that theHon’ble Jharkhand High Court in the case ofTata.Yadogawa Ltd.(cited supra) was considering thecase of a company which has entered into atechnicalcollaborationagreementwtthaT?Austrian company, ESW to acquire know-how forcertain consideration in terms of which taxes, ifany, on payment of consideration were also to beborne by the assessee therein. The assesseetherein had applied for grant of permission u/s195(2) to remit the said consideration withoutdeduction of tax at source which was rejected bythe AO and which travelled up to the Hon’bleHigh Court. The Hon’ble High Court at para.15 ofits order has considered the liability of theassessee to pay income-tax on behalf of thepayee and has held as under: XXXXXXXXXXXXXKM Further, the Special Bench of the Tribunal|at Calcutta in the case of|ABN Amro Bank(citedSupra) was seized of similar issue t.e. whethertax and interest on the offshore remunerationpaid by the assessee therein to its expatriateemployee is allowable as business expenditure Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 5/11 and at paras.23 to 34 of its order, theTribunal has held as under: XXXXXXXXXXXNK 19. We find that in both the abovedecisions, it has been held that remuneration andthe income-tax thereon paid on behalf of theemployee therein, is an allowable expenditureu/s 37 of the Act. In view of the same, we allowthe assessee’s ground of appeal”. 4. From the findings of the learned Tribunal, it isclear that on the Agreement between the Assessee andthe Employee Mr.Prakash Bare, contemplates that theincome tax liability on the salary to be paid to theemployee Mr.Prakash Bare, shall be borne by thecompany and this contractual hability agreed upon bythe assessee is liable for deduction u/s.37 of the Act. —No prohibition in law is pointed out by the learnedcounsel for the Revenue to deduct the expendituretowards the contractual income tax liability paid by theassessee as an allowable expenditure u/s.37 of the Act. Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 6/11 Oo. We are in respectful agreement with thefindings of the High Court of Jharkhand in the case of Tata Yadogawa Ltd., vs. Commissioner of IncomeTaxreported in(2011) 335 ITR 53,which is quotedbelow for ready reference:- “12. On the facts of this case the obligation|of the assessee under the agreement with ESWextended not merely to remitting the amount oftwo million DM to ESW, but also extended topayment of taxes which would include theincome-tax as well as the R & D cess. It seemsquite obvious that if the assessee had not paidthe tax or the R & D cess, and had merely madepayment of the two million DM to ESW, the latterwould not be obliged to part with the know-howin view of the terms of the_ collaborationagreement. Therefore, payment of these taxes areas integral part of the ‘consideration’ as thepayment of two million DM. In fact, the ITDepartment is itself treating not merely theamount of two million DM paid to ESW but alsothe R & D cess, as part of ‘consideration’. In thesecircumstances we find no logical reason for nottreating the income-tax paid by the assessee interms of the collaboration agreement as part of Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 7/11 the ‘consideration’ for acquisition of the know-how. We hold accordingly and answer the firstquestion as above. A reference in this connectionmay be made to the decision of the SupremeCourt in the case of McDowell & Co. Ltd., vs. CTO(1985) 47 CTR (SC) 126; (1985) 154 ITR 148 (SC)wherein it was held that excise duty was part ofthe‘consideration...Anotherdirectdecisioncovering the question is by the Madras High Courtin the case of CIT vs. Standard PolygraphMachines (P) Ltd. (2001) 171 CTR (Mad) 152 :(2000) 243 ITR 788 (Mad). 13. Before leaving this issue we may saythat the words “lump sum” as used before theword “consideration” in s.3SSAB, only excludeperiodical or turnover based payments likeroyalty etc., and any one time payment for theknow-how would fall within the expression “lumpsum’ yf it is fixed and specified in the agreement,although it may be payable in instalments”. 6. In view of the aforesaid, no substantial question of law arises for our consideration on this issue. 7. In so far as the second substantial question oflaw raised by the Revenue is concerned, the learned Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 8/11 ITAT in its Order dated|22.07.2015has given the findings, the relevant portion of which is quoted belowfor ready reference:- “We find that Tribunal in the case of M/s.Airbus India Operations Put. Ltd., (cited supra)has considered the comparability of BodhtreeConsulting Ltd., with the assessee therein, and atpara 15 and 16 of its order held as under: XXXXXXXXXX Respectfully following the decision of the|Tribunal on similar set of facts, we direct theAO/TPO to exclude Bodhtree Consulting Ltd. fromthe final list of comparable companies”. 8. However, this Court in a recent judgment in ITA No.536/2015 C/w ITA No.537/2015delivered on 25.06.2018 (Pri. Commissioner of Income Tax &Anr. Vs. M/s. Softbrands India Pvt. Ltd.,)1 has heldthat in these type of cases, unless anex-facleperversityin the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 9/11 the instance ot an assessee or the Revenue under!Section 260-Aot the Act is not maintainable. The relevant portion of the said judgment is.quoted below for ready reference: §— Conclusion: 55. A substantial quantum of internationaltrade and transactions depends upon the fair andquick judicial dispensation in such cases. Had itbeen|OmCaASeofSubstantialquestionofinterpretation of provisions of Double TaxationAvoidance Treaties (DIAA), interpretation ofprovisions of the Income Tax Act or OverridingEffectofthe TreatiesOVEeCtheDomestic.Legislations or _ the questions like TreatyShopping, Base Erosion and Profit Shifting(BEPS), Transfer of Shares in Tax Havens (like inthe case of Vodafone etc.), if based on relevantfacts, such substantial questions of law couldbe raised before the High Court underSection260-A|of the Act, the Courts could haveembarked upon such exercise of framing andanswering such substantial question of law. Onthe other hand, the appeals of the present tenoras to whether the comparables have been rightlypicked up or not, Filters for arriving at the correct Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 10/11 list of comparables have been rightly applied ornot, do not in our considered opinion, give rise toany substantial question of law. Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 10/11 list of comparables have been rightly applied ornot, do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the consideredopinion 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-A.of the Act and thus the appealsfiled by the Revenue are found to be devoid ofmerit 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 theAssessees, because, there may be cases where)the Tribunal giving its own reasons and findingshas found certain comparables to be goodcomparables to arrive at an‘Arm’s LengthPrice“in the case of the assessees with whichthe assessees may not be satisfied and have filedsuch appeals before this Court. Therefore weclarify that mere dissatisfaction with the findingsoffacts arrived at by the learned Tribunal is notat all a sufficient reason to invokeSection 260-Aof the Act before this Court. Date of Judgment 31-07-2018 I.T.A.No.56/2016 Pr. Commissioner of Income Tax & Anr. Vs. M/s. Rambus Chip Technologies (India) Pvt.Ltd. 11/11 o8. The appeals filed by the Revenue aretherefore dismissed with no order as to costs.” 9. Having heard the learned counsels for the parties, we are therefore of the opinion that no substantial question of law arises in the present casealso. The appeal filed by the Appellants-Revenue isliable to be dismissed and it isdismissedaccordingly No costs. Srl. Sd/-. JUDGE Sd/-| JUDGE