Date Of Judgment 31-08-2018, Ita v. M/S. Celstream Technologies Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 31 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.138/2018 BETWEEN : 1.THE PR. COMMISSIONEROF INCOME-ITAX"[‘T]FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BENGALURU-560 OOD.OF INCOME-ITAX"[‘T]FLOOR, BMTC BUILDING,80 FEET ROAD, KORMANGALA,BENGALURU-560 OOD. «|THERE DEPUTLY COMMISSIONEOF INCOME-TAX.CIRCLE-11(2), PRESENT ADDRESS—CIRCLEO 2(1) (1), 2 FLOOR, ©BMTC BUILDING, 80 FEET ROAD, ©KORMANGALA,BRNGALURU-560 095.)_ APPBLLANTS| (BY SRI DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.) AND ° M/s. CELSTREAM TECHNOLOGIES PVT. LTD.,BLOCK-II, No.09, PRESTIGE BLUE CHIP,HOSUR ROAD, BENGALURU-560029,|PAN: AABCCG 3210G._. RESPONDENT. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 27/09/2017 PASSED IN IT(TP)A No.167/BANG/2014,|FOR THE ASSESSMENT YEAR 2009-2010 VIDE ANNEXURE-D,| Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW STATED ABOVE. 2. ALLOW THERE APPKAL AND SEASIDE THR ORDERS PASSED BY THERE INCOME TAX APPELLATTRIBUNAL,|BBENGALURUIN|IT(TP)ANo.167/BANG/2014DATED:27/09/2017 VIDE ANNEXURE-D, CONFIRMING THE.ORDER OF THR DRP AND CONFIRM THR ORDBR PASSBD BY)THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1),.BBENGALURU. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,| S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. Dilip,Adv. tor Mr. K.V.Aravind,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.167/Bang/2014dated2'7.09.201, relating to the Assessment Year 2009-10. 2.The substantial question of law framed bythe Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and circumstances|of the case and in law, the Tribunal was right inexcluding certain comparables are similar to Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 3/9 assessee-COMmpanyOF.account|offunctionaldissimilarity?” 3.The learned Tribunal, after discussing therival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned the findings as under: “8 BodhtreeConsultingLtd., Ia‘'BodhtrS| KVM 8.3.1 We have heard the rival contentions|andperusedandcarefullyconsideredthematerial|Orrecord; includingthejudicialpronouncements cited. We find that a coordinatebench of this Tribunal in its order in the case ofBroadcomIndia|Put.Ltd.,in|IT/ITPIANo.95/Bang/2017 dated 17.03.2017 also forasstf.year2009-10,hasconsideredthe.comparability of this company and excluded‘Bodhtree’ from the list of comparables on theground that it cannot be considered comparabletoaCOTTLDPAmerelyrendering|softwaredevelopment services; as is the assessee in thecase on hand. At para 15 thereof, the co-ordinatebench, followed the decision of another co-ordinate bench in the case of Infirera India Put. Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 4/9 Ltd., in IT/TP[A No.977 & 1008/ Bang/ 2014 alsforasst.yearYAOOYI-1[theyearunderconsideration in the case on hand also/ andobserved that: Myer” At para 22 thereof, the co-ordinate bench|rendered the finding that the DRP had erred inincluding M/s. Bodhtree Consulting Ltd., as acomparable and directed the TPO to exclude thiscompany as it is functionally dissimilar to theaASSCSSCEC Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 4/9 Ltd., in IT/TP[A No.977 & 1008/ Bang/ 2014 alsforasst.yearYAOOYI-1[theyearunderconsideration in the case on hand also/ andobserved that: Myer” At para 22 thereof, the co-ordinate bench|rendered the finding that the DRP had erred inincluding M/s. Bodhtree Consulting Ltd., as acomparable and directed the TPO to exclude thiscompany as it is functionally dissimilar to theaASSCSSCEC 8.3.2 Following the aforesaid decision of)the co-ordinate bench of this Tribunal in the caseof Broadcom India Put. Ltd., for asst. year 2009-1O [Supra], te., the year under consideration inthe case on hand also and the factual matrixbeing quite the same, we direct the TPO toexclude M/s. Bodhtree Consulting Ltd., from thelist of comparables as it is functionally dissimilarand not comparable to a company merelyrendering software development services; as 1sthe assessee in the case on hand. —9 Infosys Ltd; KVeVNKK” 93.1 We have heard the rival contentions|andperusedandcarefullyconsideredthe Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 5/9 material|OF.record; includingthejudicialpronouncements cited. We find that a co-ordinatebench of this Tribunal in its order in the case ofBroadcomIndia|Put.Ltd.,in|IT/ITPIANo.95/ Bang/ 2014 dated 17.03.2017 for asstyear 2009-10; the same asst. year as the yearunder consideration in the case on hand also; hasconsidered the comparability of this company,Infosys Ltd., and excluded it from the list ofcomparables on the ground that it cannot beconsidered comparable to a company merelyrendering software development services; as isthe assessee in the case on hand. At para 21 and22 thereof, the co-ordinate bench followed thedecision of another co-ordinate bench of thisTribunal in the case of Infinera India Pvt. Ltd., inIT/TPIA No.977 & 1O08/Bang/ 2014 also for asst.year 2009-10 as under:- KVeVNKK” 9.3.2 Following the aforesaid decision ofthe co-ordinate bench of this Tribunal in the caseof Broadcom India Put. Ltd., for asst. year 2009-1O [Supraj, t.e,; the year under consideration inthe case on hand also, facts being/remaining thesame, we direct the TPO to exclude M/s. InfosysLtd., from the list of comparables as it is Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 6/9 functionally dissimilar and not comparable to a|company merely rendering software developmentservices; as is the assessee in the case on hand. 9.4 Consequently, ground No.4.7 ofassessee’s appeal is allowed only to the extent ofexcluding the two companies te., [ij BodhtreeConsulting Ltd., and [uj Infosys Ltd., from the listof comparables, on grounds of being functionally|dissimilar to the assessee in the case on hand.” 4However, 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 isestablished 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: Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 7/9 “Conclusion: 4However, 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 isestablished 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: Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 7/9 “Conclusion: 55.Asubstantialquantumof|international trade and transactions dependsupon the fair and quick judicial dispensation|in such cases. Had it been a case oOf|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.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| Date of Judgment 31-08-2018, ITA No.138/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. Celstream Technologies Pvt. Ltd., 8/9 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 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.” 5.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in thepresent 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/-.JU DGE Sd/-.JUDGE|