Date Of Judgment 9-8-2018, Ita v. M/S. Curam Software International Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 9 DAY OF AUGUST 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.720/2017 BETWEEN: 1.THE PR. COMMISSIONER OF INCOME TAX |![‘T]FLOOR BMTC BUILDING,80 FEET ROAD, KORAMANGALA![‘T]FLOOR BMTC BUILDING,80 FEET ROAD, KORAMANGALA BBENGALURU — 560 095 2.THER ASST COMMISSIONER OF INCOMB TAXCIRCLE -2(1)(1), 2 FLOOR, BMTC BUILDING, |80 FEET ROAD, KORAMANGALA~BENGALURU — 560 O95.. APPELLANTS| (BY SRI.ARAVIND K V, ADV.) AND:| M/S. CURAM SOFTWARE INTERNATIONAL PVT. LTD.,C/O IBM INDIA PVT. LTD.,SUBRAMANYA ARCADE, 12, BANNERGHATTA MAIN ROAD,BBENGALURU — 560 029PAN: AACCC547/72_. RESPONDENT (BY SRI.MALLAHARAO K , ADV. FOR ©SRI.NAGESWAR RAO, ADV.) Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 2/10 THERE INCOME TAX APPKAL IS FILED UNDER SEC.260-OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:21.03.2017, PASSED IN C.O. NO.136/BANG/2015, FOR THE.ASSESSMENT YEAR 2010-2011 ANNEXURE - D, PRAYING TO: I.FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATEDABOVE. [I]. ALLOW THR APPKAL AND SBT ASIDEB THR ORDERPASSED)BYTHEINCOME-TAX.APPBRLLATBTRIBUNAL, BENGALURU IN C.O. NO. 1360/BANG/2015 DATED: 21.03.2017ANNEBEXURE -D AND CONFIRM THR ORDBR OF THR DRCONFKFIRMINTHEORDERPASSEDBY|THEASST..COMMISSIONBR.OF.INCOMETAX,|CIRCLE2(1)(1),|BBENGALURU. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. K.V. Aravind,Adv. for Appellants — Revenue. |Mr. Mallaharao K.,Adv. for.Mr. Nageswar Rao,Adv.,for Respondent — Assessee. This Appeal is filed by the Revenue purportedly raising the following substantial questions of law arisingfrom the Order of the Income Tax Appellate Tribunal, Bangalore|Bench‘iB "Bangalore|1nNC.O. No.136/Bang/2015 in IT [TP|A No.499/Bang/2015 dated21.03.2017, relating to the Assessment Year2010-11. Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 3/10 “1. Whether on the facts and in thecircumstances of the case, the tribunal erred inholding that the assign authority is not right inincluding expenditure incurred in foreign currencyfrom export turnover and from total turnover byrelying upon the decision of this Hon'ble Court incase of CIT V/s Tata Elsxt even when theassessing authority has rightly included theaccording to parameters set out in section 10Aand the decision relied upon by the Tribunal hasnot reached finality? 2. Whether on the facts and in thecircumstances of the case, the Tribunal is right inlaw in directing the TPO to exclude certaincomparableOTLthebasisoffunctionaldissimilarity by following its earlier orders whichhas not reached finality and even when the TPOhad chosen he comparable on the basis of itsfunctionalsimilarity andbyapplicationofqualitative and quantitative tests?”| ?)The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., Regarding Substantial Question of Law No.1: 3.The issue is covered by the decision of theHon’ble Supreme Court in the case of|Commissioner of Income-tax, Central -— III vs. HCL Technologies Ltd.,[2018] 93 Taxmann.com 33(SC). 4The relevant portion of the judgment of theHon ’bleSupremeCourt1nthe.CASEoT HCL|Technologies Ltd. (supra),is quoted below for readyreference: - ?)The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., Regarding Substantial Question of Law No.1: 3.The issue is covered by the decision of theHon’ble Supreme Court in the case of|Commissioner of Income-tax, Central -— III vs. HCL Technologies Ltd.,[2018] 93 Taxmann.com 33(SC). 4The relevant portion of the judgment of theHon ’bleSupremeCourt1nthe.CASEoT HCL|Technologies Ltd. (supra),is quoted below for readyreference: - “17. The simular nature of controversy, akin|this case, arose before the Karnataka High CourtinCIT v. Tata Elxsi Ltd. [2012] 204 Taxman|3S21/17/taxman.com 100/349 ITR 98. The issuebefore the Karnataka High Court was whether|the Tribunal was correct in holding that while|computing relief under Section 10A of the IT Act,the amount of communication expenses should be|excluded from the total turnover if the same are.reduced from the export turnover? While giwing|the answer to the issue, the High Court, inter-alia,held that when a particular word is not defined|by the legislature and an ordinary meaning is to| Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 5/10 be attributed to it, the said ordinary meaning is tobe in conformity with the context in which it isused. Hence, what is excluded from ‘exportturnover’ must also be excluded from ‘totalturnover’, since one of the components of ‘totalturnover’1S|exportTurnover,Anyother|interpretation would run counter to the legislativeintent and would be impermissible. | LSE, XXXXXX 19. In the instant case, if the deductions on|freight,telecommunicationand|insuranceattributable to the delivery of computer softwareunder Section 10A of the IT Act are allowed onlyin Export Turnover but not from the TotalTurnover then, it would give rise to inadvertent,unlawful, meaningless and wulogical result whichwould cause grave injustice to the Respondentwhich could have never been the intention of thelegislature. 20. Even in common parlance, when theobject of the formula ts to arrive at the profit fromexport business, expenses excluded from exportturnover have to be excluded from total turnoveralso. Otherwise, any other interpretation makesthe formula unworkable and absurd. Hence, we 6/10 are satisfied that such deduction shall be allowedfrom the total turnover in same proportion aswell”. Regarding Substantial Question of law No.2: “9.2. Now, let us examine the relevant portion ofthe order of this Tribunal in DCIT v. IkanosCommunicationIndia.P|Ltd|in|ITANo.137/ Bang/ 201forayYQO1O-] at|10.11.2015,whichWaSprovidingcontractsoftware development services to its principal, asunder: XXXXXXXXXXNX SincethisTribunalhasfoundthatthecomparables, ICRA Techno Analytics Ltd, InfosysTechnologies ltd. Kals information Systems Ltd(Seg) and Tata Elxsi Ltd (Seg)) are functionallydifferent, in the above cases, following them, theDRP’s decision is unheld and the corresponding,grounds of the Revenue are dismissed. Percontra, ground Nos.1, 2 & 3 of the CO of theassessee are allowed.” 5.However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 7/10 25.06.2018 (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. The relevant portion of thesaid judgment is quoted below for ready reference: “Conclusion: 5.However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015delivered on Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 7/10 25.06.2018 (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. The relevant portion of thesaid judgment is quoted below for ready reference: “Conclusion: 55.Asubstantial quantumof|international trade and transactions dependsupon the fair and quick Judicial dispensation|in such cases. Had it been a case oOf|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 Erosion|and Profit Shifting (BEPS), Transfer of Sharesin Tax Havens (like in the case of Vodafone| Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 8/10 etc.), uf based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-4of 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|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 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. Date of Judgment 9-8-2018, ITA No.720/2017 The Pr. Commissioner of Income tax & another Vs. M/s. Curam Software International Pvt. Ltd., 9/10 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 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.” 6.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-Revenue 10/10is liable to be dismissed and it is dismissed accordingly. —No costs.Sd/-.JUDGE.Sd/-.JUDGE.AN /-