Ita/100/2022 Of Pr.commissioner Of Income Tax v. M/S Marlabs Innovations Pvt Ltd

Digitally signedbyMARIGANGAIAHPREMAKUMARILocation: HIGHCOURT OFKARNATAKA NC: 2024:KHC:39759-DB ITA No. 100 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24 DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 100 OF 2022 BETWEEN: 1. PR.COMMISSIONER OF INCOME TAX, BMTC COMPLEX, KORAMANGALA, BANGALORE. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, BMTC COMPLEX, KORAMANGALA, CIRCLE-4, (1) (2), BENGALURU. BMTC COMPLEX, KORAMANGALA, CIRCLE-4, (1) (2), BENGALURU. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE) AND: 1. M/S MARLABS INNOVATIONS PVT LTD., (SUCCESSOR OF MARLABS SOFTWARE PVT LTD) NO.2, 1 FLOOR, S.R.COMPLEX, TAVAREKERE MAIN ROAD, TAVAREKERE MAIN ROAD, SG PALYA, BENGALURU-29. …RESPONDENT (BY SRI TATA KRISHNA, ADVOCATE) THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13/05/2020 PASSED IN IT(TP)A NO.430/BANG/2015 AND C.O.NO. 160/BANG/2015, FOR THE ASSESSMENT YEAR 2010-2011. PRAYING THIS HON’BLE COURT TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND ETC. THIS APPEAL COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: - 2 - CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard the learned counsel Sri.Sanmathi.E.I., for appellants/Revenue and learned counsel Sri.Tata Krishna for respondent/assessee. 2. The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 13.05.2020 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.430/Bang/2015 and CO.No.160/Bang/2015 for the assessment year 2010-11. 3. This Court, admitted the appeal on 11.07.2022 to consider the following substantial question of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature as the Tribunal has directed the Transfer Pricing Officer/Assessing authority to exclude comparable’s on basis of functional dissimilarity even through the Transfer Pricing Officer as chosen comparable’s on basis of FAR analysis and in accordance with parameters set out Rule 10B of the I.T.Rules? 2. Whether on the facts and in the circumstances of the case, the tribunal is right in law in directing the Transfer Pricing Officer to exclude comparable’s on basis of functional dissimilarity and onsite revenue filter even though the said comparable’s satisfied qualitative and quantitative filters applied by Transfer Pricing Officer? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to exclude comparable on the basis Turnover filter without establishing its effect on the profit margin of the company and without acknowledging that there is no direct relationship between turnover and profit margin earned by the Company?” 4. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct - 4 - Taxes. It is also submitted that the aforesaid Circular binds the revenue. 5. On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024. 4. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct - 4 - Taxes. It is also submitted that the aforesaid Circular binds the revenue. 5. On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024. 6. In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE MPK List No.: 2 Sl No.: 36