Ita/129/2022 Of The Pr. Commissioner Of Income Tax v. M/S Sigma Aldrich Chemicals Pvt Ltd

Digitally signedby BHARATHISLocation: HIGHCOURT OFKARNATAKA NC: 2024:KHC:39415-DB ITA No. 129 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23 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. 129 OF 2022 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(3), PRESENT ADDRESS, ACIT-CIRCLE -6 (1)(1) 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560095 …APPELLANTS (BY SRI. RAVI RAJ Y V.,ADVOCATE A/W SRI. DILIP M, ADVOCATE) SRI. DILIP M, ADVOCATE) AND: M/S SIGMA ALDRICH CHEMICALS PVT LTD PLOT NO.12,BOMMASANDRA, JIGANI LINK, ANEKAL TALUK, BENGALURU-560100 PAN …RESPONDENT (BY SRI. ASHOK A KULAKARNI.,ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO. 203/BANG/2014 DATED 15/09/2020 FOR ASSESSMENT YEAR 2009-2010 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6(1)(1), BENGALURU AND ETC. THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: 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 Raviraj Y.V, along with learned counsel Sri Dilip M, for appellants/Revenue and learned counsel Sri Ashok A.Kulkarni, for the 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 15.9.2020 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.203/Bang/2014 for the assessment year 2009-10, raising the following substantial questions of law: “1. 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 comparables namely, Cyber Medical Research Ltd (R & D Segment), Infosys BPO Ltd, Accentia Technologies Ltd, Cosmic Global Ltd, E-Eclerx Ltd are liable to be excluded on the ground of functional dissimilarity when the Transfer Pricing Officer has chosen the comparables as qualitative and quantitative filters are fully satisfied in the case of each comparables and when the said comparable satisfies qualitative and quantitative filters and as per Rule 10B(e) of I.T. Rules? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in directing Transfer Pricing Officer to exclude depreciation from operating expenses for purpose of computing margin in R & D & Manufacturing Segments when the same is a direct expenses derived from the business operations? 3. Whether on the facts and in the circumstance's of the case, the Tribunal is right in law in allowing claim of assessee relating to non-granting of under capacity utilization for manufacturing and R & D segments when the law allows any adjustment over comparables and not the tested party? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in excluding comparable's without appreciating the fact that the definition of ITES Services and that there is no basis for the contention that the companies providing KPO services do not fall in the category of ITES providers?" 3. Whether on the facts and in the circumstance's of the case, the Tribunal is right in law in allowing claim of assessee relating to non-granting of under capacity utilization for manufacturing and R & D segments when the law allows any adjustment over comparables and not the tested party? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in excluding comparable's without appreciating the fact that the definition of ITES Services and that there is no basis for the contention that the companies providing KPO services do not fall in the category of ITES providers?" 3. 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 Taxes. It is also submitted that the aforesaid Circular binds the revenue. 4. 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. 5. 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 questions of law are kept open to be adjudicated in an appropriate proceeding. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE