Ita/140/2020 Of The Pr Commissioner Of Income -Tax v. M/S Analog Devices

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27 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.140 OF 2020 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME -TAX, 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANAGALA, BENGALURU-560 095. 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANAGALA, BENGALURU-560 095. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(1) PRESENT ADDRESS OF INCOME-TAX, CIRCLE-11(1) PRESENT ADDRESS DCIT, CIRCLE-1(1)(1), 2 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095. CIRCLE-1(1)(1), 2 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095. …APPELLANTS (BY SRI. DILIP M., ADVOCATE ALONG WITH SRI. RAVIRAJ Y.V., ADVOCATE) SRI. RAVIRAJ Y.V., ADVOCATE) - 2 - AND: M/S. ANALOG DEVICES INDIA PVT. LTD., RMZ INFANITY NO.3, LEVEL-6, TOWER-D, OLD MADRAS ROAD, BENGALURU 560 016. …RESPONDENT (BY SRI. SRIKANTH PATIL.K., ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 20.12.2019 PASSED IN IT(TP)A NO.619/BANG/2013, FOR THE ASSESSMENT YEAR 2005-2006 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND ETC. NO.619/BANG/2013, FOR THE ASSESSMENT YEAR 2005-2006 THIS APPEAL, COMING ON FOR 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. Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for appellants/Revenue and learned counsel Sri. Srikanth Patil.K., 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 20.12.2019 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.619/Bang/2013 for the assessment year 2005-06. 3. This Court, admitted the appeal on 13.10.2020 to consider the following substantial questions of law: 1. Whether the Tribunal was right in law to ignore the parameters of analysis prescribed under Rule 10B, which are exhaustive and if so, whether it is legally - 4 - permissible to bypass the same partially or by implication? 2. Whether the Tribunal was right in fact and in law in not acknowledging that there is no direct relationship between brand value and margin earned by the company and brand may generate the revenue of the company but does not increase the profit margin? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding comparables M/s. Bodhtree Consulting Ltd and M/s. Geometric Software Solutions Company from the list of Comparables, holding that it is functionally different, without appreciating that the comparables satisfy all the qualitative and quantitative filters applied by the TPO and that selection of comparables in a case depends on assessee specific FAR analysis 4. 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 Transfer Pricing Officer to exclude certain comparable’s on the basis of - 5 - high turnover, abnormal profit and functional dissimilarity without appreciating that the comparables chosen by TPO satisfies all required tests as prescribed in the Rule 10B? 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 Taxes. It is also submitted that the aforesaid Circular binds the revenue. 4. 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 Transfer Pricing Officer to exclude certain comparable’s on the basis of - 5 - high turnover, abnormal profit and functional dissimilarity without appreciating that the comparables chosen by TPO satisfies all required tests as prescribed in the Rule 10B? 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 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 SMJ List No.: 4 Sl No.: 25