Ita/14/2024 Of The Pr. Commissioner Of Income Tax v. M/S Etisalat Software Solutions Pvt Ltd

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA NC: 2024:KHC:40520-DB ITA No. 14 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26 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.14 OF 2024 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX, 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560 095 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560 095 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1)(1), 2 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560 095. …APPELLANTS (BY SRI. DILIP M., A/W SRI. RAVIRAJ Y.V., ADVOCATES) - 2 - AND: M/S. ETISALAT SOFTWARE SOLUTIONS PVT. LTD., (IN VOLUNTARY LIQUIDATION) E-98, 7A CROSS, MANYATA RESIDENCY, NAGAVARA, BENGALURU-560 045. PAN AABCE 7261M. …RESPONDENT (BY SRI. SANDEEP HUILGOL., ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 18/07/2023 PASSED IN IT(TP)A NO.224-BANG/2023, FOR THE ASSESSMENT YEAR 2018-19 PRAYING TO I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN 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 - 3 - 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 Sri. Sandeep Huilgol, learned counsel 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 18.07.2023 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.224/Bang/2023 for the assessment year 2018-19. 3. This Court, admitted the appeal on 10.01.2024 to consider the following substantial questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law to direct the TPO to adopt LIBOR+300 basic points as the interest rate without giving any justification for the same"? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in setting aside the matter to the TPO for inclusion of M/s. Rheal Software Ltd & Evoke Technologies Pvt Ltd when TPO has already taken up M/s. Rheal Software ltd fails persistent loss filter and Evoke technologies Pvt Ltd falls export filer during the 92CA proceedings?. 3. Whether on the facts and in the circumstances of the case the ITAT was right in law in excluding Exilant Technologies Pvt the Ltd, Tech Mahindra Ltd, Larsen and Toubro Infotech Ltd, Mindtree Ltd, Nihilent Ltd, Persistent systems Ltd, Wipro Ltd. Tata Elxis Ltd, Thirdware Solutions Ltd, Infosys Ltd, Cybage Software Pvt Ltd as comparables by imposing range turnover filter? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in not following the decision of its own bench rendered in the case of M/s. Societe General Solution Centre Pvt Ltd in IT(TP)A NO.1188/BANG/2011 & in the case of Vmoksha Technologies Pvt Ltd in IT(TP)A NO. 595/BANG/2013 wherein the ITAT has held that turnover is not relevant criterion for deciding the comparability? 5. Whether on the facts and in the circumstances of the case the ITAT was right in law in excluding - 5 - a. M/s.Three Sixty Logica Testing Services Pvt Ltd b. M/s. Elveego Circuits Pvt LTd c M/s. Grate Software Laboratory Pvt Ltd d M/s. Acewin Agritech as comparables based on functional dissimilarity by following orders which have not reached finality and even when TPO had chosen the comparable on the basis of its functional similarity and by application of qualitative and quantitative tests"? 5. Whether on the facts and in the circumstances of the case the ITAT was right in law in excluding - 5 - a. M/s.Three Sixty Logica Testing Services Pvt Ltd b. M/s. Elveego Circuits Pvt LTd c M/s. Grate Software Laboratory Pvt Ltd d M/s. Acewin Agritech as comparables based on functional dissimilarity by following orders which have not reached finality and even when TPO had chosen the comparable on the basis of its functional similarity and by application of qualitative and quantitative tests"? 6. Whether on the facts and in the circumstances of the case the ITAT was right in law in disregarding the position of law that there could be difference between the enterprises compared under the TNMM method that are not likely to materially affect the price or cost charged or the profit accuring to such enterprises"? 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. - 6 - 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.: 3 Sl No.: 25