Ita/172/2021 Of Pr. Commisisoner Of Income Tax-Ltu v. M/S. Rittal India Pvt Ltd

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA 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. 172 OF 2021 BETWEEN: 1. PR. COMMISISONER OF INCOME TAX-LTU, BMTC COMPLEX, KORAMANGALA, BANGALORE. BMTC COMPLEX, KORAMANGALA, BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, LTU, BENGALURU. …APPELLANTS (BY SRI SANMATHI E. I, ADV.) AND: M/S. RITTAL INDIA PVT LTD., NO.23 AND 24, KIADB INDUSTRIAL AREA, VERAPURA, DODDABALLAPUR-561203, PAN- . …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR, ADV.) THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 17/05/2019 PASSED IN ITA NO.2494/BANG/2017 FOR THE ASSESSMENT YEAR 2013-2014, PRAYING THIS HON’BLE COURT TO 1. 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: 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 Smt.Tanmayee Rajkumar 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 17.05.2019 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.2494/Bang/2017 for the assessment year 2013-14. 3. This Court, admitted the appeal on 17.02.2022 to consider the following substantial questions of law: - 3 - NC: 2024:KHC:39706-DBITA No. 172 of 2021 “1. Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature since direction given to the Transfer Pricing Officer to consider Cash Profits as Profit Level Indicator (PLI) under Transaction Net Margin method (for short TNMM) is contrary to Rule 10B(e) which prescribes all the PLI’s which can be adopted under the Transaction Net Margin without mentioning the cash Profit as an acceptable PLI and there is no scope for any alternate method in the said Rule? 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 re-consider one Comparable namely M/s.Schneider Electric President Systems Ltd by holding persistent loss filter has to be examined by TPO ignoring the inclusion of this - 4 - comparable at this would amount to cherry picking of the comparable’s and if the set that was adopted by the TPO is changed now by inclusion of said comparable the entire search process for all the comparable gets vitiated and application of a filter cannot be suspended/tweaked for one particular company of the taxpayer’s choice which would result in distortion of the comparability analysis undertaken by the TPO?” 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. 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 CT:VN List No.: 2 Sl No.: 22