Ita/183/2021 Of The Pr. Commissioner Of Income Tax Cit(A) v. M/S Tavant Technologies India Pvt Ltd

Digitallysigned byBHARATHI SLocation:HIGH COURTOFKARNATAKA NC: 2024:KHC:39403-DB ITA No. 183 of 2021 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. 183 OF 2021 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX CIT(A) 5TH FLOOR BMTC BUILDING 80 FEET ROAD KORAMANGALA BENGALURU - 560 095 2. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-7(1)(1) PRESENT ADDRESS DCIT, CIRCLE-2(1)(1) 2ND FLOOR BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU - 560 095 …APPELLANTS (BY SRI. RAVI RAJ Y V.,ADVOCATE A/W SRI. DILIP M. ADVOCATE) AND: M/S TAVANT TECHNOLOGIES INDIA PVT LTD NO.12, CSRIE-II GUAVA GARDEN 5TH BLOCK, KORAMANGALA BENGALURU - 560 095 PAN …RESPONDENT (BY MISS.MANASA ANANTHAN.,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 ABOVE, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO. 1700/BANG/2017 DATED 21/08/2020 FOR ASSESSMENT YEAR 2013-2014 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(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 Miss.Manasa Ananthan, 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 21.8.2020 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.1700/Bang/2017 for the assessment year 2013-2014, raising the following substantial questions of law: “1.Whether, on the facts and in the circumstances of the case and law, the Tribunal is right in directing Transfer Pricing Officer to exclude comparable on basis of functional dissimilarity and turnover filter even when the Transfer Pricing Officer had chosen comparable's in accordance with Rule 10B and after satisfying required tests prescribed under the Act?" 2. "Whether, on the facts and in the circumstances of the case and law, the Tribunal is right in directing Transfer Pricing Officer to exclude Persistent Systems Ltd and Larsen and Tourbo Ltd Persistent Systems Pvt. Ltd and Larsen & Tourbo Infotech Ltd as comparable's by holding that they are functionally dissimilar by following its earlier order without considering the findings and materials bought on record by TPO for computation of ALP which is in accordance with parameters et out in section 92 of the Act and Rule 10B as well"? 3. "Whether on the facts and in circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal has ignored Rule 10B while directing TPO to exclude or include certain comparable's"? 4. "Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis"? 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. "Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis"? 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