Ita/282/2022 Of The Pr.commissioner Of Income Tax v. M/S Arctern Consulting Pvt Ltd

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA NC: 2024:KHC:39756-DBITA No. 282 of 2022 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. 282 OF 2022 BETWEEN: 1.THE PR.COMMISSIONER OF INCOME TAX CIT(A), 5 FLOOR, BMTC BUILDING 80 FEET ROAD KORAMANGALA BENGALURU-560095. CIT(A), 5 FLOOR, BMTC BUILDING 80 FEET ROAD KORAMANGALA BENGALURU-560095. 2.THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -1(1)(2) 2 FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095.CIRCLE -1(1)(2) 2 FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095. …APPELLANTS (BY SRI. RAVIRAJ Y.V., ADV. A/W SRI. DILIP M., ADV.) AND: M/S. ARCTERN CONSULTING PVT. LTD., EMBASSY TECH VILLAGE TOWER 2B HIBISCUS 5 FLOOR OUTER RING ROAD DEVERABEESANAHALLI BANGALORE-560103 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 03/11/2021 PASSED IN IT(TP)A NO.2747/BANG/ 2017, FOR THE ASSESSMENT YEAR 2013-2014, PRAYING THIS COURT TO I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.2747/BANG/2017 DATED 03/11/2021 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-1(1)(2), BENGALURU 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.Raviraj Y.V., along with Sri.Dilip M., learned counsel for appellants/Revenue - 3 - 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 03.11.2021 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.2747/Bang/2017 for the assessment year 2013-14. 3. This Court, admitted the appeal on 22.08.2022 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 in directing the Transfer Pricing Officer to exclude comparables namely, M/s.Persistent Systems Ltd, Larsen & Tourbo Ltd, C.G.Vak Software & Exports Ltd, M/s.Hartron Communications, M/s.Infosys Ltd and Mind Tree Ltd from list of comparables on basis of turnover filter even when the said comparable satisfies qualitative and quantitative filters and as per Rule 10B of I.T.Rules and ignoring its earlier decision in case of M/s.Societe Generale Global Solution Centre Pvt Ltd and M/s.Vmoksha Technologies Pvt Ltd whereby it is held that turnover is not a relevant criteria for deciding the comparability? 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 exclude comparables even when the TPO had considered the said comparables after satisfying all the required tests and ignoring the reasoning's assigned by Transfer Pricing Officer? 3. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in directing Transfer Pricing Officer to exclude comparables when same is chosen by said authority on basis of data available in public domain and also materials on record? 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 exclude comparables even when the TPO had considered the said comparables after satisfying all the required tests and ignoring the reasoning's assigned by Transfer Pricing Officer? 3. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in directing Transfer Pricing Officer to exclude comparables when same is chosen by said authority on basis of data available in public domain and also materials on record? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that there is no basis for the Transfer Pricing Officer to grant working capital adjustments after verification of claim made by assessee when the Transfer Pricing Officer has rightly verified and examined all the materials on record? 5. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that M/s.Infosys Ltd cannot be taken as a comparable as the Company is having high turnover exceeding Rs.200 Crores without appreciating the fact that the higher turnover does not necessarily mean that it would increase the profit margin? 6. Whether on the facts and in the circumstance's of the case and in law, the Tribunal was right in holding that Transfer Pricing Officer is required to include comparables namely, M/s.Akshay Software Technologies Ltd and R.Systems International Ltd ignoring that Transfer Pricing Officer in his under section 92CA has given elaborate reasons for such exclusion? 7. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that M/s.Capegemini Business services (India) Pvt Ltd cannot be considered as comparable on account of RPT filter even though the findings of the TPO and guidelines prescribed by OECD? 8. Whether on the facts and in circumstances of the case, the Tribunal's order can be said as perverse in directing Transfer Pricing Officer to include and exclude comparables ignoring parameters of Rule 10B? 9. Whether the Tribunal is justified in taking different stands on adjustments to comparables margins to make them comparable to tested party, just to apply to case of assessee even though it goes against to principles of equality and natural justice?” 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 - 7 - 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:bms List No.: 2 Sl No.: 0