Ita/322/2023 Of The Pr. Commissioner Of Income Tax v. M/S. Continu Serve Softech India Pvt. Ltd

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA NC: 2024:KHC:40432-DBITA No. 322 of 2023 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.322 OF 2023 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU -560095. 5 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU -560095. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-2(1)(1), 2 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095. CIRCLE-2(1)(1), 2 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095. …APPELLANTS (BY SRI. DILIP M., ADVOCATE A/W SRI. RAVIRAJ.Y.V., ADVOCATE) - 2 - AND: M/S. CONTINU SERVE SOFTECH INDIA PVT. LTD., PRATHIK TECH PARK, 2 AND 3 FLOOR, SY.NO.93/1, VEERASANDRA VILLAGE, ATTIBELE HOBLI, HOSUR ROAD, ELECTRONIC CITY PHASE-I, BENGALURU-560100. PAN: AAACC 8342A (RESPONDENT SERVED) …RESPONDENT THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A.NO.242/BANG/2021 DATED 23.09.2022 FOR ASSESSMENT YEAR 2016-2017 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2(1)(1), 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. Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for the appellants/Revenue. 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 23.09.2022 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.242/Bang/2021 for the assessment year 2016-17. 3. This Court, admitted the appeal on 12.12.2023 to consider the following substantial questions of law: “1. Whether the Tribunal was right in law and in fact seeking exact comparability under Transaction Net Margin Method? 2. 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 permissible to bypass the same partially or by implication? 3. Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in excluding, i) R S Software (India) Ltd. ii) Persistent Systems Ltd. iii) Thirdware Solutions Ltd. iv) Larsen & Toubro Infotech Ltd. v) Infosys Ltd. vi) Nihilent Ltd. vii) Aspire Systems (India) Pvt. Ltd. viii) Cybage Software Pvt. Ltd and including following comparables under SWD segment: i) Akshay Software Technologies Ltd. ii) Evoke Technologies Pvt Lts. iii) Sasken Technologies Ltd without acknowledging the fact that the said comparable's were chosen by TPO on the basis of materials on record and after applying the requires testes prescribed under the Rules and as such order passed by Tribunal is perverse in nature? 4. 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 comparable by ignoring findings of Transfer Pricing Officer rendered in TPO's order which has been rightly upheld by DRP? 5. 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 not to consider this company in PLI margin computation for the FY: 2013-14? iii) Sasken Technologies Ltd without acknowledging the fact that the said comparable's were chosen by TPO on the basis of materials on record and after applying the requires testes prescribed under the Rules and as such order passed by Tribunal is perverse in nature? 4. 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 comparable by ignoring findings of Transfer Pricing Officer rendered in TPO's order which has been rightly upheld by DRP? 5. 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 not to consider this company in PLI margin computation for the FY: 2013-14? 6. 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 allow actual adjustment towards the differences in working capital position between the assessee and the companies in the final set of comparables without appreciating that upper limit would result into abnormal adjustment and would make the profit earned within the permitted range even if no operating profit is earned? 7. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in excluding Infobeans Technologies Ltd by relying on the decisions rendered by the coordinate Bench in the case of M/s. Prism Network Pvt Ltd and M/s. Borqs Software Solutions Pvt.Ltd? 8. Whether, on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal has failed to consider the reasons of DRP, TPO and materials on record? - 6 - 9. Whether the Tribunal was right in facts and in law in rejecting Softsol India Ltd. as comparable by applying RPT filter of 15% when different Tribunal’s including ITAT Bengaluru have considered 25% RPT as appropriate?” 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 - 7 - NC: 2024:KHC:40432-DBITA No. 322 of 2023 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.: 53