Ita/327/2021 Of Pr Commissioner Of Income Tax v. M/S Maxim India Integrated Circuit Design Pvt Ltd

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. 327 OF 2021 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX, BMTC COMPLEX, KORAMANGALA, BENGALURU. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(2), BMTC COMPLEX, KORAMANGALA, BENGALURU. (BY SRI SANMATHI E I, ADVOCATE) …APPELLANTS AND: 1. M/S MAXIM INDIA INTEGRATED CIRCUIT DESIGN PVT LTD., 4 FLOOR, TOWER B, Digitally signedCOMMERCIO @ MANTRI, bySURVEY NO.51/2, 51/3, MARIGANGAIAHPREMAKUMARIDEVARABISANAHALLI, SURVEY NO.39/5, Location: HIGHKARIYAMMANA AGRAHARA VILLAGE, COURT OFVARTHUR HOBLI, BANGALORE - 560 103. KARNATAKAPAN AACCM9437E. …RESPONDENT (BY SRI NARENDRA KUMAR J JAIN.,ADVOCATE) THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 02/11/2020 PASSED IN IT(TP)A NO.1573/BANG/2017, FOR THE ASSESSMENT YEAR 2013-2014, PRAYING THIS HON’BLE COURT TO SET ASIDE THE APPELLATE ORDER DATED TAX ACT 1961, ARISING OUT OF ORDER DATED 02/11/2020 02/11/2020 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO. IT(TP)A NO.1573/BANG/2017 (ANNEXURE-A) FOR THE ASSESSMENT YEAR 2013-2014 AS SOUGHT FOR IN THIS APPEAL, AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. 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 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 Sri.Narendra Kumar J. Jain 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 02.11.2020 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.1573/Bang/2017 for the assessment year 2013-14. - 3 - NC: 2024:KHC:39729-DBITA No. 327 of 2021 3. This Court, admitted the appeal on 27.01.2022 to consider the following substantial question of law: “1. Whether on the facts and circumstances of the case and in law, the Tribunal is right in holding that L & T Infotech Ltd, Mindtree Ltd, Persistent Systems Ltd and Tech Mahindra Ltd cannot be taken as comparable on basis of turnover filter without considering the FAR analysis and evidence brought on record by Transfer Pricing Officer and they are in accordance with Rule 10B? 2. Whether on the facts and circumstances of the case and in law, the Tribunal is right in excluding certain comparable's chosen by Transfer Pricing Officer even though the comparable's chosen by said officer is in accordance with Rule 10B of the Act? 3. Whether on the facts and circumstances of the case and in law, the Tribunal is right in directing assessing authority/Transfer Pricing Officer to allow working capital adjustment when the assessee was not able to demonstrate that difference in its working capital vis-a-vis the comparable-companies had affected its profit margin? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in rejecting comparable's on ground of high turnover without acknowledging that there is no direct relationship between brand value and margin earned by the Company, brand may generate revenue of the Company but does not increase the profit margin?” 3. Whether on the facts and circumstances of the case and in law, the Tribunal is right in directing assessing authority/Transfer Pricing Officer to allow working capital adjustment when the assessee was not able to demonstrate that difference in its working capital vis-a-vis the comparable-companies had affected its profit margin? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in rejecting comparable's on ground of high turnover without acknowledging that there is no direct relationship between brand value and margin earned by the Company, brand may generate revenue of the Company but does not increase the profit margin?” 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. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE MPK List No.: 2 Sl No.: 31