Ita/43/2022 Of The Pr Commissioner Of Income Tax v. M/S Aci Worldwide Solutions Pvt Ltd

Digitallysigned byBHARATHI SLocation:HIGHCOURT OFKARNATAKA NC: 2024:KHC:39409-DB ITA No. 43 of 2022 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. 43 OF 2022 BETWEEN: 1. THE PR COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560 095 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1(1)(1), PRESENT ADDRESS DCIT, CIRCLE-1(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 ACI WORLDWIDE SOLUTIONS PVT LTD No.9, SALARPURIA CAMBRIDGE MALL CAMBRIDGE ROAD ULSOOR, BENGALURU - 560 008. …RESPONDENT (BY SRI. NARENDRA KUMAR J JAIN.,ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING 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. 160 TO AND 211/BANG/2016 DATED 12/10/2020 FOR ASSESSMENT YEAR 2011-2012 ANNEXURE-E AND CONFIRM THE ORDER OF THE DRP COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(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 Sri Narendra Kumar J Jain, learned counsel 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 12.10.2020 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.Nos.160 and 211/Bang/2016 for the assessment year 2011-12, raising 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 certain comparables namely, Sasken Communication Technologies Ltd, Persistent Systems Ltd, Persistent Systems and Solutions Ltd, E-Zest Solutions Ltd, Infossys Ltd, Larsen & Tourbo Ltd and Tata Elxsi Ltd even when the said comparable satisfies qualitative and quantitative filters and as per Rule 10B of I.T. Rules? 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 limiting the working capital adjustment to the average cost of capital of the comparable companies? 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 for imposing an upper limit on the working capital adjustment when the Transfer Pricing Officer has rightly held that upper limit of working capital adjustment should be the average of the cost of capital of the comparable companies? 5. Whether on the facts and in the circumstance's of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to adjust the profit margin of the taxpayer without any upper limit in the working capital adjustment? 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 for imposing an upper limit on the working capital adjustment when the Transfer Pricing Officer has rightly held that upper limit of working capital adjustment should be the average of the cost of capital of the comparable companies? 5. Whether on the facts and in the circumstance's of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to adjust the profit margin of the taxpayer without any upper limit in the working capital adjustment? 6. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that M/s. ICC International Agencies Ltd cannot be held as comparable-company on the ground of non availability of information regarding nature of services, when the primary activity of company involves processing orders including marketing for its principal products?” 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 ND List No.: 3 Sl No.: 24