Ita/490/2023 Of Pr. Commissioner Of Income Tax-3 v. M/S I.g.infotech (India) Pvt Ltd

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA 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. 490 OF 2023 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX-3, KORMANGALA, BANGALORE. KORMANGALA, BANGALORE. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1), KORMANGALA, BANGALORE. …APPELLANTS CIRCLE 3(1)(1), KORMANGALA, BANGALORE. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE) AND: 1. M/S I.G.INFOTECH (INDIA) PVT LTD., 2 FLOOR, INFINITY BUILDING, KHATHA NO.436, SURVEY NO.13/1B, CHALLAGATTA VILLAGE, VARTH HOBLI, INTERMEDIATE RII ROAD, DOMLUR, BENGALURU - 560071, PAN . …RESPONDENT (BY SRI NAGESWAR RAO.D.D, ADVOCATE (THROUGH VC)) THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 01/11/2022 PASSED IN IT(TP)A NO.204/BANG/2022, FOR THE ASSESSMENT YEAR 2017-2018, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW - 2 - AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 01/11/2022 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEES CASE, IN IT(TP)A NO.204/BANG/2022 (ANNEXURE-A) FOR ASSESSMENT YEAR 2017-2018 AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, 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 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.Nageshwar Rao.D.D., for respondent/assessee through video conference. 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 01.11.2022 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate - 3 - Authority’) in IT(TP)A.No.204/Bang/2022 for the assessment year 2017-18. 3. This Court, admitted the appeal on 22.07.2024 to consider the following substantial questions of law: “(i) Whether the Tribunal was right in directing comparable's to be excluded from list of comparables namely, Mind Tree Ltd, R Systems International Ltd, Persistent Systems Ltd, Tata Elsi Ltd, Nihilent Ltd, Infosys Ltd and Cybage Software Pvt Ltd when the TPO has chosen proper comparable by applying qualitative and quantitative tests and when selection of comparable in a case depends in transfer pricing on assessee specific data analysis and the transfer pricing officer has passed order on the basis of specific facts on record in the case of the assessee? (ii) Whether the Tribunal was justified in including comparable's namely, M/s.Batchmaster Software Pvt Ltd, M/s.DCIS Dot Corn Solutions India Pvt Ltd and Evoke Technologies Ltd when all filters applied by TPO are satisfied and by superimposing the decisions which are not applicable to facts and materials of present case, including those of other benches of Tribunal, without going into specific facts in the case of the taxpayer? (iii) 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 grant working capital adjustment when Transfer Pricing Officer rightly denied the same as assesse failed to substantiate its claim with materials? (ii) Whether the Tribunal was justified in including comparable's namely, M/s.Batchmaster Software Pvt Ltd, M/s.DCIS Dot Corn Solutions India Pvt Ltd and Evoke Technologies Ltd when all filters applied by TPO are satisfied and by superimposing the decisions which are not applicable to facts and materials of present case, including those of other benches of Tribunal, without going into specific facts in the case of the taxpayer? (iii) 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 grant working capital adjustment when Transfer Pricing Officer rightly denied the same as assesse failed to substantiate its claim with materials? (iv) 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 comparable without establishing its effect on the profit margin of the company and without acknowledging that there is no direct relationship between turnover and profit margin earned by the Company?” 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 - 5 - 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.: 52