Ita/503/2022 Of The Pr. Commissioner Of Income Tax v. M/S Reitzel 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. 503 OF 2022 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX, KORMANGALA, BANGALORE. 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5(1)(1), KORMANGALA, BENGALURU. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE) AND: 1. M/S REITZEL INDIA PVT LTD., PLOT NO.98-99, KIADB INDUSTRIAL AREA, KUNIGAL, TUMKUR-572126, PAN- . PLOT NO.98-99, KIADB INDUSTRIAL AREA, KUNIGAL, TUMKUR-572126, PAN- . …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 26/08/2021 PASSED IN IT(TP)A NO.2341/BANG/2019, FOR THE - 2 - ASSESSMENT YEAR 2015-2016, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 26/08/2021 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO.2341/BANG/2019 FOR ASSESSMENT YEAR 2015-2016 (ANNEXURE-A) AND 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 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 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 26.08.2021 passed by the Income Tax Appellate Tribunal, - 3 - ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.2341/Bang/2019 for the assessment year 2015-16. 3. This Court, admitted the appeal on 11.09.2023 to consider the following substantial question of law: 1. “Whether in the present facts and circumstances of the case, the Tribunal is correct in law in allowing appeal preferred by assessee by directing Transfer Pricing Officer/Assessing Authority to examine the issue of benchmarking of the interest on delayed trade receivable afresh without analyzing the reasoning for aggregation / segregation and separate benchmarking of the transaction and restoring the issue merely on the ground that the main issue was restored to the file of Assessing Officer / Transfer Pricing Officer?” 2. “Whether in the present facts and circumstances of the case, the order passed by Tribunal can be said as perverse in directing the Transfer Pricing Officer to include export incentive i.e DEPB in the operating profit on the assessee without appreciating that DEPB is an incentive offered by Government as incentive offered by Government as a matter of police and is not a revenue derived from the international transaction for the purpose of transfer pricing and inclusion of the same in the operating profit of the assessee would lead to shifting of profits from the Indian Tax jurisdiction to the Foreign AE’s tax jurisdiction?” 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 Government as incentive offered by Government as a matter of police and is not a revenue derived from the international transaction for the purpose of transfer pricing and inclusion of the same in the operating profit of the assessee would lead to shifting of profits from the Indian Tax jurisdiction to the Foreign AE’s tax jurisdiction?” 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. - 5 - 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.: 48