Ita/546/2023 Of Pr. Commissioner Of Income Tax-3 v. M/S. Nts Technology

Digitallysigned byBHARATHI SLocation:HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25 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. 546 OF 2023 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX-3, KORMANGALA, BANGALORE KORMANGALA, BANGALORE 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE 3(1)(1) KORMANGALA, BANGALORE. …APPELLANTS (BY SRI. SANMATHI E.I., ADVOCATE) AND: M/S. NTS TECHNOLOGY SERVICES PVT. LTD., 2 FLOOR, SALAPUR SYMPHONY, BASAPURA, HOSUR MA ROAD, BANGALORE PAN- …RESPONDENT (RESPONDENT SERVED) THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 27/03/2023 PASSED IN IT(TP)A NO.940/BANG/2022, FOR THE ASSESSMENT YEAR 2018-2019 PRAYING TO 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 27.03.2023 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH, BENGALURU, AS SOUGHT FOR, IN APPEAL PROCEEDINGS IN IT(TP)A NO.940/BANG/2022 FOR A.Y.2018-2019 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE 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 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. 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 27.03.2023 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.940/Bang/2022 for the assessment year 2018-19. 3. This Court, admitted the appeal on 11.03.2024 to consider the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature in law in directing the Transfer Pricing Officer to exclude comparable, comparables on basis of turnover filter by imposing turnover filter without appreciating that the selection of comparables in a case depends on transfer pricing on assessee's specific FAR analysis and specific facts brought out on record by the TPO and as per Rule 108 of 1.T.Rules? 2. Whether Tribunal's order can be said as perverse in nature in imposing turnover filter by holding that there exist a co-relation between turnover and operating margin of an entity? 3. Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature in directing Transfer Pricing Officer to consider afresh in respect of issue pertaining to delayed receivables by following its earlier decision without considering that assesse has not substantiated charging of particular interest rate and grant of credit period? 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 the Transfer Pricing Officer to exclude M/s.Great Software Laboratory Pvt Ltd, M/s.Elveego Circuits Pvt Ltd, M/s. Acewin Agritech Ltd, M/s.Infobeans Technologies Ltd and M/s.Threesixty Logica Testing Services Pvt Ltd on ground of functional dissimilarity without appreciating that transfer pricing is not an exact science and no two entities can be exact replica and when the law international jurisprudence itself - 5 - recognize that there cannot been an exact comparable to a given situation? 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 the Transfer Pricing Officer to exclude M/s.Great Software Laboratory Pvt Ltd, M/s.Elveego Circuits Pvt Ltd, M/s. Acewin Agritech Ltd, M/s.Infobeans Technologies Ltd and M/s.Threesixty Logica Testing Services Pvt Ltd on ground of functional dissimilarity without appreciating that transfer pricing is not an exact science and no two entities can be exact replica and when the law international jurisprudence itself - 5 - recognize that there cannot been an exact comparable to a given situation? 5. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing Transfer Pricing Officer to exclude M/s.Exhilent Technologies Ltd, M/s.Tech Mahindra Ltd, M/s Larsen & Tourbo Infotech Ltd, M/s.Mind Tree Ltd, M/s. Nihilent Ltd, M/s.Persistent Systems Ltd, M/s.Wipro Ltd, M/s.Tata Elxsi Ltd, M/s.Infosys Ltd, M/s. Cybage Software Pvt Ltd as comparable on turnover filter when Transfer Pricing Officer has rightly rejected same on basis of Rule 10B?” 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