Ita/730/2023 Of Prl., Commissioner Of Income Tax-3 v. M/S I G Infotech(India) Pvt Ltd

Digitally signedbyMARIGANGAIAHPREMAKUMARILocation: HIGHCOURT OFKARNATAKA NC: 2024:KHC:39230-DB ITA No. 730 of 2023 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. 730 OF 2023 BETWEEN: 1. PRL. COMMISSIONER OF INCOME TAX-3 KORMANGALA, BANGALORE. KORMANGALA, BANGALORE. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(1)(1), KORMANGALA, BANGALORE. …APPELLANTS (BY SRI. SANMATHI E. I., ADV.) AND: M/S. I G INFOTECH (INDIA) PVT. LTD., 2 FLOOR, INFINITY BUILDING, KHATA NO.436, SURVEY NO.13/1B, 12/1B, CHALLAGATTA VILLAGE, VARTHUR HOBLI, INTERMEDIATE RING ROAD, DOMLUR, BENGALURU-560071, PAN: . …RESPONDENT (BY SRI. NAGESHWAR RAO D.D., ADV. (THROUGH V/C)) THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 10/07/2023 PASSED IN IT(TP)A NO. 751/BANG/2022, FOR THE ASSESSMENT YEAR 2018-2019 (ANNEXURE-A), PRAYING TO 1) DECIDE THE FOREGOING QUESTION O LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 10/07/2023 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEES CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO. 751/BANG/2022 FOR A.Y.2018-2019 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. THIS APPEAL, COMING ON FOR ADMISSION, 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., learned counsel for the 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 10.07.2023 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.751/Bang/2022 for the assessment year - 3 - 2018-19, raising the following substantial questions of law: “i) Whether on the facts and circumstances of the case the Tribunal's order can be said as perverse in nature in directing comparable's to be excluded comparables on the ground of turnover filter in excess of 200 er and in directing to apply appropriate upper turnover filter and without appreciating that Tribunal in case of M/s Societe Generale Global Solution Centre Put Ltd. in IT (TP)A No. 1188/BANG/ 2011 and M/s. Technologies Put. Ltd. in IT (TP) A No. 595/ BANG/ 2013 dated 26.08,2016 for AY 2005-06 wherein the Tribunal has held that turnover is not a relevant criterion for deciding the comparability? the case the Tribunal's order can be said as perverse in nature in directing comparable's to be excluded comparables on the ground of turnover filter in excess of 200 er and in directing to apply appropriate upper turnover filter and without appreciating that Tribunal in case of M/s Societe Generale Global Solution Centre Put Ltd. in IT (TP)A No. 1188/BANG/ 2011 and M/s. Technologies Put. Ltd. in IT (TP) A No. 595/ BANG/ 2013 dated 26.08,2016 for AY 2005-06 wherein the Tribunal has held that turnover is not a relevant criterion for deciding the comparability? ii) Whether the Tribunal was right in holding that there exists a co relation between turnover and operating margin of an entity? there exists a co relation between turnover and operating margin of an entity? ii) Whether the Tribunal was right in holding that there exists a co relation between turnover and operating margin of an entity? there exists a co relation between turnover and operating margin of an entity? iii) Whether the Tribunal was justified in granting working capital adjustment is perverse in nature Tribunal failed to observe that Average working capital will not show the actual working capital employed during the year and the segmental working capital is not disclosed working capital adjustment is perverse in nature Tribunal failed to observe that Average working capital will not show the actual working capital employed during the year and the segmental working capital is not disclosed in the Annual reports in the companies where they are engaged in multiple business segments? they are engaged in multiple business segments? iv) 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? 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? v) 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?” 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?” 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 question of law is kept open to be adjudicated in an appropriate proceeding. SD/- (S.G.PANDIT) JUDGE SD/- (C.M. POONACHA) JUDGE NC CT:bms List No.: 1 Sl No.: 47