Ita/76/2024 Of The Pr Commissioner Of Income Tax v. M/S Ariba Technologies India Pvt Ltd

Digitallysigned byBHARATHI SLocation:HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30 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. 76 OF 2024 BETWEEN: 1. THE PR COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -1(1)(1) 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095 …APPELLANTS (BY SRI. SUSHAL TIWARI N.,ADVOCATE) AND: M/S ARIBA TECHNOLOGIES INDIA PVT LTD PLOT C1, 8A CAMPUS RMZ ECOWORLD, SARJAPUR, MARATHAHALLI OUTER RING ROAD, BANGALORE-560103 PAN AADCA 0918P …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR.,ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO. 987/BANG/2022 DATED 15.06.2023 FOR ASSESSMENT YEAR 2018-2019 ANNEXURE A AND CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER - 2 - PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1), BENGALURU AND ETC. THIS APPEAL, COMING ON FOR ORDERS, 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. Sushal Tiwari. N., for appellants/Revenue and learned counsel Smt. Tanmayee Rajkumar, 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 15.06.2023 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A No.987/Bang/2022 for the assessment year 2018-19, raising the following substantial questions of law: “1. Whether the Hon’ble ITAT was right in fact and in law in directing exclusion of Infosys BPM Services Pvt. Ltd., Motif India Infotech Pvt. Ltd., Eclerx Services Ltd. & MPS Ltd., as and in law in directing exclusion of Infosys BPM Services Pvt. Ltd., Motif India Infotech Pvt. Ltd., Eclerx Services Ltd. & MPS Ltd., as 2. 3. 4. 6. ITA No. 76 of 2024 comparable on by imposing upper limit on turnover filter. Whether the Hon’ble ITAT, Bangalore, was right in not following the decision of it own bench rendered in the case of M/s Societe General Global Solution Centre Pvt. Ltd. In IT(TP)A No.1188/BANG/2011 and M/s. Vmoksha Technologies Pvt. Ltd. In IT(TP)A No. 595/BANG/2013 dated 26.08.2019 for AY 2005-06 where the Tribunal has held that turnover is not a relevant criterion for deciding the comparability. Whether the Hon’ble TITAT was right in holding that there exists a co-relation between turnover and operation margin of an entity. Whether the Hon’ble ITAT was right in fact and in law in directing exclusion of Manipal Digital Systems (P) Ltd., Domex E Data (P) Ltd. As comparables on functional dissimilarity. Whether the Tribunal is right in not appreciating in fact that transfer pricing is not an exact science and no tow entities can be exact replicas. Whether the Hon’ble ITAT is right in trying to find out exact replica of the assessee for determining the Arm’s length price based on such replica, even when the law and the international jurisprudence itself recognize that there cannot be an exact comparable to a given situation, expecially with THMM as the most appropriate method. Whether the Hon’ble TITAT was right in holding that there exists a co-relation between turnover and operation margin of an entity. Whether the Hon’ble ITAT was right in fact and in law in directing exclusion of Manipal Digital Systems (P) Ltd., Domex E Data (P) Ltd. As comparables on functional dissimilarity. Whether the Tribunal is right in not appreciating in fact that transfer pricing is not an exact science and no tow entities can be exact replicas. Whether the Hon’ble ITAT is right in trying to find out exact replica of the assessee for determining the Arm’s length price based on such replica, even when the law and the international jurisprudence itself recognize that there cannot be an exact comparable to a given situation, expecially with THMM as the most appropriate method. 7. Whether the Hon’ble ITAT was right in law in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the Income Tax Act. demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the Income Tax Act. 8. Whether the order of Tribunal in imposing conditions is beyond the scope of law and business reality all close comparable on one or the other ground, without appreciating that not two companies can ever be same. conditions is beyond the scope of law and business reality all close comparable on one or the other ground, without appreciating that not two companies can ever be same. 9. Whether the Hon’ble ITAT was right in fact and in law to remit the issue regarding inclusion of certain comparable which were not part of the TPOs Search Matrix, thereby promoting the cherry picking of comparables?” and in law to remit the issue regarding inclusion of certain comparable which were not part of the TPOs Search Matrix, thereby promoting the cherry picking of comparables?” 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 - 5 - 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 BS List No.: 1 Sl No.: 27