Ita/88/2022 Of The Pr Commissioner Of Income Tax v. M/S Arm Embedded Technologies Pvt Ltd

Digitally signed byBHARATHI SLocation:HIGHCOURT OFKARNATAKA NC: 2024:KHC:39410-DB ITA No. 88 of 2022 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. 88 OF 2022 BETWEEN: 1. THE PR COMMISSIONER OF INCOME TAX 5TH FLOOR, BMTC BUILDING 80 FEET ROAD,KORMANGALA BENGALURU 560 095 2. THE DEPUTY COMMISSIONER OF INCOME TAX 2ND FLOOR, BMTC BUILDING 80 FEET ROAD,KORMANGALA BENGALURU 560 095 …APPELLANTS (BY SRI. RAVI RAJ Y V.,ADVOCATE A/W SRI. DILIP M, ADVOCATE) AND: M/S ARM EMBEDDED TECHNOLOGIES PVT LTD BAGMANE WORLD TECHNOLOGY PVT LTD SEZ CITRINE BLOCK, 5TH FLOOR MARATHAHALLI OUTER RING ROAD, DODDANAKUNDI VILLAGE MAHADEVAPURA BENGALURU 560 048 PAN …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 - 2 - SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE, ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO. 1824/BANG/2017 DATED 12/07/2021 FOR ASSESSMENT YEAR 2013-2014 ANNEXURE-D AND CONFIRM THE ORDER OF THE DRP COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-1(1)(1), BENGALURU AND ETC. THIS APPEAL, COMING ON FOR FINAL 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 Raviraj Y.V, along with learned counsel Sri Dilip M, for appellants/Revenue and learned counsel Smt Tanmayee Rajkumar, 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 12.07.2021 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.1824/Bang/2017 for the assessment year 2013-14, raising the following substantial questions of law: “1. Whether on the facts and in the circumstances of the case, the Tribunal erred in directing the Transfer Pricing Officer to allow working capital adjustment without appreciating in fact that transfer pricing is not an exact science and no two entities can be exact replica's and when the Transfer Pricing Officer has rightly denied the same in accordance with parameter of Rule 10B? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to exclude comparables such as CG-VAK Software Exports Ltd and Larsen & Tourbo Infotech Ltd when TPO has rightly chosen the said comparables considering the functions and as the said comparables satisfies all the required tests? 3. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature as Tribunal has ignored the findings rendered by Transfer Pricing Officer and also materials brought on record by said officer which establishes that exclusion and inclusion of comparables were in accordance with parameters of Rule 10B? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to include comparables namely, M/s. Akshay Software Technologies, R. Systems International Ltd to the final set of comparable without undertaking FAR analysis of said comparables for comparing it with assessee-company?” - 4 - 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 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to include comparables namely, M/s. Akshay Software Technologies, R. Systems International Ltd to the final set of comparable without undertaking FAR analysis of said comparables for comparing it with assessee-company?” - 4 - 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 questions of law are kept open to be adjudicated in an appropriate proceeding. Sd/- (S.G.PANDIT) JUDGE ND/List No.: 3 Sl No.: 25 Sd/- (C.M. POONACHA) JUDGE