The Commissioner Of Income- Tax & Anr v. M/S. 24/7 Customer.com Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 11[th]DAY OF JULY 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs. JUSTICE S.SUJATHA I.T.A.No.485/2013 Between: Ll.The Commissioner of Income- Tax, C.R. Building, Queens Road, Bangalore. iaThe Dy. Commissioner of Income-Tax,Circle — 11(2),Circle — 11(2), Rashtrothana Bhavan, Nrupathunga Road, Bangalore. ..Appellants &By Mr. K.V.Aravind, Advocate) And: M/s 24/7 Customer.com Pvt. Ltd., Embassy Golf Link, Business Park, Challaghatta Village, IntermediateRing Road, Varthur Hobli,Bangalore South Taluk,Ring Road, Varthur Hobli,Bangalore South Taluk, Bangalore. ... Respondent KRREK Date of Judgment 11-07-2018 I.T.A.No.485/2013 The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd., 2/9 This I.T.A. is tiled under Section 260-A of Income Tax!Act 1961, praying to (a) Formulate the substantial questions|of law stated therein, (b) allow the appeal and set aside the|orderpassedbytheITATBangaloreinMP|No.|37/Bang/2013|dated03/05/2013)(inITA|No.|22//BNG/2010) Annexure-D, confirm the order of theAppellate Commissioner confirming the order passed by the|DeputyCommissioner|oT Income|Tax,Circle-11(2),Bangalore in the interest of justice & equity etc. This I.T.A. coming on tor Admission, this day S. SujathaJ. delivered the following:-. JU DGMENT Mr. K.V. Aravind.Adv. for Appellants - Revenue 1. The Appellants - Revenue have filed this appeal| raising purported substantial questions of law arising from the Order of the)learned Income Tax Appellate| Tribunal Bangalore Bench “A”,Annexure Dsdated 03/05/2013passed in.M.P.No.37/Bang/20131N ITA.No.227/Bang/2013for.AY 2004-05. 2. The appellants - Revenue have suggested two. substantial questions of law which are quoted below forready reference: -| “(1) Whether on the facts and in thecircumstances and in law the Tribunal was| Date of Judgment 11-07-2018 I.T.A.No.485/2013 Vs. M/s. 24/7 Customer.com Pvt. Ltd., The Commissioner of Income- Tax & Anr. 3/9 correct|in|directingthe|Assessingofficer/ Transfer Pricing Officer to identify therisks to bring it on par with comparables and|make required adjustments to the_ profitmargin without pointing out the risk in|comparables and without appreciating thatTP regulations in India are against making|any assumptions in respect of adjustments|and such risk adjustment cannot be provided|without making necessary assumptions and|recorded perverse finding? (2) Whether on the facts and in thecircumstances and in law the Tribunal was|correct in directing the AO to identify the risks|without appreciating that risk adjustment|could not be allowed in the absence of spectificdifference in risk and its tmpact on profit|margin and recorded preserves finding?” 3. In so far as the two substantial questions oflaw raised in the present appeal are concerned, thelearned counsel for the Revenue, Mr. K.V. Aravindsubmitted that the learned ITAT in its Order dated|03/05/2013passed inM.P.No.37/Bang/2013 (ITA) Date of Judgment 11-07-2018 I.T.A.No.485/2013 Vs. M/s. 24/7 Customer.com Pvt. Ltd., The Commissioner of Income- Tax & Anr. 4/9 No.227/Bang/2010)has|giventhefindings,the relevant portion of which is quoted below tor ready reference:-. (2) Whether on the facts and in thecircumstances and in law the Tribunal was|correct in directing the AO to identify the risks|without appreciating that risk adjustment|could not be allowed in the absence of spectificdifference in risk and its tmpact on profit|margin and recorded preserves finding?” 3. In so far as the two substantial questions oflaw raised in the present appeal are concerned, thelearned counsel for the Revenue, Mr. K.V. Aravindsubmitted that the learned ITAT in its Order dated|03/05/2013passed inM.P.No.37/Bang/2013 (ITA) Date of Judgment 11-07-2018 I.T.A.No.485/2013 Vs. M/s. 24/7 Customer.com Pvt. Ltd., The Commissioner of Income- Tax & Anr. 4/9 No.227/Bang/2010)has|giventhefindings,the relevant portion of which is quoted below tor ready reference:-. “51. The.learnedAuthorisedRepresentative submitted that a specific ground|has been raised on market risk adjustment atGroundNo.4 of the concise grounds of appealwhich had not been adjudicated by the Tribunalin order in ITA No.227/ Bang/ 10 dat.9.11.2013. this ground it is submitted that the learnedClT(Appeals) had erred in concluding that thebusiness risk is borne by the assessee andthereforedidNot|warrantamarketrTISkadjustment. In this regard, the earned AuthorisedRepresentative submitted that the petitioner is acaptive service provider and is operating in a riskfree environment. Therefore, the risks assumedby the petitioner are lower than those assumedby companies operating in uncontrolled conditions:and therefore adjustments require to be made tothe margins of the comparable companies toeliminate the differences on account of risks. Healso submitted that the co-ordinate benches of theBangalore Tribunal have acknowledged _ thamarket risk adjustment has to be granted forcomparability in appropriate cases. In support of Date of Judgment 11-07-2018 I.T.A.No.485/2013 The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd., 0/9 thisproposition,the learnedAuthorisedRepresentative relied on the decisions in thefollowing cases. il) Intellinet Technologies India Put Ltd (ITANo.1237/ Bang/ 2007 i)BearingPointBusiness(ITANo.1124/ Bang/ 2011 5.2|We have heard both parties on the.issue and carefully considered the material onrecord. It is a matter of record that the assesseehad raised a specific ground at No.4 of theconcise grounds of appeal which was notaddressed by us in our order dat.9.11.2012 andrequires adjudication.TheLSSUEofrisk.adjustment was before the authorities below andthe TPO market risk is offset by single customerrisk. We find that on similar facts, the co-ordinatebenches of Bangalore Tribunal in the cases citedviz. Intellinet Technologies India Pvt. Ltd.(supra)and Bearing Point Business (supra) have heldthat the TPO ought to have given risk adjustmentto the margins of the comparables for bringingthem on par with the assessee and remanded the|issue to the file of the TPO for computation of therisk|adjustment.Respectfullyfollowingthe Date of Judgment 11-07-2018 I.T.A.No.485/2013 The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd., 6/9 aforesaid decisions of the co-ordinate benches ofthe ITAT, Bangalore, we remand the issue ofmarketrisk.adjustmentTothe ASSeSSINGOfficer/TPO for working out and computing thesame after due examination of the assessee’ssubmission. It ts ordered accordingly’ 4. However, this Court in a recent judgment in I.T.A.No.536/2015c/w.I.T.A.No.537/2015(Pr.Commissioner.of|IncomeTax,Bangalore andAnother Vs. M/s. Softbrands India P.Ltd.,) renderedon 25-06-2018,has held that in these type of cases,unless ansex-facle’ perversity in the findings of thelearned Income Tax Appellate Tribunal is established bythe appellant, the appeal at the instance of an assesseeor the Revenue under|Section 260-Aot the Act is notmaintainable and the relevant portion of the saidjudgment is quoted below for ready reference: “Conclusion: 55.|ASubstantialquantumofinternational trade and transactions depends Date of Judgment 11-07-2018 I.T.A.No.485/2013 4. However, this Court in a recent judgment in I.T.A.No.536/2015c/w.I.T.A.No.537/2015(Pr.Commissioner.of|IncomeTax,Bangalore andAnother Vs. M/s. Softbrands India P.Ltd.,) renderedon 25-06-2018,has held that in these type of cases,unless ansex-facle’ perversity in the findings of thelearned Income Tax Appellate Tribunal is established bythe appellant, the appeal at the instance of an assesseeor the Revenue under|Section 260-Aot the Act is notmaintainable and the relevant portion of the saidjudgment is quoted below for ready reference: “Conclusion: 55.|ASubstantialquantumofinternational trade and transactions depends Date of Judgment 11-07-2018 I.T.A.No.485/2013 The Commissioner of Income- Tax & Anr. Vs. M/s. 24/7 Customer.com Pvt. Ltd., 7/9 upon the fair and quick judicial dispensationin such cases. Had it been a case ofsubstantialquestionof|interpretationofprovisions of Double Taxation AvoidanceTreaties (DTAA), interpretation ofprovisions ofthe Income Tax Act or Overriding Effect of theTreaties over the Domestic Legislations or the |questions like Treaty Shopping, Base Erosionand Profit Shifting (BEPS), Transfer of Sharesin Tax Havens (like in the case of Vodafoneetc.), if based on relevant facts, such|substantial questions of law could beraised before the High Court underSection260-Aof the Act, the Courts could haveembarked upon such exercise offraming andanswering such substantial question of law.On the other hand, the appeals of the presenttenor as to whether the comparables havebeen rightly picked up or not, Filters forarriving at the correct list of comparableshave been rightly applied or not, do not in ourconsideredopinion,|giverisetoAry,substantial question of law. Date of Judgment 11-07-2018 I.T.A.No.485/2013 8/9 06. We are therefore of the consideredopinion that the present appeals filed by theRevenue do not give rise to any substantialquestionof|lawandthe|Suggestedsubstantial questions of law do not meet therequirements ofSection 260-A.of the Act and|thus the appeals filed by the Revenue arefound to be devoid of merit and the same areliable to be dismissed. 57. We make it clear that the same'|yardsticks and parameters will have to beapplied, even if such appeals are filed by theAssessees, because, there may be caseswhere the Tribunal giving its own reasonsand findings has found certain comparablesto be good comparables to arrive at an|°‘Arm’sLength Price“in the case of the assesseeswith which the assessees may not besatisfied and have filed such appeals beforethis Court. Therefore we clarify that meredissatisfaction with the findings of factsarrived at by the learned Tribunal is not at alla sufficient reason to invoke.Section 260-Aof the Act before this Court. The Commissioner of Income- Tax & Anr. 9/9 o8. The appeals filed by the Revenueare therefore dismissed with no order as tocosts.” Oo. Having heard the learned counsel for theappellant — Revenue, this Court is satisfied that nosubstantial question of law would arise in the presentcase and the appeal filed by the Revenue is therefore,liable to be dismissed. Accordingly, it is dismissed. | No costs. BM13 Sd/-.JU DGE Sd/-.JUDGE.