Whether On The Facts And Circumstances Of The Case And In Law, The Tribunal Was Justified In Not Following Its Own Decision In The Case Of M/S Societe General G v. Nc: 2024:Khc:39738-Dbita

Digitallysigned by BLAVANYALocation:HIGHCOURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24 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. 457 OF 2022 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME TAX, KORAMANGALA, BANGALORE. KORAMANGALA, BANGALORE. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), BMTC COMPLEX, KORMANGALA, BANGALORE. CIRCLE 2(1)(1), BMTC COMPLEX, KORMANGALA, BANGALORE. …APPELLANTS (BY SRI SANMATHI E I, ADVOCATE) AND: 1. M/S CENDUIT (INDIA) SERVICES PVT LTD., OMEGA EMBASSY, TECHSQUARE, MARATHAHALLI, SARJAPUR OUTER RING ROAD, KADUBESANAHALLI, BANGALORE-560103, PAN . OMEGA EMBASSY, TECHSQUARE, MARATHAHALLI, SARJAPUR OUTER RING ROAD, KADUBESANAHALLI, BANGALORE-560103, PAN . …RESPONDENT THIS APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12/01/2022 PASSED IN IT(TP)A NO.227/BANG/2021 FOR THE ASSESSMENT YEAR 2016-2017, PRAYING THIS HON’BLE COURT (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS 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 12/01/2022 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO.227/BANG/2021 FOR TO: ASSESSMENT YEAR 2016-2017 (ANNEXURE-A) AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. THIS APPEAL, COMING ON FOR 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.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 12.01.2021 passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.227/Bang/2023 for the assessment year 2016-17, raising the following substantial questions of law: "1. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in directing the Transfer Pricing Officer to exclude comparables from ITS (SWD) Segment i.e., M/s Larsen & Toubro Infotech Ltd., M/s Nihilent Ltd., M/s Persistent Systems Ltd., M/s Thirdware Solution Ltd., M/s Aspire Systems (India) Pvt.Ltd., M/s Infosys Ltd., M/s Cybage Software Pvt.Ltd. & from ITES i.e. M/s Tech Mahindra Business Services Ltd., M/s Infosys B PM Ltd., M/s SPI Technologies India Pvt. Ltd., M/s.Eclerx Services Ltd, having turnover more than 200 crores by following its earlier orders which have not reached finality and even when the TPO had chosen the comparable on the basis of its functional similarity and by application of qualitative and quantitative tests? 2. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in disregarding the position of law that there could be differences between the enterprises compared under the Transaction Net Margin Method that are not likely to materially affect the price or cost charged or the profits accruing to such enterprises? 3. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in not following its own decision in the case of M/s Societe General Global Solution Centre (P) Ltd Vs DCIT. Circle -12(3). Bangalore vide IT (TP) A No.118 (Bang)2011, the jurisdictional ITAT Bangalore has opined that the turnover cannot be relevant criteria in a service sector where fixed overheads are nominal and the cost of service is in direct proportioned to the services rendered? 3. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in not following its own decision in the case of M/s Societe General Global Solution Centre (P) Ltd Vs DCIT. Circle -12(3). Bangalore vide IT (TP) A No.118 (Bang)2011, the jurisdictional ITAT Bangalore has opined that the turnover cannot be relevant criteria in a service sector where fixed overheads are nominal and the cost of service is in direct proportioned to the services rendered? 4. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in rejecting comparable cases by insistence on strict comparability under TNMM defeats the very purpose of the law relating to determination of Arms Length Price under income Tax Act? 5. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in ruling a decision that education cess is an allowable expenditure, contravening the express provisions of the IT Act in section 40(a)(ii) vide Finance Act, 2022 with retrospective effect from A.Y.2005-06? "? 3. It is noticedthat the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal would not be maintainable 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 MPK List No.: 2 Sl No.: 47