Wp/17125/2018 Of M/S. Wipro Ge Healthcare Pvt Ltd v. Deputy Commissioner Of Income Tax

IN THR HIGH COURT OF KARNATAKA AT BBNGALURU| DATBD THIS THR 11 DAY OF FEBRUARY, 2020 BEFORE THERE HON’BLE MR. JUSTICE KRISHNA S.DIXI ;WRIT PETITION NO.17125 OF 2018 (TIT) BETWEEN: M/S. WIPRO GE HEALTHCARE PVT LTD.,NO.4, KADUGODI INDUSTRIAL AREA,WHITEFIELD, BANGALORE-56006/7.REPRESENTED BY [TISAUTHORIZED SIGNATORY|SHRI KK DAR KULKARNI. ... PETITIONER (BY SMT. S R ANURADHA, ADVOCATE) AND: 1.DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(2),BENGALURU — 560 OO1. 2.GOVERNMENT OF INDIA,MINISTRY OF FINANCE,INCOME TAX DEPARTMENT,% FLOOR, INCOME TAX OFFICE,BMTC BUILDING,|80 FEET ROAD,KORAMANGALA,BENGALURU -560 OO1..REP BY ITS SKHCRB TARY — RBSPONDENTS| (BY SRI. K V ARAVIND, ADVOCATE) THIS WRIT PEHTITION IS FILED UNDER ARTICLES 226 AND22/ OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THEORDER DATED 12.03.2018 FOR A/Y 2009-10 PASSED BY R-1/VIDE ANNEX-A. THIS WRIT PETITION COMING ON FOR PRELIMINARY|HEARING IN B GROUP, THIS DAY, THE COURT MADE THEROLLOWING: ORDER Petitioner being a Corporate Assessee is Knocking at thedoors of Writ Court for assailing the Assessment Order dated12.03.2018, made by the first respondent at Annexure-A forthe Assessment Year 2009-10 whereupon the demand forpayment of tax so assessed, has been raised. | 2 |After service of notice, respondents having enteredappearance through their Panel Counsel resist the writpetition making submission in justification of the impugnedorder; it is also submitted that the petitioner has got analternate remedy of appeal and therefore, it should berelegated thereto. 3.|Having heard the learned counsel for the partiesand having perused the petition papers, this Court grantsreprieve to the petitioner for the following reasons: Q)|the return of income filed by the petitioner for theAssessment Year 2009-10 was selected for scrutiny by issueof Notice under Section 143(2) of the Income Tax Act, 1961;since the value of international transactions of the petitionerexceeded the prescribed limit, a reference was made to TPOfor determining the arm’s length price of the subjectinternational transactions entered with the associated enterprises of thepetitioner; the TPO passed an order u/s 92CA on 29.01.2013determining the ALP adjustment that was added to thereturned Income along with the allowance u/s’ 10A;accordingly, the drait Assessment Order having been made on |04.03.2013 was objected to by the petitioner; the DisputeResolution Panel issued directions u/s 144C (5) of the Act on10.10.2013 which resulted into the Assessing Officer makinga final Assessment vide order dated 29.11.2013; b)the Revenue went in appeal to the Income TaxAppellate Tribunal which partly allowed the appeal vide orderdated 06.10.2017; paragraphs 7 & 8 of the said order beingrelevant for adjudication read as under: C7|Being aggrieved, the revenue is inappeal before us. Ground Nos.1,6 and 7 are generalin nature and do not require any adjudication.Ground No.2 challenges the direction of the Hon'bleDRP in directing the AO to carry out working capitaladjustment as per actual working without puttingany artificial cap. The TPO has put an artificiallimit on working capital adjustment. The law isquite settled to the extend that there should not beany artificial cap on working capital adjustment.The benefit of working capital adjustment should begranted based on the actual working as permethodology adopted for working out workingcapital adjustment. It requires to be ensured thatsame methodology is adopted in respect of bothtested party as well as comparable entities.— Nothing is discernible from the material on recordon this aspect of the issue. Therefore, we remit thisissue back to the file of the AO/TPO to computeworking capital adjustment on the above lines angrant the adjustment without any cap. Nothing is discernible from the material on recordon this aspect of the issue. Therefore, we remit thisissue back to the file of the AO/TPO to computeworking capital adjustment on the above lines angrant the adjustment without any cap. 5.Third ground of appeal challenges thedirection of the Hon’ble DRP to include FCSsoftware Solutions and Thinksoft Global ServicesLtd., we find from record that TPO excluded thesecompanies on the ground that working capitaladjustment in both the cases was more than 4%.Though, this cannot be a valid reason for exclusionof the entities for the purpose of comparability butthere is no finding by the TPO that these companiespass through all the filters applied by the TPO.Hence, we remand this issue back to the file of theTPO/AOtoexamine.whethertheseClOcomparables pass through all the filters applied bythe TPO tf so to include the same in the list ofcomparable.” Cc)the reasoning contained in subject paragraphs ofthe ITAT order makes it apparent that there was a limitedremand of the matter for judicious consideration afresh andtherefore, the mandatory procedure prescribed u/s 144C ofthe Act to the extent of such remand ought to have beenfollowed; there is force in the contention of the Assessee thatordinarily, a remand results into reconsideration of thematter regardless of its scope, and therefore, there ought tohave been a draft order to which the Assessee would haveresponded; there may be exceptions to this general rule asrightly illustrated by the Panel Counsel for the Revenue is true, but case of the petitioner does not fit into that inasmuchas, the remand order expects a judicious determination by afresh look, certain fixed factors/parameters notwithstanding;there cannot be a mechanical exercise in a case of remand ofthis nature; — d)the contention vehemently advanced by the PanelCounsel for the Revenue that there is no scope for judiciousdetermination aiter the remand, is bit difficult to acceptinasmuch as, the remand order specifically directs theAssessment Officer to carryout Working Capital adjustmentdisregarding the artificial cap; this apart, the ITAT hasdirected re-examination as to whether the two comparablesie., FCS Software Solutions and Thinksoft Global ServicesLimited pass through all the filters applied by the TPO; thiscan not be done mechanically; thus, there is a remand whichwarrants judicious determination of the matter remanded; © e)the impugned order dated 12.03.2018 has beenstructured on a wrong legal premise that there is no need forjudicious determination of the matter as per the procedureprescribed u/s 144C(1) of the Act, when it is otherwise, as already discussed in the paragraphs supra; this apart, whatprejudice would have been caused to the Revenue had themandatory procedure prescribed under this provision wasotherwise adhered to, is not forthcoming; the procedureprescribed is intended to meet out a fair treatment to theAssessee; even this aspect has not been adverted to by theanswering respondent; thus, there is an error of greatmagnitude warranting indulgence of Writ Court for setting thesame right; and, f) |the contention of the Revenue that the petitionerhas got an alternate remedy of appeal and therefore, it shouldbe relegated thereto does not much impress this Court; theargument of alternate remedy does not bar the writjurisdiction of the Court when the impugned order has ademonstrable error of law on it’s face resulting into prejudiceto the Assessee; nothing is stated as to how the Revenuewould be aifected by the invocation of writ jurisdiction by theAssessee when full opportunity is given to both the sides;|added to this, what difference an appeal would have made tothe matter is also not forthcoming. In the above circumstances, this writ petition is allowed;a Writ of Certiorari issues quashing the impugned order andthe consequential demands; the matter is remitted to the firstrespondent for consideration afresh, in accordance with lawaiter hearing the petitioner or its agent. All contentions of the parties are kept open. Bsv No costs. In the above circumstances, this writ petition is allowed;a Writ of Certiorari issues quashing the impugned order andthe consequential demands; the matter is remitted to the firstrespondent for consideration afresh, in accordance with lawaiter hearing the petitioner or its agent. All contentions of the parties are kept open. Bsv No costs. Sd/-|JUDGE