MINDTECK (INDIA) LTD V. THE DEPUTY COMMISSIONER OF INCOME TAX

ITA/589/2017

AI Insights

Mindteck (India) Ltd. appealed against the order of the Income Tax Appellate Tribunal, Bangalore, which had excluded certain comparables based on turnover range in a transfer pricing dispute for the assessment year 2012-2013. The High Court examined whether the tribunal's decision was perverse or if it had erred in considering the turnover range of comparable companies. The court referenced a similar case (I.T.A. Nos.536/2015 c/w 537/2015) to conclude that the issues raised did not constitute substantial questions of law under Section 260-A of the Income Tax Act, 1961, and dismissed the appeal.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 697928 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 28-08-2018
• Assessment Year: misc
• Other Referred Cases: I.T.A. Nos.536/2015 c/w 537/2015 Prl. Commissioner of Income Tax & Anr. \\u2013v- M/s Softbrands India Pvt. Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S NARAYANAN
• Keywords: Assessment year 2012-2013; Income tax appeal; ITAT order; Substantial questions of law
• Section: 260-A

Judgement Text

" 1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 28TH DAY OF AUGUST 2018 PRESENT THE HON’BLE DR.JUSTICE VINEET KOTHARI AND THE HON’BLE MRS.JUSTICE S.SUJATHA I.T.A. No.589 /2017 BETWEEN : MINDTECK (INDIA) LTD (ADDRESS AS PER THE TRIBUNAL ORDER) PRESTIGE ATLANTA, NO.10, INDUSTRIAL LAYOUT, 7TH MAIN, 80 FT ROAD, 3RD BLOCK, KORAMANGALA BENGALURU- 560 034. (PRESENT ADDRESS) A.M.R. TECH PARK, BLOCK-1, 3RD FLOOR, NO.664, 23/24, HOSUR ROAD, BOMMANAHALLI, BENGALURU, KARNATAKA – 560 068 ...APPELLANT (BY SRI.S.SANKARA NARAYANAN, ADV. (ABSENT)) AND : THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4 (1) (2), 2ND FLOOR, BMTC BUILDING, 80FT ROAD, KORAMANGALA, VI TH BLOCK, BENGALURU – 560 034 …RESPONDENT (BY SRI.K.V.ARAVIND , ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 2/8 DATED 24.03.2017 PASSED IN IT(TP)A NO.1834/BANG/2016, FOR THE ASSESSMENT YEAR 2012-2013 ANNEXURE – K, PRAYING TO 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN IT(TP)A NO.1834/BANG/2016 DATED 24TH MARCH 2017 ANNEXURE –K. THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING: J U D G M E N T Mr. S Sankara Narayanan, Adv. for Appellants – Assessee. [Absent] Mr. K.V.Aravind, Adv. for Respondent – Revenue. This Appeal is filed by the Assessee purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘A’, Bangalore, in IT[TP]A No.1834/Bang/2016 dated 24.03.2017,(M/s Mindtech (India) Ltd., Vs. The Deputy Commissioner of Income-Tax) relating to the Assessment Year 2012-13. 2. The appeal has been admitted on 25.10.2017 to consider the following substantial questions of law framed by the Appellants-Assessee: Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 3/8 “1. Whether the order passed by ITAT suffering from perversity with regard to considering the turnover range of 1/10 to 10 times of the turnover of the Appellant., when the Appellant was not asking for the same? 2. Whether ITAT is correct in so far as it considered Turnover range of comparable companies as a standalone criteria while eliminating these comparables?” 3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Assessee and the Respondent-Revenue, has given the following findings:- Regarding substantial questions of law No. 1 & 2: “12. We deal with suitability of the comparables on the basis of settled principle of law, functional similarity and other parameters. It is mentioned that the TPO has provided the total turnover of the assessee as well as the comparables in annexure B of the order. The Total turnover of the 7 comparable mentioned in annexure B is as under: Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 4/8 Name of Company Turn over/Total sales 1) Genesys International Corpn., Ltd. 982,144,212 2) Infosys Ltd. 33083 Crore 3) Larsen & Toubro Info Tech Ltd. 23,685,533,106 4) Mindtree Ltd. 12,558,000,000 5) Persistent Systems Ltd. 8427.4 Millions 6) Sasken Communication 38808.64 lakh 7) Spry Resources Rs.37,074,498 14. If we compare the total sales of the assessee i.e. Rs.5199,74,151/- with these comparable companies, than we notice these companies are not comparable with that of the assessee on the basis of turnover except Genesys International Corpn., Ltd. And Sasken Communication. As turnover of these five companies is either less than 1/10th of the turnover of the assessee or is more than 10 times of the turnover sales of the assessee. This tribunal is taking a consistent stand of excluding the comparable if turnover is not falling between the range of 1/10 to 10 times of the turnover of the assessee. Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 5/8 Accordingly we direct deletion of these 5 companies form the list of comparables.” 4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr. –v- M/s Softbrands India Pvt. Ltd.,) has held that in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable. The relevant portion of the said judgment is quoted below for ready reference: “Conclusion: 55. A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 6/8 provisions of Double Taxation Avoidance Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answering such substantial question of law. On the other hand, the appeals of the present tenor as to whether the comparables have been rightly picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law. 56. We are therefore of the considered opinion that the present appeals filed by the Revenue do not give rise to any substantial question of law and the suggested Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 7/8 substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are found to be devoid of merit and the same are liable to be dismissed. 57. We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an ‘Arm’s Length Price’ in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all a sufficient reason to invoke Section 260-A of the Act before this Court. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs.” Date of Judgment 28-08-2018, ITA No.589/2017 Mindteck (India) Ltd. Vs. The Deputy Commissioner of Income-Tax 8/8 5. Having heard the learned counsel appearing for the Respondent-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellant- Assessee is liable to be dismissed and it is dismissed accordingly. No costs. Sd/- JUDGE Sd/- JUDGE PSG. "