THE COMMISSIONER OF INCOME TAX V. M/S SAP LABS PVT LTD

ITA/842/2008

AI Insights

The case involves two appeals by the Commissioner and Assistant Commissioner of Income Tax against M/s SAP Labs Pvt Ltd, challenging the Tribunal's decision which set aside the Commissioner's order under Section 263 of the Income Tax Act. The disputes arose from the assessment year 2002-03, where the Transfer Pricing Officer had accepted the arm's length price for international transactions as determined by the Assessing Authority. The Commissioner later intervened, deeming the assessment erroneous and prejudicial to the interest of the revenue, which was contested by the respondent leading to the Tribunal's decision in favor of the respondent. The High Court's dismissal of the appeals affirmed the Tribunal's stance, emphasizing the lack of a pending return at the time of the Transfer Pricing Officer's reference and the acceptance of the pricing by the Transfer Pricing Officer.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728975 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-08-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR; M LAVA
• Assessee Lawyers: K V ARAVIND; E I SANMATHI
• Keywords: Arm's Length Price; Assessment Year 2002-03; Income tax appeal; International Transactions; Transfer pricing
• Section: 148; 143(1); 263; 92CA; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 25th DAY OF AUGUST, 2014 PRESENT THE HON' BLE MR. JUSTICE N.KUMAR AND THE HON' BLE MRS. JUSTICE RATHNAKALA Income Tax Appeal No 842 OF 2008 c/w Income Tax Appeal No.339 OF 2010 In Income Tax Appeal No 842 OF 2008: BETWEEN 1.THE COMMISSIONER OF INCOME TAX C R BUILDING QUEENS ROAD BANGALORE 2.THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-12(2) C.R. BUILDING QUEENS ROAD BANGALORE ... APPELLANTS (BY SRI K V ARAVIND, ADVOCATE) AND M/S SAP LABS PVT LTD 138, EXPORT PROMOTION INDUSTRIAL PARK WHITEFIELD BANGALORE ... RESPONDENT (BY SRI A. SHANKAR & M.LAVA, ADVOCATES) … 2 This Income Tax Appeal is filed under Section 260-A of Income Tax Act, 1961 praying to formulate the substantial questions of law and to allow the appeal and set aside the Order dated 30-04-2008 passed by the ITAT, Bangalore in ITA No. 799/BNG/2007 and confirm the order passed by the Assistant Commissioner of Income Tax , Circle-12(2), Bangalore. In Income Tax Appeal No.339 OF 2010 BETWEEN 1.THE COMMISSIONER OF INCOME TAX C R BUILDINGS QUEENS ROAD BANGALORE-560 001. 2.THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(3) BANGALORE ... APPELLANTS (BY SRI E.I. SANMATHI, ADVOCATE) AND M/S SAP LABS PVT LTD No.138, EXPORT PROMOTION INDUSTRIAL PARK WHITEFIELD BANGALORE-560 009 ... RESPONDENT (BY SRI A. SHANKAR & M.LAVA, ADVOCATES) … This Income Tax Appeal is filed under Section 260-A of Income Tax Act, 1961 praying to formulate the substantial questions of law and to allow the appeal and set aside the Order dated 22-04-2010 passed by the ITAT, Bangalore in ITA No. 1193/BANG/2009 for the assessment year 2002-03. 3 These Income Tax Appeals coming on for Hearing this day, N. Kumar J., delivered the following: JUDGMENT The revenue has preferred these appeals challenging the order passed by the Tribunal which has set aside the order passed by the Appellate Commissioner under Section 263 of the Income Tax Act (hereinafter referred to as ‘the Act’). 2. The assessee in ITA No. 842/2008 filed its return of income for the assessment year 2002-03 on 31st October, 2002. The same was processed under Section 143(1) of the Income Tax Act. The assessee received notices dated 1st of April, 2004 under Section 148 of the Act and 12th April 2004 under Section 92CA of the Act from the Transfer Pricing Officer seeking details about the international transactions entered into by the assessee with the 4 group companies on a reference made by the Assessing Authority. At the time of issue of notice under Section 92CA of the Act, no valid return was pending on the basis of which notice under Section 92CA of the Act could have been issued. Since no notice under Section 143(2) of the Act was issued pursuant to filing of the original return, the assessment is deemed to have become final. In reply to the notice issued under Section 148 of the Act, the assessee filed a letter dated 21st April, 2004 requesting the Assessing Authority to treat the return filed on 31-10-2002 as return in compliance with the notice under Section 148 of the Act. In fact the Transfer Pricing Officer on 20.1.2005 passed an order under Section 92CA of the Act accepting the pricing of the Assessing Authority. However, the Commissioner of Income Tax invoking his power under Section 263 of the Act initiated proceedings and set aside the order of the Assessing Authority on the ground that it is erroneous and prejudicial to the 5 interest of the revenue. It is against that order, the assessee preferred an appeal to the Tribunal. 3. The Tribunal has held that when two views are possible and when the Transfer Pricing Authority has accepted valuation by the Assessing Authority determining the arm’s length price, the Commissioner had no jurisdiction to interfere with the said order under Section 263 of the Act and moreover on the day the reference was made by the Assessing Authority, there was no return pending for consideration and therefore, the Tribunal has set aside the order of the Commissioner. It is against the said order, the revenue is before this Court. 4. From the aforesaid facts, it is clear that on the day the reference was made by the Assessing Authority to the Transfer Pricing Authority, there was no return pending for consideration by him and therefore, the very reference was bad. Even 6 otherwise, the said Transfer Pricing Authority did not find fault with the adjudication of determining arms length price by the Assessing Authority. In those circumstances, the Commissioner committed an error in exercising his power under Section 263 of the Act and the Tribunal was justified in interfering with the said order. Therefore, we do not see any merit in appeal No. 842/2008. Accordingly, it is dismissed. 5. Consequently, the impugned order which is the subject matter of ITA 339/2010 which is a consequential order is also dismissed. Sd/- Judge Sd/- Judge Nsu/- "