The Pr. Commissioner of Income-Tax, 5th Floor, BMTC Building, 80 Feet Road, Koramangala, Bengaluru \\u2013 560 095 and The Income-Tax Officer, Ward -11 (2), Present Address Ward \\u2013 3(1)(1), 2nd Floor, BMTC Building, 80 Feet Road, Koramangala, Bengaluru \\u2013 560 095 V. I Pass India Pvt. Ltd., Unit - 501 Level - V Prestige Solitaire No.6, Brunton Road, Bengaluru \\u2013 560 001

ITA/432/2017

AI Insights

The case involves an appeal by the Revenue against the decision of the Income Tax Appellate Tribunal, which excluded certain comparables in a transfer pricing assessment for M/s. I Pass India Pvt. Ltd. for the assessment year 2006-07. The Revenue challenged the Tribunal's decision to exclude KALS Infosystems Ltd. and Accel Transmatics Ltd. as comparables, arguing that the Tribunal followed earlier decisions that had not reached finality. Additionally, the Tribunal's direction to consider only the software segment of Megasoft Limited as comparable was contested. The High Court dismissed the appeal, referencing a prior decision which held that such matters do not give rise to substantial questions of law under Section 260-A of the Income Tax Act.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 805880 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-07-2018
• Assessment Year: misc
• Other Referred Cases: Prl. Commissioner of Income Tax & Anr. V/s. M/s.Softbrands India Pvt. Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: ARAVIND
• Keywords: Assessment Year 2006-2007; Comparable Companies; Income tax appeal; Transfer pricing
• Section: 260-A

Judgement Text

" 1/8 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 30TH DAY OF JULY 2018 PRESENT THE HON’BLE DR.JUSTICE VINEET KOTHARI AND THE HON’BLE MRS.JUSTICE S.SUJATHA I.T.A. No.432/2017 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX, 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU – 560 095 2. THE INCOME–TAX OFFICER, WARD -11 (2), PRESENT ADDRESS WARD – 3(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BENGALURU – 560 095. ...APPELLANTS (BY SRI ARAVIND K.V., ADV.) AND: M/s. I PASS INDIA PVT. LTD., UNIT - 501 LEVEL - V PRESTIGE SOLITAIRE No.6, BRUNTON ROAD, BENGALURU – 560 001 PAN: AABCG 3659H ... RESPONDENT THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 29/11/2016 PASSED IN IT(TP)A NO.1367/BANG/2010, FOR THE ASSESSMENT YEAR 2006-2007, VIDE ANNEXURE – D. PRAYING Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 2/8 TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.1367/BANG/2010 DATED 29/11/2016 VIDE ANNEXURE – D AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-3(1)(1), BENGALURU. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING: J U D G M E N T Mr. K.V.Aravind, Adv. for Appellants – Revenue. This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore in IT[TP]A No.1367/Bang/2010 dated 29.11.2016, relating to the Assessment Year 2006-07 to consider the following substantial questions of law as framed by the Revenue in the Memorandum of Appeal. “1. Whether on the facts and circumstances of the case, the Tribunal is right in law in excluding comparables, namely, Kals Info- systems Ltd., and Accel Transmatics Limited by Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 3/8 following its earlier decisions when the said decisions has not reached finality and even when the TPO has selected the said comparable by applying all the tests prescribed under the Act? 2. Whether on the facts and circumstances of the case, the Tribunal is right in law in directing the assessing authority/Transfer Pricing Officer to consider only software segment of Megasoft Limited as comparable even without bringing the fact or logic in support of the said finding?” 2. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under: Regarding Substantial Questions of Law Nos.1 & 2: “ KALS Infosystems Ltd., 5. It was held in the case of Actiance India Pvt. Ltd., that this company was developing software products and not purely or mainly software development service provider. We, therefore, accept the plea of the assessee that this is not comparable. Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 4/8 Accel Transmatics Ltd., 6. It was held in the case of Actiance India Pvt. Ltd., that this company was not comparable in the case of the assessees engaged in software development services business. 7. The facts and circumstances under which the aforesaid companies were considered as comparable is identical in the case of the assessee as well as in the case of Trilogy E- Business Software India Pvt. Ltd., (Supra). Respectfully following the decision of the Tribunal referred above, we direct the following companies be excluded from the list of 26 comparable arrived by the TPO:- 1. KALS Infosystems Ltd., 2. Accel Transmatics Ltd., 8. The assessee requested following comparables to included: 1 Geometric Software Ltd (seg) - 2 R System International Ltd (Seg) - 3 Mediasoft Solutions (P) Ltd. - 4 RS Software (India) Ltd - 5 SIP Technologies & Exports Ltd - 6 Bodhtree Consulting Ltd - 7 Synfosys Business Solutions Ltd - 8 Lanco Global Systems Ltd - Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 5/8 9. The learned counsel for the assessee stated that only Megasoft software segment is to be considered as comparable. 10. We direct the TPO to exclude 11 comparables as stated in para 4 and include 8 comparables stated in para 5 and consider inclusion of Megasoft (Software Segment).” 3. The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 [Prl. Commissioner of Income Tax & Anr. V/s. M/s.Softbrands India Pvt. Ltd.,] wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the 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 Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 6/8 interpretation of 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 substantial questions of law do not meet the requirements of Section 260-A of the Act and thus the appeals Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 7/8 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.” 4. In the circumstances, having heard the learned Counsel appearing for Appellants-Revenue, we are of the considered opinion that no substantial question of law arises for consideration in the present case. Date of Judgment 30-07-2018, ITA No.432/2017 The Pr. Commissioner of Income–tax & Another Vs. M/s.I Pass India Pvt. Ltd., 8/8 5. Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs. Copy of this order be sent to the Respondent- Assessee, forthwith. Sd/- JUDGE Sd/- JUDGE AN/- "