THE PR COMMISSIONER OF INCOME TAX V. M/S BROADCOM COMMUNICATIONS

ITA/687/2017

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The case involves an appeal by the Pr. Commissioner of Income-tax and the Deputy Commissioner of Income-Tax against M/s. Broadcom Communications Technologies Pvt. Ltd. The appeal was filed under Section 260-A of the Income Tax Act, 1961, challenging the decision of the Income Tax Appellate Tribunal (ITAT) which directed the exclusion of certain comparables used for determining the arm's length price in transfer pricing. The Revenue contended that the Tribunal erred in excluding comparables like M/s. Bodhtree Consulting Ltd, Persistent Systems Ltd, Larsen and Tourbo Infotech, and Infosys Technologies Ltd, arguing that these were chosen based on functional similarity and through qualitative and quantitative tests. However, the High Court dismissed the appeal, referencing a recent judgment that emphasized the non-maintainability of such appeals under Section 260-A unless an ex-facie perversity in the Tribunal's findings is established.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 691946 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-07-2018
• Assessment Year: misc
• Other Referred Cases: Pr. Commissioner of Income Tax, Bangalore and Another Vs. M/s. Softbrands India P.Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MANASA ANANTHAN
• Assessee Lawyers: ARAVIND
• Keywords: Arm's Length Price; Comparables; Income Tax; Transfer pricing
• Section: 92C(2); 260-A

Judgement Text

" 1/7 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 5th DAY OF JULY 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE Mrs.JUSTICE S.SUJATHA I.T.A.No.687/2017 Between: 1. The Pr. Commissioner of Income-tax, CIT(A) 5th floor, BMTC Building, 80 Feet Road, Kormangala. Bengaluru-560 095. 2. The Deputy Commissioner of Income-Tax, Circle-11(2), Present Address Circle-1(1)(2), 2nd Floor, BMTC Building, 80 Feet Road Kormangala, Bengaluru-560 095. …Appellants (By Mr. Aravind K.V. Advocate) And: M/s. Broadcom Communications Technologies Pvt. Ltd., Campus 1A, 4th Floor, RMZ Ecospace, Bellandur Village, Varthur Hobli, Bengaluru-560 103. PAN: AACCB 8136B. …Respondent (By Ms. Manasa Ananthan. Advocate) Date of Judgment 05-07-2018 I.T.A.No.687/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Broadcom Communications Technologies Pvt. Ltd., 2/7 This I.T.A. is filed under Section 260-A of Income Tax Act 1961, praying 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.145/Bang/2014 dated 17-03-2017 Annexure - D and confirm the order of the DRP confirming the order passed by the Deputy Commissioner of Income Tax, Circle-1(1)(2), Bengaluru & etc. This I.T.A. coming on for Admission, this day Dr. Vineet Kothari J. delivered the following:- J U D G M E N T Mr. Aravind K.V. Adv. for Appellants – Revenue Ms. Manasa Ananthan Adv. for Respondent - Assessee 1. The Appellants - Revenue have filed this appeal raising purported substantial questions of law arising from the Order of the learned Income Tax Appellate Tribunal Bangalore Bench “B”, Annexure D dated 17/03/2017 in IT(TP)A.No.145/Bang/2014 for AY 2009-10. 2. The Revenue has suggested the substantial question of law, which is quoted below for ready reference: Date of Judgment 05-07-2018 I.T.A.No.687/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Broadcom Communications Technologies Pvt. Ltd., 3/7 “Whether on the facts and circumstances of the case, the Tribunal is right in law in directing the TPO to exclude comparables such as M/s. Bodhtree Consulting Ltd, Persistent Systems Ltd, Larsen and Tourbo Infotech and Infosys Technologies Ltd as comparable’s by following its earlier orders which has not reached finality and even when the TPO had chosen the comparable’s on the basis of its functional similarity and by application of qualitative and quantitative tests?” 3. In so far as the substantial question of law raised by the Revenue in this appeal is concerned, the learned ITAT in its Order dated 17/03/2017 has given the findings, the relevant portion of which is quoted below for ready reference:- “6. We have considered the rival submissions as well as relevant material on record. At the outset, we note that the functional comparability of five companies has been considered by the co-ordinate bench of this Tribunal in the case of Infinera India Date of Judgment 05-07-2018 I.T.A.No.687/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Broadcom Communications Technologies Pvt. Ltd., 4/7 Pvt. Ltd. Vs. ITO 72 taxmann.com 68 in paras 12 to 17 as under: … … … Following the earlier order of this Tribunal, we direct the A.O/TPO to exclude these five companies from the set of comparables. The AO/TPO is directed to recompute the arm’s length by considering the remaining comparable companies. Needless to say the benefit of 2nd proviso to section 92C (2) be considered.” 4. However, this Court in a recent judgment in I.T.A.No.536/2015 c/w. I.T.A.No.537/2015 (Pr. Commissioner of Income Tax, Bangalore and Another Vs. M/s. Softbrands India P.Ltd.,) rendered on 25-06-2018, 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 Date of Judgment 05-07-2018 I.T.A.No.687/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Broadcom Communications Technologies Pvt. Ltd., 5/7 maintainable and 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 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 Date of Judgment 05-07-2018 I.T.A.No.687/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Broadcom Communications Technologies Pvt. Ltd., 6/7 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 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 Date of Judgment 05-07-2018 I.T.A.No.687/2017 The Pr. Commissioner of Income-Tax, CIT (A) & Anr. Vs. M/s. Broadcom Communications Technologies Pvt. Ltd., 7/7 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.” 5. Having heard the learned counsel for the appellant – Revenue, this Court is satisfied that no substantial question of law would arise in the present case and the appeal filed by the Revenue is therefore, liable to be dismissed. Accordingly, it is dismissed. No costs. Sd/- JUDGE Sd/- JUDGE BMV* "