THE PR COMMISSIONER OF INCOME TAX V. M/S CITRIX R AND D INDIA PVT LTD

ITA/345/2019

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The Income Tax Appeal No. 345 of 2019 was filed by the Principal Commissioner of Income Tax and the Deputy Commissioner of Income-Tax against M/S. Citrix R and D India Pvt. Ltd. The appeal questioned the correctness and legality of an order passed by the Income Tax Appellate Tribunal, Bengaluru, concerning the assessment year 2011-12. The substantial questions of law included issues related to the comparability of companies under the Transfer Pricing Officer's filters, the nature of foreign exchange transactions, and the disallowance of belated remittance of EPF/ESI. The revenue argued that the tax effect was less than Rs.2 Crores, referencing a Circular from the Central Board of Direct Taxes, which the court considered in deciding to dispose of the appeal with the possibility of revival under certain exceptions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 746049 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 27-09-2024
• Assessment Year: misc
• Other Referred Cases: M/s. Essae Teroka Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: TANMAYEE RAJKUMAR
• Assessee Lawyers: DILIP M; RAVI RAJ
• Keywords: Comparable Companies; Foreign exchange transactions; Income tax appeal; Transfer pricing; EPF ESI Remittance
• Section: 260-A

Judgement Text

" - 1 - NC: 2024:KHC:40397-DB ITA No. 345 of 2019 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27TH DAY OF SEPTEMBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO.345 OF 2019 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-2 (1) (1), 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA, BENGALURU - 560 095. …APPELLANTS (BY SRI. DILIP M, ADVOCATE A/W SRI. RAVI RAJ Y.V, ADVOCATE) Digitally signed by B LAVANYA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:40397-DB ITA No. 345 of 2019 AND: M/S. CITRIX R AND D INDIA PVT. LTD., PRESTIGE DYNASTY, GROUND FLOOR, 33/2, ULSOOR ROAD, BENGALURU - 560 049, PAN: AABCN 3639C. …RESPONDENT (BY SMT. TANMAYEE RAJKUMAR, ADVOCATE) THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31.12.2018 PASSED IN IT(TP)A NO.592/BANG/2016, FOR THE ASSESSMENT YEAR 2011-12 PRAYING TO I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.G.PANDIT and HON'BLE MR JUSTICE C.M. POONACHA - 3 - NC: 2024:KHC:40397-DB ITA No. 345 of 2019 ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard the learned counsel Sri.Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for appellants/Revenue and learned counsel Smt.Tanmayee Rajkumar for respondent/assessee. 2. The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 31.12.2018 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru (for short, ‘Appellate Authority’) in IT(TP)A.No.592/Bang/2016 for the assessment year 2011-12. 3. This Court, admitted the appeal on 24.10.2019 to consider the following substantial questions of law: \"i. Whether on the facts and circumstances of the case, the Tribunal is right in law in holding that M/s.R.S.Software Pvt. Ltd., and M/s.Acropetal Technologies Ltd., cannot be taken as comparable, - 4 - NC: 2024:KHC:40397-DB ITA No. 345 of 2019 when it satisfies all the qualitative and quantitative filters adopted by the Transfer Pricing Officer? ii. Whether on the facts and in the circumstances of the case and in law, the right in law in seeking exact comparability while searching for comparable companies of the assessee under TNMM method whereas requirement of law and international jurisprudence require seeking similar comparable companies? iii. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in holding that the foreign exchange transactions are to be considered as operating in nature, when the Rule 10B(2)(d) stipulates that the net profit margin realized by the taxpayer in the international transaction shall alone be computed for comparability analysis under TNMM? iv. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in confirming the finding of the DRP that foreign exchange is operative in nature by following its earlier order which has not reached finality? v. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside disallowance of belated remittance of EPF / ESI by - 5 - NC: 2024:KHC:40397-DB ITA No. 345 of 2019 following judgment of this Hon'ble Court in case of M/s.Essae Teroka Ltd.,?\" 4. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue. 5. On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024. 6. In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is - 6 - NC: 2024:KHC:40397-DB ITA No. 345 of 2019 kept open to be adjudicated in an appropriate proceeding. Sd/- (S.G.PANDIT) JUDGE Sd/- (C.M. POONACHA) JUDGE SMJ List No.: 4 Sl No.: 8 "