Karnataka High Court
The Pr Commissioner Of Income Tax vs M/S Symbol Technologies India Pvt Ltd on 27 September, 2024
Author: S.G.Pandit
Bench: S.G.Pandit
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NC: 2024:KHC:40430-DB
ITA No. 239 of 2023
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.239 OF 2023
BETWEEN:
1. THE PR. COMMISSIONER
OF INCOME TAX
5TH FLOOR, BMTC BUILDILNG,
80 FEET ROAD,
KORMANGALA,
BENGALURU-560095.
2. THE DEPUTY COMMISSIONER
OF INCOME-TAX
CIRCLE-6(1)(2),
PRESENT ADDRESS
Digitally ACIT, CIRCLE-6(1)(1),
signed by
BHARATHI S 2ND FLOOR, BMTC BUILDING,
Location: 80 FEET ROAD, KORMANGALA,
HIGH COURT
OF BENGALURU-560095.
KARNATAKA
...APPELLANTS
(BY SRI. DILIP.M, ADVOCATE A/W
SRI. RAVIRAJ.Y.V., ADV.)
AND:
M/S. SYMBOL TECHNOLOGIES
INDIA PVT LTD
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NC: 2024:KHC:40430-DB
ITA No. 239 of 2023
201, NO.3, PRESTIGE SIGMA,
VITTAL MALLYA ROAD,
ASHOK NAGAR,
BENGALURU-560001.
PAN: AAECS 7171H.
...RESPONDENT
(BY SMT. TANMAYEE RAJKUMAR, ADVOCATE)
THE ITA/INCOME TAX APPEAL IS FILED UNDER SEC.260-
A OF THE INCOME TAX ACT, 1961, PRAYING TO FORMULATE
THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND
TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED
BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN
ITA NO.2221/BANG/2019 DATED 20.05.2022 FOR
ASSESSMENT YEAR 2011-2012 ANNEXURE- G CONFIRMING
THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM
THE ORDER PASSED BY THE ASST. COMMISSIONER OF
INCOME-TAX , CIRCLE-6(1)(1), BENGALURU AND ETC.
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
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NC: 2024:KHC:40430-DB
ITA No. 239 of 2023
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE S.G.PANDIT) Heard the learned counsel Sri. Dilip.M., along with Raviraj.Y.V., learned counsel for the 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 20.05.2022 passed by the Income Tax Appellate Tribunal, 'C' Bench, Bengaluru (for short, 'Appellate Authority') in ITA.No.2221/Bang/2019 for the assessment year 2011-12.
3. This Court, admitted the appeal on 05.12.2023 to consider the following substantial questions of law:
1. "Whether on the facts and circumstances of the case, the Tribunal's order can be said as perverse in nature in holding that, Persistent Systems Ltd., Larsen & Toubro Infotech Ltd., Infosys Ltd., Communications Technologies Ltd. Cannot be taken -4- NC: 2024:KHC:40430-DB ITA No. 239 of 2023 as comparable holding that the size and turnover of the company are deciding factors for treating a company as a comparable"?
2. "Whether on the facts and in the circumstances of the case, the Tribunal is correct in fact and law in disregarding the position of law that there could be differences between the enterprises compared under the TNMM method that are not likely to materially affect the price or cost charged or the profits accruing to such enterprises?
3. "Whether on the facts and circumstances of the case, the Tribunal is right in law not following its own decision in the case of M/s Societe General Global Solution Centre (P) Ltd. Vs DCIT, Circle- 12(3), Bangalore vide IT(TP) A No. 118 (Bang)2011, the jurisdictional ITAT Bangalore has opined that the turnover cannot be relevant criteria in a service sector where fixed overheads are nominal and the cost of service is in direct proportioned to the services rendered".
4. "Whether on the facts and circumstances of the case the order of the Tribunal is right in law in rejecting comparable cases by insistence on strict comparability under TNMM defeats the very purpose -5- NC: 2024:KHC:40430-DB ITA No. 239 of 2023 of the law relating to determination of ALP under income Tax Act"?
5. "Whether the Tribunal is right in law in including comparable i.e. FCS Software Solutions Ltd as comparables on functional similarity only when there is doubt in its operating activity & majority of it is financial activity"?
6. "Whether on the facts and circumstances of the case, the Tribunal was right in fact and in law by relying upon the decision in the case of Huawei Technologies India (P) Ltd., wherein the Tribunal held that the working capital adjustment is to be allowed as per actual on the final set of comparables"?
7. "Whether on the facts and circumstances of the case, the Tribunal was right in fact and in law in directing to allow Working capital adjustments without considering that the average working capital may not show the actual working capital employed during the year"?
8. "Whether on the facts and circumstances of the case, the Tribunal was right in law in providing working capital adjustment to the taxpayer without considering that the disclosures in the Annual report -6- NC: 2024:KHC:40430-DB ITA No. 239 of 2023 does not contain a breakup of trade and non-trade Debtors and Creditors"?
9. "Whether on the facts and circumstances of the case the Tribunal was right in law in providing working capital adjustment to the taxpayer without considering that Cost of capital is different for different companies"?
10. "Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not considering the fact that the normal credit period is 30 days which was confirmed by Tribunal itself and accordingly erred in not sustaining the interest on delayed receivables computed by the TPO and moreover assesse raised this issue for first time before Tribunal"?
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.-7-
NC: 2024:KHC:40430-DB ITA No. 239 of 2023
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 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.: 50