Bombay High Court
The Pr. Commissioner Of Income Tax - 6 vs John Deere India Pvt Ltd on 28 February, 2024
Bench: K.R. Shriram, Neela Gokhale
Digitally
signed by
2024:BHC-OS:3467-DB
MEERA
MEERA MAHESH
MAHESH JADHAV
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JADHAV Date:
2024.03.04
11:16:11
+0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 63 OF 2017
The Pr. Commissioner of Income Tax-6 ....Appellant
V/s.
John Deere India Pvt Ltd. ....Respondent
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Mr. Suresh Kumar for Appellant.
Mr. P. J. Pardiwalla, Senior Advocate, a/w Mr. Nitesh Joshi i/b Mr. Atul
Jasani for Respondent.
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CORAM : K.R. SHRIRAM &
DR. NEELA GOKHALE, JJ.
DATED : 28th FEBRUARY 2024 P.C. :
1 This appeal came to be disposed by an order dated 11 th June 2019.
Based on an application made by the Revenue that the order passed by this Court came to be set aside in view of the orders passed by the Apex Court in the case of Sap Labs India Private Limited v. Income Tax Officer, Circle 6, Bangalore in Civil Appeal No.8463 of 2022 along with a batch of appeals, the present appeal got listed on 6th July 2023.
2 The issue before the Apex Court was whether in every case where the Tribunal determines the Arm's Length Price, ("ALP") the same shall attain finality and the High Court is precluded from considering the determination of the ALP determined by the Tribunal, in exercise of powers under Section 260A of the Income Tax Act 1961 ("the Act"). The Apex Court answered the issue by observing that within the parameters of Section 260A of the Act in an appeal challenging the determination of the ALP, it is always open for the Meera Jadhav ::: Uploaded on - 04/03/2024 ::: Downloaded on - 09/03/2024 12:05:07 ::: 2/5 2-itxa-63-17.doc High Court to examine in each case whether while determining the ALP, the guide-lines laid down under the Act and the Rules are followed or not and whether the determination of the ALP and the findings recorded by the Tribunal while determining the ALP are perverse or not.
3 Shri Suresh Kumar submitted that in the light of the above observations made by the Apex Court, we should examine afresh in each and every case whether the guide-lines laid down under the Act and Rules are followed while determining the ALP by the Tribunal or not and whether the findings are perverse or not.
4 We agree with Mr. Pardiwalla that in the case at hand while passing the order dated 11th June 2019, this Court has not refused to scrutinise the Tribunal's findings on the ALP. This Court has considered the matter on merits and came to the conclusion that no substantial questions of law arise. The crisp order dated 11th June 2019 reads as under:
"1. Counsel for the Revenue has pressed following reframed questions before us :
(i) Whether on the facts and in circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is correct in holding that assessee maintained separate books of accounts where as during the course assessment proceedings the assessee could not produce the books while claiming deduction under section 10A ?
(ii) Whether on the facts and circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal is correct in deleting the disallowance of deduction u/s 10A of the IT Act on account of disallowances made u/s 40(a)(ia) and 43B of the IT Act, ignoring the facts that disallowance u/s 40a(ia) and 43B is not profits derived and related to manufacturing activities, for Meera Jadhav ::: Uploaded on - 04/03/2024 ::: Downloaded on - 09/03/2024 12:05:07 ::: 3/5 2-itxa-63-17.doc which the assessee has been claiming deduction u/s 10A of the IT Act ?
(iii) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in law in excluding M/s. Bodhtree consulting Ltd., eZest Solutions Ltd., Helios, Matheson Information Tech, Kals Information Systems, FCS Software Solutions Ltd., Coral Hubs Ltd., (Earlier known as Vishal Informational Technology Ltd.), Genesys International Corporation Ltd., and M/s. Apitco Ltd., from the set of comparables selected by the TPO ?
(iv) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in law in including M/s. SIP Technologies and Exports Ltd., in the set of comparables selected by the TPO ?
2. We would deal with question (i) at the end.
3. In so far as Question No.(ii) is concerned, identical issue had came up before this Court in Income Tax Appeal No.902 of 2016. The question was considered by an order dated 14th January, 2019 in the following manner :
"It is an agreed position between the parties that the issue raised herein stands concluded in favour of the Respondent-Assessee and against the Appellant-Revenue by the decision of this Court in CIT V/s. Gem Plus Jewellery India Pvt. Ltd. 330 ITR 175.
In the above view, as the issue stands concluded by the decision of this Court in Gem. Plus Jewellery India Pvt. Ltd. (Supra), the question as proposed does not give rise to any substantial question of law. Thus, not entertained."
4. This question is therefore, not entertained.
5. In so far as the question (iii) is concerned, the same arises out of transfer prising adjustment exercise. The Revenue objects to the decision of the Income Tax Appellate Tribunal to exclude the instances of several companies mentioned in the question itself on various grounds. The Tribunal in the impugned judgment had come to the conclusion that these companies do not provide comparable instances.
6. Under similar circumstances, this Court in case of Principal Commissioner of Income Tax-1 V/s. Barclays Technology Centre India (P) Ltd. (Income Tax Appeal No.1384 of 2015 decided on 26th June, 2018) had occasion to test such conclusions of the Tribunal in relation to the following companies : Bodhtree Consulting Ltd., E-Zest Solutions Ltd., Kals Information Systems Ltd. and FCS Software Solutions Ltd. We further notice that in case of Principal Commissioner of Income Tax V/s. John Deere Meera Jadhav ::: Uploaded on - 04/03/2024 ::: Downloaded on - 09/03/2024 12:05:07 ::: 4/5 2-itxa-63-17.doc India Pvt. Ltd., (Income Tax Appeal No.902 of 2016 decided on 14th January, 2019) this Court had considered the instances of Helios and Matherson Information Technology Ltd., and Kals Information Solutions Ltd., and rejected the Revenue's Appeal.
7. Remaining instances have been dealt with by the Tribunal elaborately in the impugned Judgment.
8. With respect to Coral Hubs, the Tribunal relied on its earlier decision and excluded it from the comparables primarily on the ground that the said Company was functionally different from the assessee. The assessee had pointed out that Coral Hubs was engaged in e-publishing which was different from the activities carried out by the assessee. Further it was contended that operating margin of the said company was abnormally high. The Tribunal concluded that the said Company and the assessee were functionally different. Both companies had different operating models and that therefore, the two cannot be compared.
9. We are broadly in agreement with a view of the Tribunal. The Tribunal having examined the sphere of activities of the suggested comparables and having come to the conclusion that the two companies are functionally different, decided to exclude the same from the list of comparables. No question of law arises.
10. With respect to Genesys International, the Tribunal noted that the same Company was engaged in providing geo-spatial services. The activities of the assessee were therefore, at variance from that of Genesys. It was on this count that the Tribunal held that the said Company was functionally different from the assessee. No question of law therefore, arises.
11. With the sole surviving instance of Apitco Limited, the assessee pointed out that the said Company had abnormally high operating margin of 52% and that the same was also otherwise functionally different. The Tribunal concluded that looking to the activities of the assessee and the said Company, the same are at variance. The Tribunal held that the said Company was functionally different from that of the assessee. The Tribunal referred to and relied upon the earlier decision of similar instances. No question of law therefore, arises.
12. Coming to question (iv), it arises out of the Revenue's objection to the decision of the Tribunal to include the instance of one SIP Technology and Exports Limited in the set of comparables. In this context, the objection of the Revenue was that the said SIP Technology was a loss making company and therefore, had to be excluded. The Tribunal however, held that the Company was not constantly loss making Company. It had suffered losses only in one out of the last three years under consideration. The Tribunal therefore, refused to exclude the Meera Jadhav ::: Uploaded on - 04/03/2024 ::: Downloaded on - 09/03/2024 12:05:07 ::: 5/5 2-itxa-63-17.doc said Company from the list of comparables. No question of law arises.
13. Coming to the question No.(i), brief facts are that the assessee had two units, one was eligible for deduction under Section 10A of the Act, whereas the other one was not so eligible. The dispute between the Revenue and the assessee was with respect to allocation of expenditure between these two units. The Disputes Resolution Panel resorted to the provisions of Section 80IA(8) of the Act and held that the bifurcation of operating expenses would be in the ratio of sales between eligible and non-eligible units with respect to total sales of both these units. The assessee had questioned this allocation before the Tribunal. The Tribunal appears to have deleted this addition, restoring the expenditure allocation as claimed by the assessee. However, having perused the impugned judgment of the Tribunal with the assistance of the learned Counsel for the parties, we do not find any discussion on this issue in the entire decision. The Tribunal appears to have totally lost sight of this contentious issue. We would therefore, request the Tribunal to decide this ground of Appeal of the assessee confined to the question of allocation of operative expenses between assessee's two units i.e. eligible and non-eligible units for deduction under Section 10A of the Act.
14. For convenience, we may reproduce specific ground in Appeal that the assessee had taken in this regard :
"(i) Without prejudice to Ground Nos.4.3 and 4.4, the assessee submits that the learned DRP erred in apportioning the actual expenses incurred by individual units on turnover basis without appreciating that these expenses were pertaining to the individual unit and hence, there was no reason to apportion these expenses between the two units on the basis of turnover of each of the units."
15. The Tribunal would entertain this ground and give its opinion on merits. For such limited purpose, the proceedings are placed back before the Tribunal.
16. The Income Tax Appeal is accordingly disposed of."
5 Since the order dated 11th June 2019 is in conformity with the directions given by the Apex Court, Appeal dismissed.
(DR. NEELA GOKHALE, J.) (K.R. SHRIRAM, J.)
Meera Jadhav
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