Karnataka High Court
The Commissioner Of Income-Tax vs M/S Toyota Kirloskar Auto Parts ... on 30 August, 2018
Bench: Vineet Kothari, S.Sujatha
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 30TH DAY OF AUGUST 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.68/2018
BETWEEN :
1. THE COMMISSIONER
OF INCOME-TAX, LTU,
JSS TOWERS, BSK III STAGE,
BENGALURU 560085.
2. THE DEPUTY COMMISSIONER
OF INCOME-TAX, LTU
JSS TOWERS, BSK III STAGE,
BENGALURU 560085. ...APPELLANTS
(BY SRI DILIP, ADV FOR SRI K.V.ARAVIND, ADV.)
AND :
M/s. TOYOTA KIRLOSKAR AUTO
PARTS PVT. LTD., (TKAP), PLOT No.21,
BIDADI INDUSTRIAL AREA, BIDADI,
RAMANAGARA DISTRICT-562109.
PAN: AABCT 5590Q. ...RESPONDENT
(BY SRI ANKUR PAI, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION
260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
DATED 13.09.2017 PASSED IN IT(TP)A No.206/BANG/2016, FOR
THE ASSESSMENT YEAR: 2011-2012 VIDE ANNEXURE-D,
PRAYING TO: I] FORMULATE THE SUBSTANTIAL QUESTIONS OF
LAW STATED ABOVE. II] ALLOW THE APPEAL AND SET ASIDE
Date of Judgment 30-08-2018, ITA No.68/2018
The Commissioner of Income-Tax & Another Vs.
M/s.Toyota Kirloskar Auto Parts Pvt. Ltd.,
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THE ORDERS PASSED BY THE INCOME-TAX APPELLATE
TRIBUNAL, BENGALURU IN IT(TP)A No.206/BANG/2016 DATED:
13.09.2017 VIDE ANNEXURE-D AND CONFIRM THE ORDER OF
THE DRP CONFIRMING THE ORDER PASSED BY THE DEPUTY
COMMISSIONER OF INCOME TAX, LTU, BENGALURU.
THIS APPEAL COMING ON FOR ADMISSION, THIS
DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
JUDGMENT
Mr. Dilip, Adv. for Mr. Aravind.K.V., Adv. for Appellants - Revenue. Mr. Ankur Pai, 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 'C', Bangalore, in IT[TP]A No.206/Bang/2016 dated 13.09.2017, relating to the Assessment Year 2011-12.
2. The substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under:
"1. Whether on the facts and in the circumstances of the case, the Tribunal is right in setting aside the issues of determination of ALP Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 3/9 on the international transaction of payment of Royalty fees to its AEs directing the TPO to reconsider the issue on the most appropriate method and holding that, even under CUP method a comparable should be selected without appreciating that the application of TNMM in such a case subsidises the shortfall in one transaction with excess of another and affirmed the applicability of CUP and the payments made need to be commensurate with the volume and quality of service? If no entity would have incurred an expenditure on a service similar to the one obtained by the assessee, the ALP has been rightly determined at NIL. As no expenditure would have been incurred, there is no necessity to apply a particular method to arrive at such conclusion?
2. Whether on the facts and in the circumstances of the case, the Tribunal is right in setting aside the issue of determination of ALP of the international transaction royalty fees holding that the revenue authorities have to adopt uniform and consistent approach in the case of the assessee when; the principle of re-judicata is not applicable in income-tax proceedings?
Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 4/9
3. Whether on the facts and in the circumstances of the case, the Tribunal erred in not appreciating that it is not possible to decide the value as NIL of an international transaction in the nature of management services without looking into the benefit derived there from as Benefits Test is integral aspect to the Transfer Pricing Analysis?"
3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned the findings as under:
Regarding Substantial Question of Law Nos.1 to 3:
"4.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. We find that on an identical issue to the one under consideration before us, has been dealt with by a co-ordinate bench of this Tribunal in the assessee's own case for asst. year 2007-08 in IT[TP]A No.1356/Bang/2011 dated 22/10/2014. The co- ordinate bench in the aforesaid order, after comprehensively analyzing the issue, remitted the Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 5/9 issue of determining the ALP of royalty payments by the assessee to its AE to the file of the AO/TPO for fresh examination and adjudication after affording the assessee adequate opportunity of being heard. We also find that the aforesaid finding rendered by the co-ordinate bench in its order for asst. year 2007-08 [Supra] has been followed by other co-ordinate benches of this Tribunal in the assessee's own case for asst. year's 2008-09, 2009-10 and 2010-11 [supra]. In fact, on this very issue, the co-ordinate bench in its order in the assessee's own case for asst. year 2010-11 in IT[TP]A Nos.298 & 554/Bang/2015 dated 13/4/2016, has followed the decision of the co-ordinate bench for asst. year 2007-08 [Supra] holding under at pages 8 to 8.3 of its order.
"xxxxx"
4.3.2 Respectfully, following the decisions of the co-ordinate bench of this Tribunal for asst. year's 2007-08 and 2010-11 in the assessee's own case [Supra], we remit the issue of determination of the ALP of royalty payments by the assessee to its AE in the year under consideration, by adopting TNMM as the MAM, to the file of the AO/TPO with the direction to adhere to the ratio of the findings Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 6/9 rendered by the co-ordinate benches for asst. year 2007-08 and 2010-11. While doing so, the TPO shall keep in view and follow the order of the TPO passed u/s. 254 r.w.s 92CA of the Act dated 22/3/2016 for asst. year 2007-08. We hold and direct accordingly. Consequently, grounds I [1 to 11] of the assessee's appeal are allowed for statistical purposes to the extent as indicated above."
4. However, this Court in a recent judgment in I.T.A. Nos.536/2015 c/w 537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax & Anr.
-v- M/s Softbrands India Pvt. Ltd.,) 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 maintainable.
The relevant portion of the said judgment is quoted below for ready reference:
Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 7/9 "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 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 Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 8/9 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 this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all Date of Judgment 30-08-2018, ITA No.68/2018 The Commissioner of Income-Tax & Another Vs. M/s.Toyota Kirloskar Auto Parts Pvt. Ltd., 9/9 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 counsels appearing for the parties, we are therefore of the opinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly.
No costs.
Sd/-
JUDGE Sd/-
JUDGE NC.