Karnataka High Court
The Commissioner Of vs M/S Marlabs Software Pvt Ltd on 18 July, 2018
Bench: Vineet Kothari, S.Sujatha
1/9
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 18TH DAY OF JULY 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.202/2015
BETWEEN :
1. THE COMMISSIONER OF INCOME TAX,
C.R.BUILDINGS, QUEENS ROAD,
BANGALORE-1,
2. THE DEPUTY COMMISSIONER
OF INCOME TAX, CIRCLE -12(1),
BANGALORE. ...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND :
M/s MARLABS SOFTWARE PVT. LTD.,
14TH FLOOR, BAGMANE CITRINE,
BAGMANE WORLD TECHNOLOGY CENTRE,
K.R.PURAM, MARATHALLI ORR,
MAHADEVAPURA VILLAGE,
K.R.PURAM HOBLI
BANGALORE-560 048,
PAN: AACCM 6627 Q ...RESPONDENT
(BY SRI S.SHARATH, ADV. FOR SRI CHYTHANYA K.K., ADV.)
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME
TAX ACT 1961, ARISING OUT OF ORDER DATED 10/12/2014
PASSED IN IT(TP)A NO.72/BANG/2014, FOR THE ASSESSMENT
YEAR 2009-2010 ANNEXURE-A. PRAYING TO: 1. DECIDE THE
Date of Judgment 18-07-2018, ITA No.202/2015
The Commissioner of Income Tax & another Vs.
M/s Marlabs Software Pvt. Ltd.,
2/9
FOREGOING QUESTION OF LAW AND/OR SUCH OTHER
QUESTIONS OF LAW AS MAY BE FORMULATED BY THE
HON'BLE COURT AS DEEMED FIT. 2. SET ASIDE THE
APPELLATE ORDER DATED 10/12/2014 PASSED BY THE ITAT,
'A' BENCH, BANGALORE, AS SOUGHT FOR, IN THE
RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN
IT(TP)A NO.72/BANG/2014 FOR ASSESSMENT YEAR 2009-2010
ANNEXURE-A.
THIS APPEAL COMING ON FOR HEARING, THIS DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:
JUDGMENT
Mr. E.I. Sanmathi, Adv. for Appellants - Revenue. Mr. S.Sharath, Adv., for Mr. Chythanya K.K., Adv. - Assessee.
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 'A', Bangalore in IT[TP]A No.72/Bang/2014 dated 10.12.2014, relating to the Assessment Year 2009-10.
2. This Appeal has been admitted on 9.2.2016 to consider the following substantial questions of law as framed by the Revenue in the Memorandum of Appeal.
Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 3/9 "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to exclude M/s Bodhtree Consulting Ltd., as comparable holding it as functionally different by relying on the decision in the case of M/s Mindteck (India) Ltd., even though the said comparable is applicable to case of assessee and decision relied upon by Tribunal has not reached finality?
2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in applying turnover filter limit of Rs.200 Crores for selecting comparables by relying on its earlier decision even though the said decisions have not reached finality?
3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the TPO to exclude M/s Infosys BPO Ltd., M/s Accentia Technologies Ltd., and M/s Eclerx Services Ltd., by relying on its earlier decision which have not reached finality and without taking note of the facts recorded by TPO which clearly demonstrates that the said comparables are clearly to applicable to case of assessee?"
Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 4/9 Regarding Substantial Question No.1:
3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
"9.3. We have heard both parties and perused and carefully considered the material on record, including the judicial decision cited (supra). We find that the co-ordinate bench of this Tribunal in the case of Mindteck (India) Ltd., in IT(TP)A No.70/Bang/2014 dt.21.8.2014 for Assessment Year 2009-10 has excluded this company form the final list of comparable companies. the relevant portion of this order at para 16 thereof is extracted hereunder:
xxxxxx Following the above decision of the co- ordinate bench of this Tribunal in the case of Mindteck (India) Ltd., (supra), we direct that this company be excluded from the list of comparables."
Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 5/9 Regarding Substantial Question No.2:
"10.3.1. We have heard both parties and perused and carefully considered the material on record, including the judicial decision cited. The seven companies that the assessee to exclude from the TPO's final list of comparables are as under:
xxxxx 10.3.2. We find that the co-ordinate bench of this Tribunal, in the case of Mindteck (India) Ltd. (supra) has excluded the above 7 companies from the list of comparables, by applying the turnover filter of Rs.200 Crores. The relevant portion of the order of the co-ordinate bench in the case of Mindteck (India) Ltd. (supra), at paras 17 and 18 of its order are extracted hereunder:
xxxxx 10.3.3. Following the above decision of the co-ordinate bench in the case of Mindteck (India) Ltd. (supra), we hold that the comparables chosen by the TPO at S.Nos.5 to 11 of the final list of comparables, listed at para 10.3.1 of this order Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 6/9 (supra), have to be excluded as comparables by applying the turnover filter of Rs.200 Crores, for the purpose of determining the ALP of the international transaction in the software development services segment in this appeal. It is ordered accordingly."
Regarding Substantial Question No.3:
"13. Infosys BPO Ltd.
13.1. The comparability of this company with an ITES company was considered by the co- ordinate bench of this Tribunal in the case of Mindteck (India) Ltd. (supra). The relevant portion of the above order at paras 30 and 31 are extracted hereunder:
xxxxxx 13.2. Following the above decision of the co-ordinate bench of this Tribunal, we hold that Infosys BPO Ltd., chosen by the TPO as a comparable is to be excluded from the list of comparables."
4. The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 c/w 537/2015 dated 25.06.2018 Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 7/9 [Prl. Commissioner of Income Tax & Anr. V/s.
M/s.Softbrands India Pvt. Ltd.,] wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the 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 Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 8/9 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 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 Date of Judgment 18-07-2018, ITA No.202/2015 The Commissioner of Income Tax & another Vs. M/s Marlabs Software Pvt. Ltd., 9/9 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. In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
6. Hence, the Appeal filed by the Appellants-
Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/-
JUDGE Sd/-
JUDGE AN/-