Karnataka High Court
The Commissioner vs M/S Dell International Services India ... on 27 August, 2018
Bench: Vineet Kothari, S.Sujatha
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 27TH DAY OF AUGUST 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.13/2017
BETWEEN:
1. THE COMMISSIONER OF INCOME TAX,
LTU, JSS TOWERS
BSK III STAGE, BENGALURU - 560 085
2. THE JOINT COMMISSIONER OF INCOME TAX
LTU,
JSS TOWERS,
BSK III STAGE
BENGALURU - 560 085 ...APPELLANTS
(BY SRI.DILIP, ADV. FOR SRI.ARAVIND K V, ADV.)
AND:
M/S DELL INTERNATIONAL SERVICES INDIA PVT. LTD.
12/A, 12/12A, 13/1A, DIVYASHREE GREENS
CHALLAGHATTA VILLAGE,
VARTHUR HOBLI,
BENGALURU - 560 071
PAN NO: AAACH 1925Q ... RESPONDENT
(BY SRI.SANDEEP HUILGOL, ADV. FOR
SRI.T SURYANARAYANA, ADV.)
Date of Judgment 27-08-2018, ITA No.13/2017
The Commissioner of Income Tax & Another Vs.
M/s.Dell International Services India Pvt. Ltd.
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THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A
OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
DATED:20/07/2016 PASSED IN IT(TP)A NO.3/BANG/2013, FOR
THE ASSESSMENT YEAR 2008-2009 ANNEXURE -D, PRAYING
TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE
ORDERS PASSED BY THE ITAT, BENGALURU IN IT(TP)A
NO.3/BANG/2013 DATED 20/07/2016 ANNEXURE-D AND
CONFIRM THE ORDER OF THE DRP CONFIRMING THE ORDER
PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, LTU,
BENGALURU.
THIS APPEAL COMING ON FOR HEARING, THIS DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:
JUDGMENT
Mr. Dilip, Adv. for Mr. K.V. Aravind, Adv. for Appellants - Revenue.
Mr. Sandeep Huilgol, Adv. for Mr. T. Suryanarayana, Adv. for Respondent - 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 'B', Bangalore, in IT[TP]A No.3/Bang/2013 dated 20.07.2016, relating to the Assessment Year 2008-09.
Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.
3/92. The appeal has been admitted on 02.01.2018 to consider the following substantial questions of law:
"1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Assessing Authority to examine contention of the Assessee in respect of Foreign Exchange Fluctuations even though the same was not warranted considering the materials on record?
2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in excluding comparables namely M/s Infosys Technologies Ltd and M/s Kals Information System Ltd and LGS Global Limited on the ground of functional dissimilarity by relying upon its earlier orders which have not reached finality and when the Transfer Pricing Officer has considered the said companies as comparables by applying all the required tests?"
3. Learned counsel for the appellants/revenue does not press question No.1. The same is placed on record.
Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.
4/94. 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 No.2:
23. We have considered the rival submissions as well as the relevant material on record. At the outside we note that the functional comparability of the Infosys Technologies Ltd. and KALS Infosystems Ltd. have been considered by the co-
ordinate bench of this Tribunal vide order dt.31.7.2015 in the case of GXS India Technology Centre Pvt. Ltd. Vs. ITO (IT(TP)A No.1444/Bang/2012) in paras 11 & 12 held as under :
xxxxxxxxxxxx Following the earlier orders of this Tribunal wherein all the relevant facts were examined by the Tribunal and it was found that these two companies cannot be considered as good comparable with company providing software development services as captive service provider. Accordingly, we direct the A.O./TPO to exclude these two companies from the list of comparables.
Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.5/9
It is pertinent to note that in the case of KALS Infosystems Ltd., no segmental data has been reported however the TPO himself has computed the margin of software development services which cannot be accepted without giving supporting details of expenditure to be allocated to various activities.
LGS Global Limited.
xxxxxxxxxxx
26. We have considered the rival submissions as well as the relevant material on record. At page 26 of the Annual Report of this company, the details of the services and sales provided by this company includes:
(i) Consultancy Services
(ii) Enterprise System Solutions
(iii) BPO (iv) Custom Development, etc. Thus it is apparent from the various services undertaken by this company that it engaged in diversified activity including Business Process Outsourcing (BPO) in the field of human resources, life sciences, legal services, supply chain management, sales and customer care etc. We further note that the company has not Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.6/9
reported segmental data and therefore the composite data from the diversified activity of this company cannot be compared with the assessee's software development activity. Accordingly, we direct the A.O. / TPO to exclude this company from the set of comparables."
5. 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:
"Conclusion:
55. A substantial quantum of international trade and transactions depends Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.7/9
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 considered opinion, give rise to any substantial question of law.
Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.
8/956. 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 a sufficient reason to invoke Section 260-A of the Act before this Court.
Date of Judgment 27-08-2018, ITA No.13/2017 The Commissioner of Income Tax & Another Vs. M/s.Dell International Services India Pvt. Ltd.
9/958. The appeals filed by the Revenue are therefore dismissed with no order as to costs."
6. 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 PMR