Karnataka High Court
The Pr Commissioner Of Income Tax-4 vs M/S Lm Wind Power Technologies India ... on 5 July, 2018
Bench: Vineet Kothari, S.Sujatha
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 5TH DAY OF JULY 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A.No.213/2017
BETWEEN :
1. THE Pr. COMMISSIONER
OF INCOME TAX-4
BMTC COMPLEX
KORAMANGALA
BANGALORE.
2. THE Dy. COMMISSIONER
OF INCOME TAX
CIRCLE 4[1][1]
BMTC COMPLEX,
KORAMANGALA
BANGALORE. ...APPELLANTS
(BY SRI SANMATHI.E.I., ADV.)
AND :
M/s. LM WIND POWER
TECHNOLOGIES INDIA PVT. LTD.,
3RD FLOOR, RMZ INFINITY
TOWER 'B'
BANGALORE-560016. ...RESPONDENT
(BY Mrs. MANASA ANANTHAN, ADV.)
Date of Judgment 05-07-2018, ITA No.213/2017
The Pr. Commissioner of Income Tax-4 & another Vs.
M/s. LM Wind Power Technologies India Pvt. Ltd.,
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THIS INCOME TAX APPEAL IS FILED UNDER SECTION
260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
DATED 08.09.2016 PASSED IN IT[TP]A NO.289/BANG/2016, FOR
THE ASSESSMENT YEAR 2011-12, ANNEXURE-A, PRAYING TO
[1]. DECIDE THE FOREGOING QUESTION OF LAW AND / OR
SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED
BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE
APPELLATE ORDER DATED 08.09.2016 PASSED BY THE ITAT,
'A' BENCH, BENGALURU, AS SOUGHT FOR, IN THE
RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS
No.IT[TP]A No.289/BANG/2016 FOR ASSESSMENT YEAR 2011-
2012, ANNEXURE-A AND GRANT SUCH OTHER RELIEF AS
DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, Dr.
VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
JUDGMENT
Mr. Sanmathi.E.I., Adv. for Appellants - Revenue. Mrs. Manasa Ananthan, 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 'A', Bangalore, in I.T.[T.P]A. No.289/Bang/2016 dated 08.09.2016, relating to the Assessment Year 2011-12.
2. The appeal has been admitted on 05.12.2017 to consider the substantial question of law Date of Judgment 05-07-2018, ITA No.213/2017 The Pr. Commissioner of Income Tax-4 & another Vs. M/s. LM Wind Power Technologies India Pvt. Ltd., 3/8 formulated in the appeal memorandum, which reads thus:
"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the assessing authority / transfer pricing officer to allow risk adjustment of 1% to the assessee as per prevailing norms by following its earlier decision in case of Intellinet Technologies P. Ltd., in ITA No.1237/Bang/2007 which has been challenged before this Hon'ble Court and even when no adjustment on account of risk is required to be allowed to assessee as per Rule 10(3)?"
3. The learned Tribunal has though passed a very brief order holding that the grounds of appeals raised by the appellant are misconceived but they were extracted from the submissions made by the assessee and have relied upon the earlier decision of the learned Tribunal and order of DRP for preceding year A.Y. 2010-11. Para No.3 of the said order of the learned Tribunal is quoted below for ready reference:
Date of Judgment 05-07-2018, ITA No.213/2017 The Pr. Commissioner of Income Tax-4 & another Vs. M/s. LM Wind Power Technologies India Pvt. Ltd., 4/8 "3. The learned counsel for the assessee submitted as under:
As regards adjustment on account of risk analysis, the objections of the tax payer have been considered along with the judicial decisions cited. This issue was before DRP for AY 2010-11 also and the objection of the assessee was accepted. The Hon'ble Bangalore ITAT in case of Intellinet Technologies Pvt. Ltd., Vs. ITO [ITA No.1237/Bang/2007] rejected the tax department's argument that a single customer risk borne by the tax payer in its status of a captive service provider was equivalent to the marketing and technical risk attached to the comparables. The Hon'ble ITAT held that the risk of having a single customer is an anticipated risk which may or may not happen unlike the marketing and technical risks which have to be contemporaneously dealt with by the comparables. The ITAT did not accept that the risk adjustment should be by 5% or at the difference of PLR of the RBI and the banks, and directed the TPO to consider all the contentions and decide the percentage of risk adjustments to be made in accordance Date of Judgment 05-07-2018, ITA No.213/2017 The Pr. Commissioner of Income Tax-4 & another Vs. M/s. LM Wind Power Technologies India Pvt. Ltd., 5/8 with law. Respectfully following the decision of the Hon'ble ITAT Bangalore as above the TPO is directed to decide the percentage of risk adjustments to be calculated in this case. By means of guidance, it may be mentioned that in the case of DCIT Vs. Hello Soft Pvt. Ltd., [2013] 32 taxmann.com 101 [ITAT, Hyd] 1% adjustment to the average margin was provided towards risk differential.
4. We are of the opinion that Revenue's grounds are misconceived and hence we dismiss the same."
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 [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:
Date of Judgment 05-07-2018, ITA No.213/2017 The Pr. Commissioner of Income Tax-4 & another Vs. M/s. LM Wind Power Technologies India Pvt. Ltd., 6/8 "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 05-07-2018, ITA No.213/2017 The Pr. Commissioner of Income Tax-4 & another Vs. M/s. LM Wind Power Technologies India Pvt. Ltd., 7/8 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 05-07-2018, ITA No.213/2017 The Pr. Commissioner of Income Tax-4 & another Vs. M/s. LM Wind Power Technologies India Pvt. Ltd., 8/8 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 NC.