Karnataka High Court
The Pr. Commissioner Of Income Tax vs M/S Cypress Semi-Conductor (I) Pvt Ltd 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.412/2018
BETWEEN :
1. THE PR. COMMISSIONER
OF INCOME-TAX,
5TH FLOOR, BMTC BUILDING
80 FEET ROAD, KORMANGALA
BENGALURU-560095.
2. THE ASST. COMMISIONER
OF INCOME-TAX, CIRCLE-2(1)(1)
2ND FLOOR, BMTC BUILDING
80 FEET ROAD, KORMANGALA
BENGALURU-560095. ...APPELLANTS
(BY SRI DILIP, ADV. FOR SRI ARAVIND.K.V., ADV.)
AND :
M/s. CYPRESS SEMI-CONDUCTOR (I) PVT. LTD.,
No.65/2, BAGMANE TECH PARK
BLOCK-C, BAGMANE LAURELL
C V RAMAN NAGAR
BENGALURU-560093
PAN: AABCC 2470Q. ...RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SECTION
260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
DATED 25.01.2018 PASSED IN IT(TP)A No.434/BANG/2015, FOR
THE ASSESSMENT YEAR: 2010-2011, VIDE ANNEXURE-D,
Date of Judgment 30-08-2018, ITA No.412/2018
The Pr. Commissioner of Income-Tax & Another Vs.
M/s. Cypress Semi - Conductor [I] Pvt. Ltd.,
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PRAYING TO: I] FORMULATE THE SUBSTANTIAL QUESTIONS OF
LAW STATED ABOVE. II] ALLOW THE APPEAL AND SET ASIDE
THE ORDERS PASSED BY THE INCOME-TAX APPELLATE
TRIBUNAL, BENGALURU IN IT(TP)A No.434/BANG/2015 DATED:
25.01.2018, VIDE ANNEXURE-D CONFIRMING THE ORDER OF
THE DRP AND CONFIRM THE ORDER PASSED BY THE ASST.
COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), 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.
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.434/Bang/2015 dated 25.01.2018, relating to the Assessment Year 2010-11.
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 was right Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 3/9 in holding that the certain comparables, namely, M/s. ICRA Techno Analytics Ltd, M/s. Persistent Systems & Solutions Ltd., M/s. Persistent Systems Ltd., M/s. Infosys Ltd., and M/s. Kals Information Ltd., chosen by TPO cannot be taken as comparable, being functionally different when it satisfies all the qualitative and quantities filters adopted by the TPO and when selection of comparables in a case depends in transfer pricing on assessee specific data analysis and the transfer pricing officer has passed order on the basis of specific facts on record in the case of the assessee?
2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law following orders of this Hon'ble Court with regard to issues pertaining to computation of income under section 10A and reconstruction of business when the orders relied upon by the Tribunal has not reached finality? "
3. Learned Counsel for the Appellants-Revenue does not press substantial question No.2.
4. Submission is taken on record.
Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 4/9
5. 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.1:
"7. As per Grounds No.7 & 8, the grievance of the revenue is regarding the directions of DRP to exclude 1] M/s. ICRA Techno Analytics Ltd., 2] M/s. Persistent Systems & Solutions Ltd., and 3] M/s. Persistent Systems Ltd., 4] Infosys Ltd., and 5] M/s. Kals Information Systems Ltd. Learned AR of the assessee has placed reliance on the tribunal order rendered in the case of Electronics for Imaging India Pvt. Ltd., [Supra]. In Para 8 of this tribunal order, the tribunal has noted the profile of that assessee and as per the same, that assessee was engaged in the business of developing software solution services as well as rendering sales and support services for its products. In the present case, the TPO has noted on page 2 of his order about the business profile of the present assessee and as per the same, the assessee is providing software development services for projects assigned from Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 5/9 its Group Companies. Hence, in our considered opinion, the profile of both are similar and therefore, this tribunal order is applicable in the present case. In para 13 to 16 of this tribunal order, it was held that there is no error or illegality in the findings of DRP that M/s. ICRA Techno Analytics Ltd., is functionally not comparable. Similarly in respect of M/s. Persistent Systems Ltd., the tribunal held in Para Nos. 24 to 26 that there is no error or illegality in the findings of DRP that this company is functionally not comparable. Similarly in respect of M/s. Persistent Systems & Solutions Ltd., the tribunal held in Para Nos.61 to 61 that there is no error or illegality in the directions of DRP that this company is to be excluded. The reasoning given is this that this company is earning revenue from software products and services and segmental data is not available. Similarly in respect of Infosys Ltd., the tribunal held in Para Nos. 19 that Hon'ble Delhi High Court has held in the case of Aginity India Technologies [P] Ltd., that this company is having brand value and intangible assets and hence, it cannot be compared with an ordinary entity providing captive services. Hence, respectfully following this judgment of Hon'ble Delhi High Court, we hold Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 6/9 that there is no error or illegality in the directions of DRP that this company is to be excluded. Similarly in respect of M/s. Kals Information Systems Ltd., the tribunal held in Para Nos. 21 to 23 that there is no error or illegality in the directions of DRP that this company is to be excluded. The reasoning given is this that there is inventory in the books of accounts of this company which shows that this company is in the software product business and hence, it cannot be compared with a pure software development service provider. Respectfully following this tribunal order, these Grounds of the revenue are also rejected."
6. 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.
Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 7/9 The relevant portion of the said 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 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 Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 8/9 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 at all a sufficient reason to invoke Section 260-A of the Act before this Court.
Date of Judgment 30-08-2018, ITA No.412/2018 The Pr. Commissioner of Income-Tax & Another Vs. M/s. Cypress Semi - Conductor [I] Pvt. Ltd., 9/9
58. The appeals filed by the Revenue are therefore dismissed with no order as to costs."
7. Having heard the learned counsel appearing for the Appellants-Revenue, 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.
Copy of this Order be sent to the Respondent- Assessee forthwith.
Sd/-
JUDGE Sd/-
JUDGE NC.