Karnataka High Court
The Pr.Commissioner Of Income Tax-6, vs M/S Novell Software Development ... on 4 July, 2018
Bench: Vineet Kothari, S.Sujatha
1/8
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 4TH DAY OF JULY 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A.No.282/2016
BETWEEN :
1. THE Pr. COMMISSIONER OF INCOME TAX-6
BMTC COMPLEX
KORAMANGALA
BANGALORE.
2. DEPUTY COMMISSIONER OF INCOME TAX [OSD]
CIRCLE 12[2]
BANGALORE. ...APPELLANTS
(BY SRI SANMATHI.E.I., ADV.)
AND :
M/s. NOVELL SOFTWARE
DEVELOPMENT [INDIA] PVT LTD.,
"LAUREL", BLOCK-D
BAGMANE TECH PARK
C.V. RAMAN NAGAR
BYRASANDRA POST
BANGALORE-560003
PAN: AAACN6992K. ...RESPONDENT
(BY Mrs. MANASA ANANTHAN, ADV.)
Date of Judgment 04-07-2018, ITA No.282/2016
The Pr. Commissioner of Income Tax-6 & another Vs.
M/s. Novell Software Development [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 30.09.2015 PASSED IN IT[TP]A NO.1106/BANG/2013,
FOR THE ASSESSMENT YEAR 2008-2009, ANNEXURE-A,
PRAYING TO [a]. 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. [b]
SET ASIDE THE APPELLATE ORDER DATED 30.09.2015 PASSED
BY THE ITAT, 'A' BENCH, BENGALURU, IN APPEAL
PROCEEDINGS No.IT[TP]A No.1106/BANG/2013 FOR
ASSESSMENT YEAR 2008-09, ANNEXURE-A, AS SOUGHT FOR
IN THIS APPEAL AND TO 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 IT [TP]A. No.1106/Bang/2013 dated 30.09.2015, relating to the Assessment Year 2008-09.
2. The appeal has been admitted on 12.09.2017 to consider the first substantial question of Date of Judgment 04-07-2018, ITA No.282/2016 The Pr. Commissioner of Income Tax-6 & another Vs. M/s. Novell Software Development [India] Pvt. Ltd., 3/8 law formulated in the appeal memorandum, which reads thus:
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that few companies are functionally different from the assessee when it satisfied all the qualitative and quantitative filters applied by the TPO. The Tribunal has used a narrower functionality filter than the TPO, but has not tested other comparables against the narrower functionality filter applied by it?"
3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned a finding as under:
"14. As far as the next grievance of the Assessee is concerned, the plea is that Infosys Ltd., Tata Elsxi Ltd., and Wipro Ltd., have been excluded by the CIT[A] from the list of comparable companies based on the fact that their turnover were more than Rs.200 crores and therefore cannot be compared with a company like the Assessee whose turnover is only around Rs.83 crores. According to the Assessee, these three companies have been held to be functionally also Date of Judgment 04-07-2018, ITA No.282/2016 The Pr. Commissioner of Income Tax-6 & another Vs. M/s. Novell Software Development [India] Pvt. Ltd., 4/8 not comparable to a software development service provider such as the Assessee in the case of 3DPLM Software Solutions Ltd., [supra] and hence on this ground also, the aforesaid three companies should be excluded.
15. We have considered his submission and find that these three companies have been held to be functionally not comparable with a software development service provider such as the Assessee in the case of 3DPLM Software Solutions Ltd., [supra]. The following were the relevant observations of the Tribunal:
"xxxxxxxx"
16. Respectfully following the aforesaid decision, we direct that the aforesaid three companies be excluded from the list of comparable companies chosen by the TPO on the ground that they are not functionally comparable also."
4. On similar grounds, other comparables have also been discussed by the learned Tribunal.
Date of Judgment 04-07-2018, ITA No.282/2016 The Pr. Commissioner of Income Tax-6 & another Vs. M/s. Novell Software Development [India] Pvt. Ltd., 5/8
5. 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:
"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 Date of Judgment 04-07-2018, ITA No.282/2016 The Pr. Commissioner of Income Tax-6 & another Vs. M/s. Novell Software Development [India] Pvt. Ltd., 6/8 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.
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.
Date of Judgment 04-07-2018, ITA No.282/2016 The Pr. Commissioner of Income Tax-6 & another Vs. M/s. Novell Software Development [India] Pvt. Ltd., 7/8
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.
58. The appeals filed by the Revenue are therefore dismissed with no order as to costs."
6. 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.
Date of Judgment 04-07-2018, ITA No.282/2016 The Pr. Commissioner of Income Tax-6 & another Vs. M/s. Novell Software Development [India] Pvt. Ltd., 8/8
7. Hence, the Appeal filed by the Appellants-
Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/-
JUDGE Sd/-
JUDGE NC.