Karnataka High Court
Pr. Commissioner Of vs M/S Ntt Data Global on 31 July, 2018
Bench: Vineet Kothari, S.Sujatha
1/10
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 31ST DAY OF JULY 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.590/2016
BETWEEN :
1. Pr. COMMISSIONER OF
INCOME TAX-5
BMTC COMPLEX
KORMANGALA
BANGALORE.
2. ASSISTANT COMMISSIONER
OF INCOME TAX
CIRCLE-11[5]
BANGALORE. ...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND :
M/s. NTT DATA GLOBAL
DELIVERY SERVICES LTD.,
[FORMERLY KNOWN AS KEANE
INTERNATIONAL [INDIA] PVT. LTD.,]
No.17, SOUTH END ROAD
BASAVANAGUDI
BANGALORE-560004
PAN: AAACI 4796E. ...RESPONDENT
(BY SRI S.SHARATH, ADV. FOR SRI CHYTHANYA.K.K., ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION
260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER
Date of Judgment 31-07-2018, ITA No.590/2016
Pr. Commissioner of Income Tax-5 & Another Vs.
M/s. NTT DATA Global Delivery Services Ltd.,
2/10
DATED 06.04.2016 PASSED IN IT[TP]A No.1487/BANG/2013,
FOR THE ASSESSMENT YEAR 2005-06, 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 06.04.2016 PASSED BY THE ITAT,
'A' BENCH, BENGALURU, IN APPEAL PROCEEDINGS No. IT[TP]A
No.1487/BANG/2013 FOR ASSESSMENT YEAR 2005-06,
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,
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. 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.1487/Bang/2013 dated 06.04.2016, relating to the Assessment Year 2005-06.
2. The appeal has been admitted on 29.11.2017 to consider the following substantial Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 3/10 questions of law formulated in the appeal memorandum:
"1. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the high intangibles and goodwill are deciding factors for treating a company as a comparable and accordingly erred in excluding the comparables Tata Elxi Limited, Infosys Technologies Ltd., in Software Development Segment?
2. Whether, on the facts and in the circumstances of the case the Tribunal is right in law in excluding comparables, namely, Bodhtree Consulting, Exceneous Software Solutions, Flextronics Software Systems, Geometric Software Solutions and Sankhya Infotech by following its earlier order which has not reached finality and even though the TPO has taken said comparables after applying the required test?
3. Whether, on the facts and in the circumstances of the case the Tribunal is right in law in excluding comparables, namely, Tata Elxi Ltd., and Thirdware Solutions by following its earlier order which has not reached finality and Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 4/10 even though the TPO has taken said comparables after applying the required test?"
3. Learned Counsel for the Appellants-Revenue does not press substantial question No.2.
4. Submission is taken on record.
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 Nos.1 & 3:
"14.2 We heard the rival submissions and perused material on record. The co-ordinate bench of Tribunal in the case of Sunquest Information Systems (India) Pvt. Ltd. (cited supra) held (vide paras. 28 and 29 of the order) that it is not comparable with software development provider such as the assessee.
"xxxxx"
14.3 We do not find any reason to differ with the decision of the co-ordinate bench in the Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 5/10 above cases. Accordingly, we hold that this company cannot be held to be comparable with that of the assessee-company on functional dissimilarities. In our opinion, these activities of the company cannot be equated with the software development service.
Thirdware Solutions:
15. This company was selected by the TPO and the assesseecompany objected to the inclusion of this company in the list of comparables on the ground that the financial data was not available in the public domain at the time of transfer pricing audit. The TPO held that the data was available in capital line as well as prowess data base. The TPO further held that more than 50% of the revenue is from software development services; this can be considered as a comparable.
15.1 Before us, learned AR of the assessee- company submitted that this company cannot be considered as comparable in the light of the decisions of the co-ordinate bench in the case (i) the Sunquest Information Systems (India) Pvt. Ltd.(cited supra); (ii) Textron Global Technology Centre Pvt. Ltd(cited supra) and (iii) Colt Technology Services India Pvt.Ltd. (cited supra).
Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 6/10 15.2 We heard the rival submissions and perused the material on record. The co-ordinate bench (Delhi) of Tribunal in the case Colt Technology Services India Pvt.Ltd. (cited supra) recorded the finding on the above company as follows:
"xxxxx"
Similarly co-ordinate bench of Tribunal in the case of Textron Global Technology Centre Pvt. Ltd(cited supra) recorded the finding as under:
"xxxxx"
Similarly co-ordinate bench of Tribunal in the case of Sunquest Information Systems (India) Pvt. Ltd.(cited supra) "xxxxx"
15.3 The decision in the case of Sunquest Information Systems (India) Pvt. Ltd.(cited supra) is based on the non-availability of information to make suitable adjustments to bring the company on par with the assessee-company. However, in the present case, the TPO made available full details of the revenue and expenditure in respect Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 7/10 of each of the segments and segmental details are very much available. However this company does not pass through the filter of 75% of revenue. Therefore, this company cannot be considered as software development service provider. Hence, we direct the TPO/AO to delete this company from the list of comparables.
16. The other comparables were either accepted by the assessee-company or not pressed during the course of hearing. Thus, the grounds of appeal Nos.8 to 9 are disposed of."
6. 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 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 8/10 "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 considered opinion, give rise to any substantial question of law.
Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 9/10
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.
58. The appeals filed by the Revenue are therefore dismissed with no order as to costs."
Date of Judgment 31-07-2018, ITA No.590/2016 Pr. Commissioner of Income Tax-5 & Another Vs. M/s. NTT DATA Global Delivery Services Ltd., 10/10
7. 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.
8. Hence, the Appeal filed by the Appellants-
Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/-
JUDGE Sd/-
JUDGE NC.