Karnataka High Court
The Pr Commissioner Of Income Tax vs M/S Cgi Information Systems & on 7 August, 2018
Bench: Vineet Kothari, S.Sujatha
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 7TH DAY OF AUGUST 2018
PRESENT
THE HON'BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON'BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.389/2017
BETWEEN:
1. THE PR. COMMISSIONER OF INCOME TAX
5TH FLOOR, BMTC BUILDING,
80 FEET ROAD, KORAMANGALA,
BENGALURU - 560095.
2. THE ASST. COMMISSIONER OF INCOME-TAX
CIRCLE -2(1) (1)
2ND FLOOR, BMTC BUILDING,
80 FEET ROAD,
KORAMANGALA,
BENGALURU - 560 095. ... APPELLANTS
(BY SRI.K V ARAVIND, ADV.)
AND:
M/S CGI INFORMATION SYSTEMS &
MANAGEMENT CONSULTANT PVT. LTD.,
95/1, 92/2, ELECTRONIC CITY,
PHASE-1(WEST)
BENGALURU - 560 100
PAN:AAACI 1994C. ... RESPONDENT
(BY SRI.SANDEEP HUILGOL, ADV. FOR
SRI.T.SURYANARAYANA, ADV.)
Date of Judgment 7-8-2018, ITA No.389/2017
The Pr. Commissioner of Income Tax & Another Vs.
M/s.CGI Information Systems & Management
Consultant 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 :
26.10.2016 PASSED IN C.O. NO.110/BANG/2015, FOR THE
ASSESSMENT YEAR 2010-2011 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 C.O.
NO.110/BANG/2015 DATED:26.10.2016 AND CONFIRM THE
ORDER OF THE DRP CONFIRMING THE ORDER PASSED BY THE
ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1),
BENGALURU.
THIS APPEAL COMING ON FOR HEARING, THIS DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:
JUDGMENT
Mr. Aravind K.V., 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 question of law arising from the Order of the Income Tax Appellate Tribunal, 'A' Bench, Bangalore in C.O. No.110/Bang/2015 in IT[TP] No.346/Bang/2015 dated 26.10.2016, relating to the Assessment Year 2010-11.
Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.
3/92. This Appeal has been admitted on 17.01.2018 to consider the following substantial question of law.
"1. Whether in the facts and circumstances of the case, the Tribunal is right in law in excluding the comparables, namely Kals Information Systems Ltd., M/s. Persistent Systems Ltd., Tata Elxsi Ltd, ICRA Techno Analytics Ltd on the ground of functional dissimilarity by following its earlier order which has not reached finality and even when the TPO had chosen the comparables as it satisfies qualitative and quantitative filters applied by the TPO and Tribunal ought to have decided the comparability of these companies on the basis of specific facts brought out on record by the TPO in the case of the assessee?"
3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and Respondent-Assessee, has returned findings as under:
"We heard the rival submissions and perused the material on record. Now it is settled law that a company which is engaged in pure services provider cannot be compared with the company Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.4/9
which is engaged in the development of software products. There is not dispute that this company was engaged in the development of software products as well as software services and no segment details were available Therefore the decision of the coordinate bench in this case of DCIT v. Electronics for Imaging India P. Ltd., [(2016) 70 taxmann.com 299 (Bang-Trib)] is squarely applicable and the relevant paragraph is reproduced below:
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26. Thus respectfully following the decision of the coordinate bench we direct the AO/TPO to exclude this company from the list of comparables."
xxxx xxxx xxxx "28. We heard the rival submissions and perused the material on record. There is no dispute about the business profile of this comparable that it is engaged in the software segment business of the company consisting of product design services (PDS), industrial design engineering (IDE) and Visual Computing Labs Division (VLC). The PDS division provides offerings in multiple domains such as broadcase, wireless, transportation, Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.
5/9convergence, DSP, graphics and imaging and semicon. The IDE segment supports Global corporations in the area of new brand/product introduction from concept to market. Its expertise lies in the areas of consumer insights, product/service innovation, industrial design, functional prototyping and engineering. It also engages in brand development and retail design. The VLC division delivers 3D computer graphics, animation and special effects in the preproduction, production and post-production of content for the film, television, gaming and advertising industry. The system integration & support segment is involved in value-added reselling involving systems integration and support for a wide range of technical computing hardware and software solutions involving high- end computing platforms, mechanical design automation tools, enterprise storage solutions, digital media and life sciences solutions through its tie-ups with global leaders in these respective areas. It is now fairly settled that a product design company cannot be compared with the pure software services provider like that of the assessee company and therefore this company deserves to be rejected from the list of comparables following the law laid down by the Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.
6/9coordinate bench in the case of DCIT v. Electronics for Imaging India P. Ltd., [ (2016 ) 70 taxmann.com 299 (Bang-Trib.)
29. We have heard the ld. DR as well as ld. AR and considered the relevant material on record. We find that this company even in the software development segment is engaged in diversified activities of product design services, innovation design, engineering services, visual computing labs, etc. We further note that in the case of Telcordia Technologies India (P.) Ltd. (supra), the Mumbai Bench of the Tribunal vide its order dated 11.5.2012 in para 9.7 has held under:-
xxxxxxxxx "
4. 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 Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.7/9
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 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 Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.8/9
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.
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 Date of Judgment 7-8-2018, ITA No.389/2017 The Pr. Commissioner of Income Tax & Another Vs. M/s.CGI Information Systems & Management Consultant Pvt. Ltd.9/9
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."
5. 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 AN/-