Karnataka High Court
The Pr. Commissioner Of Income Tax vs M/S Ntt Data Fa on 5 July, 2018
Bench: Vineet Kothari, S.Sujatha
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 05TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON'BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.588/2016
BETWEEN:
1. THE PR. COMMISSIONER OF INCOME TAX
CENTRAL REVENUE BUILDINGS
QUEENS ROAD, BANGALORE-560 001.
2. THE DEPUTY COMMISSIONER OF INCOME TAX
CIRCLE-5(1)(1), ERSTWHILE CIRCLE 11(3)
BANGALORE.
...APPELLANTS
(By Mr. SANMATHI E.I. ADV.)
AND:
M/S. NTT DATA FA INSURANCE SYSTEMS
(INDIA) PRIVATE LIMITED
OZONE MANAY TECH PARK
B BLOCK, 3RD FLOOR, GARVEBHAVEPALYA
HOSUR ROAD, BANGALORE-560068
PAN: AAA CF 9123A.
...RESPONDENT
(By Ms. TANMAYEE RAJKUMAR, ADV.)
THIS I.T.A. IS FILED UNDER SECTION 260-A F INCOME
TAX ACT 1961, PRAYING TO DECIDE THE FOREGOING
QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW
AS MAY BE FORMULATED BY THE HON'BLE COURT AS
Date of Judgment 05-07-2018 I.T.A.No.588/2016
The Pr. Commissioner of Income Tax & Anr. Vs.
M/s. NTT DATA FA Insurance Systems (India) Private Limited
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DEEMED FIT. SET ASIDE THE APPELLATE ORDER DATED
20/01/2016 PASSED BY THE ITAT, 'B' BENCH, BENGALURU, IN
APPEAL PROCEEDINGS M.A. No.88/Bang/2015 IN IT(TP)A
No.1311/Bang/2010 FOR ASSESSMENT YEAR 2006-07, AS
SOUGHT FOR IN THIS APPEAL; AND TO GRANT SUCH OTHER
RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS I.T.A. COMING ON FOR ADMISSION, THIS DAY
Dr. VINEET KOTHARI J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Sanmathi E.I. Adv. for Appellants - Revenue Ms. Tanmayee Rajkumar, Adv. for Respondent - Assessee
1. The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly a substantial question of law arising from the order of the ITAT, 'B' Bench, Bangalore, dated 20.01.2016 passed in M.A.No.88/Bang/2015 [ IT(TP)A No.1311/Bang/2010] (M/s.NTT Data FA Insurance Systems Ind. Pvt. Ltd., vs. The Deputy Commissioner of Income Tax) for A.Y.2006-07.
2. The proposed substantial questions of law framed in the Memorandum of appeal by the Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 3/8 Appellants-Revenue are quoted below for ready reference:-
"1. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the size and turnover of the company are deciding factors for treating a company as a comparable and accordingly erred in excluding the comparables, iGate Global Solutions Ltd, Mindtree Consulting Ltd, Sasken Communications Ltd, Persistent Systems Ltd, in Software Development segment?
2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in excluding uncontrolled comparables having turnover more than Rs.200 crores in the absence of Turnover criterion prescribed in Rule 10B of Income Tax Rules and also there being no correlation between turnover and profit margin?
3. Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in fixing the RPT filter at 15% of total revenue by superimposing the decisions of Tribunal in other cases, including those of other benches of Tribunal, without going into specific Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 4/8 facts in the case of the taxpayer and without adducing the basis for arriving at the 15% cut off for RPT filter, in the case of taxpayer?"
3. The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue and the Respondent-assessee, has given the following findings against Revenue with regard to various issues raised before it with regard to 'Transfer Pricing' and 'Transfer Pricing Adjustments' made by the concerned authorities below. We consider it appropriate to quote from the order of Tribunal rejecting the Application seeking a review before Tribunal as hereunder:-
It is stated in the MP that applying the ratio laid down by this Tribunal vide para-8 to 10 of the impugned order that the following six companies be rejected being comparable, as the turnover is more than 200 Crores.
Infosys Technologies Ltd.
Flextronics Software Systems Ltd., iGate Global Solutions Ltd., Mindtree Consulting Ltd.
Sasken Communication Ltd.
Persistent Systems Ltd.
Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 5/8 Similarly, it is stated in the MP that paras.14 & 15 of the order may be amended to exclude the companies viz., M/s Geometric Software Ltd., M/s Aztec Software Ltd M/s Megasoft Ltd., applying the filter of related party transactions of more than 15%.
2. We have heard the rival submissions and perused the material on record. We find merit in the submissions of the learned counsel that the Tribunal having applied the filter of more than 200 Crores should be excluded, as the same should have been applied to all the comparables finally-chosen for computing the Arm's Length Price (ALP). Similarly, in the case of filter of RPT more than 15%, the same filter should be applied for all the comparables finally chosen for computing the ALP. Therefore, we remit the matter back to the file of the AO/TPO to apply the turnover filter of more than 200 Crores as well as filter of RPT 15% to all the comparables finally chosen for the purpose of computing the ALP".
4. This Court in ITA No.536/2015 C/w ITA No.537/2015 delivered on 25.06.2018 Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 6/8 (Prl. Commissioner of Income Tax & Anr. Vs. 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.
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 Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 7/8 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.
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 Date of Judgment 05-07-2018 I.T.A.No.588/2016 The Pr. Commissioner of Income Tax & Anr. Vs. M/s. NTT DATA FA Insurance Systems (India) Private Limited 8/8 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."
5. Having heard the learned counsels 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 Srl.