Karnataka High Court
Commissioner Of Income Tax vs M/S Motorola India Electronics Pvt ... on 17 July, 2018
Bench: Vineet Kothari, S.Sujatha
1/8
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 17TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON'BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.491/2015
BETWEEN:
1. COMMISSIONER OF INCOME-TAX,
C.R.BUILDING, QUEENS ROAD,
BANGALORE - 560 001.
2. THE ASST. COMMISSIONER OF INCOME-TAX,
CIRCLE -12(1), RASHTROTHANA BHAVAN,
NRUPATHUNGA ROAD, BANGALORE - 560 001.
...APPELLANTS
(By Mr. K.V. ARAVIND, ADV.)
AND:
M/S. MOTOROLA INDIA ELECTRONICS PVT. LTD.,
(Since merged with Motorola India Pvt. Ltd.,)
#66/1, PLOT NO.5, BAGMANE TECH PARK,
C.V.RAMAN NAGAR, BENGALURU-560 093.
PAN:AABCM 2326D.
...RESPONDENT
THIS I.T.A. IS FILED UNDER SECTION 260-A OF INCOME
TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL
QUESTIONS OF LAW STATED ABOVE. ALLOW THE APPEAL AND
SET ASIDE THE ORDER PASSED BY THE ITAT, BENGALURU IN
IT(TP)A.NO.1413/BANG/2008 DATED 21/06/2013 ANNEXURE-D
AND CONFIRM THE ORDER OF THE
APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED
Date of Judgment 17-07-2018 I.T.A.No. 491/2015
Commissioner of Income-Tax & Anr.
Vs. M/s. Motorola India Electronics Pvt. Ltd.,
2/8
BY THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE - 12(1),
BENGALURU.
THIS I.T.A. COMING ON FOR ORDERS, THIS DAY
S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. K.V.Aravind, Adv. for Appellants-Revenue The appellants-Revenue have filed this appeal u/s. 260A of the Income Tax Act, 1961 (for short 'Act') raising purportedly certain substantial questions of law arising from the order of the Income Tax Appellate Tribunal, 'A' Bench, Bangalore (for short 'Tribunal') dated 21.06.2013 passed in I.T(TP)A No.1413/Bang/2008 for the A.Y.2004-05.
2. The proposed substantial questions of law framed in the memorandum of appeals by the appellants-Revenue is quoted below for ready reference:
"(1) Whether the tribunal erred in holding that Infosys Technologies, Sathyam Computer Services Ltd and Sat Investesck Ltd cannot be taken as comparable is when it satisfies all the qualitative and quantitative filters adopted by the TPO ?
Date of Judgment 17-07-2018 I.T.A.No. 491/2015 Commissioner of Income-Tax & Anr.
Vs. M/s. Motorola India Electronics Pvt. Ltd., 3/8 (2) Whether tribunal is right in completely rejecting the three comparables without following the comparability process as envisaged under the provisions of the Income Tax Act?
(3) Whether, the Tribunal, on the facts and in the circumstances of the case, was right in excluding Infosys Technologies Limited from the list of comparables due to premium branding, without taking into consideration that brand is only one of the variables to determine the profit margin as laid down in the decision of the Tribunal Vizag in the case of LG Polymers India P Ltd 2011-TII- 97 wherein it held that ".... Brand is only one of the factors which affects profitability and not the sole factor which affects profitability?
(4) Whether the Tribunal was correct in deleting Sat Investesck Ltd. as comparable only on the ground that it had related party transaction (RPT) of 68.32% and recorded perverse finding? (5) Whether the Tribunal was correct in holding that Satyam Computer Services Ltd cannot be considered as comparable only on the ground that financial statements were not reliable as is available in the public domain and recorded perverse finding?"
Date of Judgment 17-07-2018 I.T.A.No. 491/2015 Commissioner of Income-Tax & Anr. Vs. M/s. Motorola India Electronics Pvt. Ltd., 4/8
3. 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 to 5:
"23. As far as Infosys Technologies is concerned, it has been pointed out before us that this Tribunal in the case of Logica Pvt.Ltd. (supra) had in para.13 of its order held that Infosys Technologies cannot be regarded as a comparable for the following reasons:
Infosys Technologies Ltd.
xxxx In view of the above, we hold that Infosys Technologies cannot be regarded as a comparable.
24. As far as Satyam Computer Services Ltd., is concerned, we have already held while regarding this company as a comparable in assessment year 2003-04 that this company cannot be regarded as a comparable. For the reasons stated therein, we are of the view that Satyam Computer Services Ltd cannot be regarded as a comparable.
Date of Judgment 17-07-2018 I.T.A.No. 491/2015 Commissioner of Income-Tax & Anr.
Vs. M/s. Motorola India Electronics Pvt. Ltd., 5/8
25. As far as Sat Investesck Ltd., is concerned, we find that this company cannot be regarded as a comparable for the reason that it had Related Party Transaction (RPT) of 68.32%. The figures from the Profit & Loss account and books of account with regard to the sale and RPT are available at pages 515 & 517 of the assessee's paper book. This Tribunal, in the case of 24/7 Customer.Com Pvt. Ltd. vs. DCIT (ITA No.227/Bang/2010 dated 9-11-2012) has taken the view that if the RPT exceed 10 to 15% of the total revenue, then there would be a significant influence on profitability and therefore such companies cannot be taken as comparable. In coming to the aforesaid conclusion, the Tribunal followed the decision of the ITAT, Delhi Bench in the case of Sony India (P) Ltd. reported in 2008-TIOL-439-ITAT-Delhi dated 23-12- 2008. In view of the aforesaid decision, we are of the view that Sat Investesck Ltd., cannot be considered as a comparable."
4. 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 Date of Judgment 17-07-2018 I.T.A.No. 491/2015 Commissioner of Income-Tax & Anr.
Vs. M/s. Motorola India Electronics Pvt. Ltd., 6/8 has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeals 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 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 Date of Judgment 17-07-2018 I.T.A.No. 491/2015 Commissioner of Income-Tax & Anr.
Vs. M/s. Motorola India Electronics Pvt. Ltd., 7/8 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 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 17-07-2018 I.T.A.No. 491/2015 Commissioner of Income-Tax & Anr.
Vs. M/s. Motorola India Electronics Pvt. Ltd., 8/8
58. The appeals filed by the Revenue are therefore dismissed with no order as to costs."
5. In the circumstances, having heard the learned Counsel appearing for the appellants-Revenue, we are of the considered opinion that no substantial question of law arises for consideration in this appeal.
6. Hence, the Appeal filed by the Appellants-
Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Copy of this order be sent to the Respondent-
assessee forthwith.
Sd/-
JUDGE Sd/-
JUDGE TL