2018 (8) TMI 2057 - HC - Income Tax

Revenue's Appeal Dismissed on Tribunal's Order for Assessment Year 2007-08

The Pr. Commissioner of Income Tax-7, Bangalore, The Assistant Commissioner of Income Tax Circle 12 (1), Bangalore Versus M/s. Microchip Technology (India) Pvt. Ltd.

The Court dismissed the Revenue's appeal challenging the Income Tax Appellate Tribunal's order for Assessment Year 2007-08. The Tribunal's decisions on ... TP Adjustment - comparable selection - Substantial question of law or fact - HELD THAT:- After exclusion of the comparables as directed by us, the A.O./TPO is directed to recomputed the ALP by considering the remaining 8 comparables and correct margin in respect of Mega Soft Ltd. Needless to say the benefit under proviso to section 92 C shall be considered. Additional ground of assessee with regard to claim of ESOP expenses - Tribunal has allowed the claim by following when no such claim is made before assessing authority and as well as in return of income filed for the year in question - HELD THAT:- This Court in a recent judgment in Prl. Commissioner of Income Tax & Anr. –v- M/s Softbrands India Pvt. Ltd.[2018 (6) TMI 1327 - KARNATAKA HIGH COURT]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. No substantial question of law arises in the present case. Issues involved:1. Appeal filed by Revenue challenging the Order of the Income Tax Appellate Tribunal regarding Assessment Year 2007-08.2. Substantial questions of law framed by the Revenue:a. Rejection of comparables by the Tribunal based on functional dissimilarity.b. Admitting additional ground of assessee regarding ESOP expenses claim.Analysis:Issue 1: Rejection of ComparablesThe Tribunal directed the exclusion of specific companies from the set of comparables based on functional dissimilarity, following a previous order. The Tribunal also instructed the TPO to consider segmental results for Mega Soft Ltd. and correct the margin. After excluding certain comparables, the A.O./TPO was directed to recompute the ALP by considering the remaining comparables and correct margin for Mega Soft Ltd.Issue 2: ESOP Expenses ClaimThe Tribunal noted that the assessee did not claim deduction for ESOP expenses for the year under consideration. However, a similar issue was decided in favor of the assessee for a different assessment year. The Tribunal set aside the issue for verification of relevant details by the Assessing Officer, including apportionment of the expenditure between eligible and non-eligible units under Section 10A.The Court cited a recent judgment emphasizing that appeals based on comparability issues do not generally raise substantial questions of law unless involving significant legal interpretations. It was clarified that dissatisfaction with Tribunal findings is not sufficient to invoke Section 260-A of the Act. The Court dismissed the Revenue's appeals, stating no substantial question of law arose in the present case, leading to the dismissal of the Appeal filed by the Appellants-Revenue without costs.