THE COMMISSIONER OF INCOME TAX vs HUAWEI TECHNOLOGIES
- Court
- Karnataka High Court
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HC-KAR
NC: 2026:KHC:60253-DB
ITA No. 451 of 2013
CNR: KAHC010374112013
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 29 DAY OF OCTOBER, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
INCOME TAX APPEAL NO. 451 OF 2013
BETWEEN:
1. THE COMMISSIONER OF INCOME TAX
C.R. BUILDING
QUEENS ROAD
BANGALORE
2. THE INCOME-TAX OFFICER
CIRCLE - 11(2)
RASHTROTHANA BHAVAN,
NRUPATHUNGA ROAD
BANGALORE
…APPELLANTS
Digitally
signed by
VEERENDRA
KUMAR K M
Location:
High Court of
Karnataka
(BY SRI E.I. SANMATHI, ADVOCATE)
AND:
1. M/S. HUAWEI TECHNOLOGIES
INDIA PVT. LTD.
LEVEL-3, LEELA GALLERIA
THE LEELA PALACE
23 AIRPORT ROAD
BANGALORE - 560 008
…RESPONDENT
(BY SRI/SMT. K.K. CHYTHANYA, SENIOR ADVOCATE A/W
SRI AJIT V. GHATIKAR, ADVOCATE FOR
SRI TATA KRISHNA & S. SHARATH, ADVOCATE)
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HC-KAR
NC: 2026:KHC:60253-DB
ITA No. 451 of 2013
CNR: KAHC010374112013
THIS ITA IS UNDER SECTION 260-A OF THE INCOME TAX
ACT 1961, PRAYING TO I. FORMULATE THE SUBSTANTIAL
QUESTIONS OF LAW STATED ABOVE II. ALLOW THE APPEAL AND
SET ASIDE THE ORDER PASSED BY THE INCOME-TAX APPELLATE
TRIBUNAL, BANGALORE IN ITA NO.1338/Bang/2010 DATED
30/04/2013 AND CONFIRM THE ORDER OF DISPUTE RESOLUTION
PANEL, CONFIRMING THE ORDER PASSED BY THE INCOME TAX
OFFICER, CIRCLE-11(2), BANGALORE & ETC.
THIS APPEAL, COMING ON FOR HEARING, THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA
ORAL JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
1. The Revenue has filed the present appeal under Section
260A of the Income Tax Act, 1961 [ the Act ], impugning an order
dated 30.04.2013 [ impugned order ] passed by the learned
Income-Tax Appellate Tribunal, Bengaluru [ Tribunal ] in ITA
No.1338/Bang/2010, in respect of Assessment Year [ AY ] 2006-07.
2. The respondent [ Assessee ] had filed the said appeal
assailing the Assessment Order dated 24.09.2010 passed by the
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HC-KAR
NC: 2026:KHC:60253-DB
ITA No. 451 of 2013
CNR: KAHC010374112013
Assessing Officer [ AO ] under Section 143(3) read with Section
144C(1) of the Act.
3. The Assessee is engaged in the business of software
development and related services. It had filed its return of income
for AY 2006-07 declaring its taxable income as nil after claiming
deduction under Section 10A of the Act. The Assessee had
entered into international transactions. Accordingly, the AO
referred the case to the learned Transfer Pricing Officer [ TPO ]. The
learned TPO passed an order issuing directions under Section
92CA of the Act recommending Transfer Pricing Adjustment [ TPA ]
₹
to the extent of 10,82,34,382/-.
4. Pursuant to the said directions, the AO issued the draft
Assessment Order on 24.09.2010. The Assessee filed its
objections against the said order before the Dispute Resolution
Panel [ DRP ]. The DRP disposed of the said objections by an order
dated 16.09.2010. Pursuant to the directions issued by the DRP,
the AO issued the final assessment order, which was impugned
before the learned Tribunal.
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HC-KAR
NC: 2026:KHC:60253-DB
ITA No. 451 of 2013
CNR: KAHC010374112013
5. The learned Tribunal accepted the Assessee’s objections to
the inclusion of certain companies as comparables for determining
the Arm’s Length Price [ ALP ] of the international transactions.
6. Aggrieved by the said order, the Revenue has filed the
present appeal projecting the following substantial questions of law:
“1. Whether on the facts and in the
circumstances of the case and in law the
Tribunal was right in super imposing the
decisions of the other benches and the decision
of the ITAT while rejecting the comparables ((i)
Accel Transmatic Limited, (ii) KALS Information
Systems Limited (iii) Lucid Software Limited,
and (iv) Tata Elxsi Ltd.,) without appreciating
the fact that selection of comparables in a case
depends on assessee specific FAR analysis?
2. Whether on the facts and in the
circumstances of the case and in law the
Tribunal was correct in holding that Accel
Transmatic Limited, and KALS Information
Systems Limited cannot be taken as
comparables on the ground of functional
difference without appreciating the fact it
satisfies all the quantitative and qualitative
filters applied by the Transfer Pricing Officer
while segmental results have been used and
recorded a perverse finding?
3. Whether on the facts and in the
circumstances and of the case in law the
Tribunal was justified in fixing the related party
transaction filtered at 15% of the total revenue
without going into the specific facts in the case
of the Tax Payer and without adducing the
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ITA No. 451 of 2013
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basis for arriving at such cut-off at 15% and
recorded a perverse finding?
4. Whether on the facts and in the
circumstances of the case and in law the
Tribunal was correct in rejecting M/s. Lucid
Software Limited as a comparable by placing
reliance on the order in the case of the other
assessee passed by the Mumbai ITAT without
taking into consideration the finding recorded
by the Transfer Pricing Officer for selecting as a
comparable and recorded a perverse finding?
5. Whether on the facts and in the
circumstances of the case and in law the
Tribunal was correct in holding that the
expenses excluded from export turnover has to
be reduced from total turnover for computing
deduction under Section 10A of the Act
contrary to the provisions of Section 10A of the
Act?
7. This Court, by a judgment dated 10.07.2018 had dismissed
the present appeal on the ground that no substantial question of
law arise. This Court had also referred to its earlier decision dated
25.06.2018 passed in ITA No.536/2015 c/w ITA No.537/2015,
captioned Prl. Commissioner of Income Tax and another v. M/s.
Softbrands India Pvt. Ltd., in support of the said view.
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HC-KAR
NC: 2026:KHC:60253-DB
ITA No. 451 of 2013
CNR: KAHC010374112013
8. The Revenue had filed an appeal before the Supreme Court
which was tagged along with SAP Labs India (P) Ltd. v. Income
1
Tax Officer (and other appeals) and other connected matters.
9. The Supreme Court allowed the appeals by an order dated
19.04.2023 and remanded the appeals, including the present
appeal, for fresh consideration of the issues relating to transfer
pricing in light of the Supreme Court's observations. Thus, this
Court must examine whether the exclusion of the companies as
comparables and the use of the Related Party Transaction [ RPT ]
filter disregarded the provisions of the Act and the Rules made
thereunder.
10. Question No.1 relates to the exclusion of following
companies as comparables:
((i) Accel Transmatic Limited,
(ii) KALS Information Systems Limited
(iii) Lucid Software Limited, and
(iv) Tata Elxsi Ltd.,
1
(2023) 454 ITR 121 (SC); (2023) 149 taxmann.com 327 (SC)
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ITA No. 451 of 2013
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11. Question No.2 relates to the exclusion of, Accel Transmatic
Limited and KALS Information Systems Limited. And, q uestion No.4
relates to exclusion of M/s Lucid Software Limited, as comparables.
12. Concededly, the exclusion of the aforementioned companies
is covered in favour of the Assessee by a recent decision of this
Court dated 28.10.2026 passed in ITA No.338/2013, captioned The
Commissioner of Income Tax and another v. M/s Logica
Private Limited .
13. Question No.3 relates to the use of RTP filter at 15% of the
total revenue. Concededly, this issue is also covered by the
decision of the Co-ordinate Bench of this Court in SAP Labs India
2
(P) Ltd. v. Income Tax Officer .
14. Question No. 5, as rightly pointed out by the learned counsel
for the parties, stands concluded. The Supreme Court’s order
remanding the appeal is confined to the questions relating to the
Transfer Pricing Adjustment.
2
ITA No.10/2011 decided on 28.08.2026
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HC-KAR
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ITA No. 451 of 2013
CNR: KAHC010374112013
15. Thus, no substantial question of law arises for consideration
of this Court.
16. The appeal is, accordingly, dismissed.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(K.S. HEMALEKHA)
JUDGE
KMV
List No.: 1 Sl No.: 22