Court rules ITAT decision, rejects Revenue appeal on transfer pricing adjustment for assessment year 2005-06.

The High Court upheld the ITAT's decision, ruling that Infosys Technologies Ltd. and Satyam Computer Services Ltd. were not suitable comparables for the assessee. Consequently, the court dismissed the Revenue's appeal, affirming the deletion of the transfer pricing adjustment of Rs.1,27,87,016 for the assessment year 2005-06. The ITAT upheld the CIT(A)'s order, with the cross-objection of the assessee being dismissed for statistical purposes.

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Issues Involved:
1. Transfer pricing adjustment of Rs.1,27,87,016.

Analysis:
1. The appeal by the Revenue challenged the deletion of the addition of Rs.1,27,87,016 on account of transfer pricing adjustment for the assessment year 2005-06. The Transfer Pricing Officer (TPO) proposed the adjustment based on the operating profit difference between the assessee and comparable companies. The CIT(A) excluded Infosys Technologies Ltd. and Satyam Computer Services Ltd. from the list of comparables, following a decision by ITAT in the assessee's own case for AY 2006-07. The CIT(A) found that the operating profit of the remaining comparables fell within the ambit of the proviso to Section 92C(2) of the Income-tax Act, 1961, and deleted the addition. The Revenue appealed the CIT(A)'s decision.

2. The ITAT considered the issue in the assessee's own case for AY 2006-07, where it was held that Infosys Technologies Ltd. and the assessee were not comparable due to significant differences in their business models and risk profiles. The ITAT excluded Infosys Technologies Ltd. as a comparable, leading to the acceptance that no adjustment was necessary for the assessee's declared results. The High Court upheld the ITAT's decision, emphasizing that Infosys Technologies Ltd. and Satyam Computer Services Ltd. should not be considered as comparables. The High Court dismissed the appeal, affirming the ITAT's findings.

3. The ITAT's decision in the assessee's case for AY 2006-07, supported by the High Court, established that Infosys Technologies Ltd. and Satyam Computer Services Ltd. were not suitable comparables for the assessee. The CIT(A) correctly followed this precedent by excluding these companies and allowing relief to the assessee. Consequently, the ITAT upheld the CIT(A)'s order, dismissing the Revenue's appeal. The cross-objection of the assessee, supporting the CIT(A)'s decision, was treated as infructuous and dismissed for statistical purposes.

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