Infosys Excluded from ALP Analysis: High Court Upholds Tribunal Decision

The High Court upheld the Tribunal's decision to exclude Infosys Technologies Ltd. from comparables for determining the Arm's Length Price (ALP) in international transactions. The court agreed with the Tribunal's assessment that Infosys provided different services compared to the assessee, justifying its exclusion. Despite the revenue's arguments, referencing a Supreme Court judgment, the court found no error in the Tribunal's decision and dismissed the appeal. The court emphasized the lack of legal grounds for interference, affirming Infosys' exclusion from the comparability analysis for ALP determination.

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Issues:
Whether Infosys Technologies Ltd. has been rightly excluded from the list of comparables for determining ALPRs.

Analysis:
The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal. The Tribunal directed the Transfer Pricing Officer to exclude Infosys Technologies Ltd. from the comparability analysis of software support systems segment of the assessee while determining Arm's Length Price of international transactions. The revenue challenged this decision, questioning the exclusion of Infosys Technologies Ltd. as a comparable. The only issue in this appeal was whether Infosys Technologies Ltd. was rightly excluded from the list of comparables for determining ALP.

The assessee initially selected Infosys Technologies Ltd. as a comparable in its transfer pricing study report and accepted it before the TPO without any objection. However, the assessee later challenged Infosys Technologies Ltd. as a comparable before the CIT(A), claiming that it was not a valid comparable due to significant differences between the two companies. The Tribunal accepted the assessee's plea, emphasizing that the assessee provided low-end software services, while Infosys Technologies Ltd. engaged in full-fledged software development services. The Tribunal concluded that Infosys Technologies Ltd. could not be treated as a comparable in this case, based on the differences in the nature of services provided by the two companies.

The Tribunal's decision was supported by the Delhi High Court judgment in a similar case, where it was held that Infosys Technologies Ltd. could not be considered a comparable in the same line of business as that of the assessee. The court also referred to a previous judgment regarding Infosys Technologies Ltd., emphasizing the differences in the business operations of the two companies. Despite the revenue's reliance on a judgment of the Apex Court, the court found no merit in the appeal and dismissed it, stating that no error was found in the Tribunal's findings. The court concluded that no substantial question of law arose in the appeal, and there was no justification for interference in the Tribunal's decision to exclude Infosys Technologies Ltd. from the comparability analysis for determining ALP.

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