2026 (1) TMI 682

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....[ Assessee] for the assessment year 2013-14 against the appellate order passed by the CIT(Appeals)-12, Bangalore, [ld. CIT(A)] dated 26.7.2024 wherein the appeal filed by the assessee on 21.2.2017 against the assessment order passed u/s. 143(3) r.w.s. 144C of the Income-tax Act, 1961 [the Act] dated 27.1.2017 by the ACIT, Circle 7(1)(2) [ld. AO] was allowed. 2. The Revenue is aggrieved with the same and in appeal before us on the following grounds of appeal :- "1. Whether the Ld. CIT(A) was right in fact and in law in removing as comparables M/s Harton Communications Ltd, M/s Capgemini Business (India) Ltd., M/s Tech Mahindra Ltd and M/s Infosys BPO Ltd on functional dissimilarity. a. Whether the Ld. CIT(A) is right in ....

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....ft Technologies Ltd. for A. Y. 2013-14 and GXS India Technology Centre Pvt. Ltd. for A. Y. 2013-14. 6. Whether the Ld. CIT(A) is correct in fact and law in disregarding the position of law that there could be difference between the enterprises compared under the TNMM method that are not likely to materially affect the price or cost charged or the profits accruing to such enterprises. 7. Whether the order of the Ld. CIT(A), relying on the decision of Hon'ble ITAT, Bangalore in the cases of M/ s ISG Novosoft Technologies Ltd. for A. Y. 2013-14 and GXS India Technology Centre Pvt. Ltd. for A.Y. 2013-14, in rejecting comparable cases by insistence on strict comparability under TNMM defeats the very purpose of the law relat....

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....nt functions, etc. The assessee in its TP Study Report (TPSR) computed the margins of the assessee at 10.01% and set of comparable companies margin was determined at 2.73% on Operating Cost without working capital adjustment. Assessee submits that it is at arm's length. 5. The ld. TPO examined the TPSR wherein after examination same was rejected and a fresh analysis was carried out. He computed the margins of the assessee of OP/OC at 10.36%, selected 9 comparable companies and computed the margin at 20.64%. Adjustment of 1.41% was made to the margins of the comparable and final margin was derived at 19.23% making an adjustment of Rs. 2,87,20,804. Accordingly the draft assessment order was passed on 15.11.2016 and as the assessee did not ....

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....es while excluding the above 3 comparables, even otherwise he submits that these comparables deserve to be excluded. His argument is that Infosys BPO Ltd. has a turnover of Rs. 1831 crores, Tech Mahindra Ltd. of Rs. 6000 crores and Capgemini Business (India) Ltd. of Rs. 516 crores turnover. Therefore as the turnover of the assessee is merely Rs. 35.60 crores, same is not comparable with the assessee because of the huge turnover. He submitted that even the RPT filter fails in the case of Capgemini Business (India) Ltd. where it has a RPT of 82%. Therefore it deserves to be excluded on that basis. With respect to Harton Communications Ltd., he submits that the comparable also fails 75% filter of core income. Thus, there is no infirmity in the....