TaxTMI 
TaxTMI 
2026 (6) TMI 970
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..../s. 143(3) r.w.s.144C(13) r.ws 1448 of the Income Tax Act, 1961 is opposed to law, facts and circumstances of the case 2. Issue No.1: Upward adjustment of Rs. 10,25,20,700/- in respect of Sale of IT/ Software Development Services to its Associated Enterprise. 2.1. For that the Learned TPO/ Learned AO and Hon'ble DRP erred in upholding the upward adjustment of Rs. 10,25,20,700/- in respect of Sale of IT/ Software Development Services to its Associated Enterprise 2.2. For that the Learned TPO/ Learned AO and Hon'ble DRP erred in rejecting the Transfer Pricing study of the applicant, despite non-satisfaction of the conditions laid down in section 92C(3) of the Act. 2.3. For that the Learned TPO/ Learned AO and Hon'ble DRP ought to have appreciated the fact that the uncontrolled comparables adopted in the Transfer Pricing Study of the applicant had invariably satisfied the filters criteria adopted by TPO 2.4. For that the Learned TPO/ Learned AD and Hon'ble DRP ought not have included companies with disproportionately high turnover compared to the applicant in the set of uncontrolled comparables, particularly when companies w....
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....international transactions with its A.E. As per Form No.3CEB filed by the assessee company, it has reported international transactions with its A.E. in relation to provision of software services and development services for Rs. 1,23,31,96,708/-. The assessee company has benchmarked international transactions with its A.E. by adopting Transactional Net Margin Method (TNMM) as the most appropriate method with OP/OC as Profit Level Indicator (PLI). The assessee company has computed PLI of 13.58%. The assessee company has selected 24 comparables and claimed that, transactions with its A.E. are at arm's length price. 4. During the course of assessment proceedings, a reference was made to the learned Transfer Pricing Officer (for short "TPO") to determine the arm's length price of international transactions of the assessee company with its associated enterprise. During the course of transfer pricing proceedings, the learned TPO rejected the Transfer Pricing Study Report submitted by the assessee company and conducted fresh TP analysis by applying certain filters and has finally selected 22 comparables with 35th percentile of 23.23% and 65th percentile of 34.67% and median of 26.15%. T....
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.... has reported turnover of Rs. 123,32,00,000/- for the assessment year under consideration, whereas the turnover of the above four companies, is in several crores, which is more than ten times that of the assessee company. Since the above four companies are not satisfying the turnover filter, if we apply ten times on either side, the A.O. ought not to have selected the above four companies for the purpose of comparability analysis, and therefore, he submitted that, the above four companies should be excluded from the list of final comparables. In this regard, he relied upon the decision of the ITAT, Hyderabad Bench in the case of DGS Technical Services Pvt. Ltd. Vs. DCIT reported in (2025) 180 Taxmann.com 266 and also the decision in the case of Genisys Integrating Systems (India) (P.) Ltd., Vs. DCIT reported in (2025) 177 taxmann.com 793. 8. The learned counsel for the assessee company further, referring to remaining comparables like Apptus Software Private Limited, CG-VA Software & Exports Limited, etc., submitted that, the learned TPO has wrongly considered the above companies for the purpose of comparability analysis, even though the FAR analysis of the above companies is dif....
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....s cited by the learned counsel for the assessee company in support of his arguments on the issue of selection of comparables. Insofar as the first argument of the learned counsel for the assessee company that high turnover companies cannot be included in the list of comparables, because the giant companies operate in different circumstances and their magnitude of operations and large scale of operations make them incomparable with a company which is providing captive services to its A.E. in the field of IT Services/Software development services. We find that an identical issue has been considered by ITAT, Hyderabad in the case of DGS Technical Services Pvt. Ltd. Vs. DCIT (supra), where under identical facts and circumstances, the coordinate bench held that companies like Infosys Ltd, LTI Mindtree Ltd., Wipro Ltd., and Cybage Software Pvt. Ltd., are giant companies having huge turnover of more than ten times that of the assessee company and hence, cannot be included for the purpose of benchmarking analysis. We further note that, the assessee company is having a turnover of Rs. 123.32 crores, whereas the turnover of Infosys Ltd. is Rs. 1,03,940 crores, the turnover of Wipro Ltd. is R....
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....sultancy services where the assessee company is a captive service provider to its A.E. for IT Services and Software development services and therefore, the assessee company cannot be compared with the above companies. We find that, the learned counsel for the assessee company has furnished extracts of annual reports of above comparable selected by the learned TPO and upon perusal of relevant extracts, we find that, in the annual reports, it was disclosed that the said companies are engaged in various services which are different from the services rendered by the assessee company to its A.E. Although the nature of services provided by any company cannot be identified from the disclosures made in the annual reports, but the arguments of the learned counsel for the assessee company require verification in light of complete annual reports of the said companies to ascertain the exact nature of services provided by the companies selected by the learned TPO and whether the FAR analysis of the above companies is identical with that of the assessee company or not. Since there are differences in FAR analysis of companies selected by the learned TPO with that of the assessee company, in our c....