TaxTMI 
TaxTMI 
2026 (10) TMI 157
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....e Resolution Panel-2, Bengaluru [the Ld. DRP], dated 17 October 2025, following the draft assessment order dated 17 January 2025 under section 144C(1) of the Act, which incorporated the order dated 12 December 2024 passed by the Deputy Commissioner of Income-tax, Transfer Pricing-2(1)(2), Bengaluru [the Ld. TPO]. 02. The Assessee has raised the following grounds of appeal: General Grounds: 1. The Order of the Learned Assessing Officer ('AO'), learned Transfer Pricing Officer ('TPO') and the Honourable Dispute Resolution Panel ('Hon'ble DRP) in so far as it is prejudicial to the interest of the Appellant is not justified under the facts and circumstances of the case and in law and is liable to be quashed. 2. The learned AO learned TPO and the Hon'ble DRP are not justified in law and on facts and circumstances of the case, in adjusting the Transfer Price ("TP") by Rs. 6,24,55,937/- with respect to the international transactions undertaken by the Appellant, under section 92CA of the Income Tax Act, 1961 ("the Act"). 3. Ground relating to the Assessment Order under section 143(3) read with section 144C (13) being barred....
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....al transaction thereby following a non-transparent approach. 6.2 The comparability analysis undertaken by the learned TPO/AO is not in accordance with the Transfer Pricing guidelines laid under the Act and the Income-tax, Rules 1962 ('Rules'). The comparability analysis so undertaken by the learned TPO is bad in law and liable to be quashed. 6.3 The Hon'ble DRP is not justified in upholding the action of the learned TPO/AO of not applying the upper limit for the turnover filter. The learned TPO/ Hon'ble DRP failed in not appreciating that since lower limit on the turnover filter has been accepted by both the Appellant and the learned TPO, similar filter should also be applied on the upper limit on turnover while carrying out the comparability analysis. 6.4 The Hon'ble DRP is not justified in upholding the action of the learned TPO/AO in rejecting the companies having employee cost of less than 25% of total cost. 6.5 The Hon'ble DRP is not justified in upholding the action of the learned TPO/AO applying the filter of companies having different accounting year to reject the comparable companies. 6.6 The Hon'ble ....
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....on the basis that company has different financial year period. 7.5 The Hon'ble DRP is not justified in upholding the action of the learned TPO/AO in selecting the following companies as comparables: a. Indianic Infotech Ltd b. Sagarsoft (India) Ltd c. Nintec Systems Ltd. d. Apttus Software Pvt. Ltd e. QSG Technologies Pvt. Ltd f. Happiest Minds Technologies Ltd g. Systango Technologies Ltd h. Tata Elxsi Ltd i. Net4Nuts Lid j. Robosoft Technologies Pvt. Ltd k. IDS Infotech Ltd 1) Ezee Technosys Pvt. Ltd m) Cybage Software Pvt Ltd 8. Grounds regarding the transfer pricing adjustment of Rs 5,38,268/- qua interest on outstanding receivables 8.1 The Hon'ble DRP is not justified in upholding the action of the learned TPO/AO in charging notional interest amounting to INR 5,38,268 in relation to outstanding receivables due from Associated Enterprise ('AE'). 8.2 The Hon'ble DRP and learned TPO/AO have failed to appreciate that the outstanding receivables from AEs arise from the provision of services and shall be considered as clo....
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....rievance on the online Income-tax eGrievance portal specifically seeking the computation of income for the demand raised. 9.3 The failure of the learned Assessing Officer and the departmental authorities to redress the grievance and supply the computation of income has caused serious prejudice to the Appellant, depriving the Appellant of an effective opportunity to verify, contest and comply with the impugned demand. 9.4 The absence of a computation sheet and break-up of assessed income violates the principles of natural justice, as the Appellant is left without clarity as to the basis and quantum of additions forming part of the final assessment. 03. Briefly stated, the assessee is a wholly owned subsidiary of Quotient Technology Inc. and provides software development services to its parent company. It filed its return of income on 23 November 2022, declaring total income of Rs. 48,091,490. The return was selected for scrutiny, and statutory notices were issued. 04. Since the assessee had entered into international transactions reported in Form 3CEB, the Assessing Officer referred the matter to the Transfer Pricing Officer for determination of the arm's len....
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.... cost PLI, and selected 23 comparables, with the 35th percentile margin at 20.46%, the 65th percentile margin at 34.17%, and the median margin at 24.18%. He computed the arm's length price on the taxpayer's operating revenue of Rs. 762,133,083 as Rs. 824,050,752, resulting in a shortfall of Rs. 61,917,669, and proposed an adjustment under section 92CA of the Act. 11. The Transfer Pricing Officer also noted outstanding trade receivables of Rs. 162,122,277 for which no interest had been benchmarked. Considering the 60-day credit period under the service agreement dated 30 November 2021, and applying LIBOR plus 450 basis points, he computed interest of Rs. 538,267 on six invoices, using the last six-month average rate from April 2021 to March 2022 of 0.33%. Accordingly, by order dated 12 December 2024 passed under section 92CA(3) of the Act, he proposed a total adjustment of Rs. 62,455,937. 12. Pursuant to the above adjustment, the learned Assessing Officer passed a draft assessment order on 17 January 2025, assessing the assessee's total income at Rs. 110,547,427. The assessee filed objections before the Dispute Resolution Panel, which issued its directions on 17 October 2025. ....
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....ng its operating profit margin. He further submitted that the amount also included rent, which could not be excluded from operating cost. The learned CIT-DR agreed with this submission. We therefore direct the learned Assessing Officer to verify whether the amount shown in the profit and loss account under rates and taxes includes rent. If it does, the rent component shall not be excluded from operating item when recomputing the assessee's margin. Ground No. 4 is accordingly allowed. 16. Ground No. 5 alleges that the learned Dispute Resolution Panel's binding directions were not complied with by the learned AO/TPO. We find, however, that the learned Dispute Resolution Panel directed the exclusion of certain comparables, and the learned Transfer Pricing Officer excluded them while giving effect to those directions by order dated 6 November 2025. Even after such exclusion, the 35th percentile margin of the comparable set remained at 19.01% and the median margin at 24.18%, leaving the shortfall adjustment of Rs. 61,917,669 unchanged. Accordingly, Ground No. 5 is dismissed. 17. Ground No. 6 concerns the fresh comparability analysis carried out by the learned Transfer Pricing ....
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....e has also not pressed before us the grievance of the rejection of its transfer pricing study report. It is apparent that the assessee's only grievance is the inclusion or exclusion of comparable companies from the comparability analysis. 23. The Actual delineation of transaction is that Quotient US primarily generates revenue by providing digital coupons and media solutions to its customers and partners. It is an industry-leading digital marketing company that powers integrated digital promotions and media programmes for CPGs, brands and retailers. Quotient US delivers these programmes through its platforms across a broad network of digital properties, including its flagship consumer brand, Coupons.com. This network provides Quotient US with proprietary and licensed data, including retailers' in-store POS shopper data, purchase intent and online behaviour, and location intelligence, to deliver more valuable outcomes for CPGs, retailers and consumers. Using shopper data from retail partners and Quotient US's proprietary data and audience segments, Quotient US delivers targeted and/or personalised digital media and promotions to shoppers through its network, including its web....
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....ngaged only in providing software development activities and works under the control and supervision of Quotient US. The key intangible property employed by the assessee is only Computer software of Rs. 3,08,604. 26. The learned authorised representative submitted that the assessee's turnover was about Rs. 76 crore, whereas the comparison had been with companies whose turnover was many times higher, and that such companies therefore deserved to be excluded on that ground alone. He referred, in particular, to Happiest Minds Technologies Ltd., with turnover of Rs. 1,033 crore; Tata Elxsi Ltd., with turnover of Rs. 2,471 crore; Robosoft Technologies Pvt. Ltd., with turnover of Rs. 270 crore; and Cybage Software Pvt. Ltd., with turnover of Rs. 1,444 crore. 27. Regarding the difference in Assets Used, he further submitted that Happiest Minds Technologies Ltd. is an industry leader in product engineering services, digital business services, infrastructure management, and security services, and that it owns substantial intangible assets, including goodwill, unlike the assessee. With regard to Tata Elxsi Ltd., he submitted that, apart from its turnover of Rs. 2,471 crore, it benefits....
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....e comparable margins. The raw Upper Turnover filter is applied only to reduce the number of comparables. Of course, companies falling outside because of the Upper Turnover filter may have different characteristics and, on that basis, may be removed from the comparable set. That is perfectly the mandate of Rule 10B(2) of the Rules. 31. After a careful review of the rival contentions, it is evident that Happiest Minds Technologies Ltd. is an industry leader specializing in product engineering services, digital business solutions, infrastructure management, and security services. The company possesses substantial intangible assets, including goodwill. Therefore, it needs to be removed under the provisions of Rule 10B (2) (a). 32. Tata Elxsi Ltd., with a turnover of Rs. 2,471 crore, benefits from the Tata Group's strong brand presence and has a distinct asset base. Clearly, the Tata brand is extensive and cannot be compared with the assessee's assets, which operate as a captive unit. Thus, it needs to be removed as per rule 10B (2) (b) of The Rules. 33. Cybage Software Pvt. Ltd. has a turnover of Rs. 1,444 crore and offers digital marketing services such as branding, visual de....
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....t serves a diverse range of process manufacturing industries, with solutions designed to meet the unique needs of these sectors, providing comprehensive support for manufacturing and distribution operations. Functionally different from the taxpayer, it was therefore rejected. (Source: https://www.batchmaster.com/) Hence, the company has not been included in the final set of comparables. 39. The assessee contended that the comparable is engaged in the business of software development and provides software services to cater for the distribution, manufacturing, financial, quality and compliance needs of various manufacturers. It has the companies functionally comparable to the assessee and should have been included in the final set of comparables. 40. The learned departmental representative referred to the direction of the learned dispute resolution panel at page No. 40 of that direction and submitted that it is not functionally comparable. 41. We have carefully considered the rival contention and find that the comparable companies involved in software products and software services, as per the financial statements submitted and perused by the learned dispute resolution panel....
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....ow-code-isliving-up-to-its-promises-and-ai-is-set-to-turbocharge-the-benefitsfurther-according-to-new-evoke-technologies-research/). Evoke Technologies thus does not pass the qualitative test of comparability through functional analysis. Hence, this company has not been included in the final list of comparables. 43. The learned dispute resolution panel referred to the order of the learned transfer pricing officer and approved that analysis, noting that the comparable company is engaged in high-end services, unlike the taxpayer. 44. The learned authorised representative did not advance any argument, and therefore the order of the learned lower authorities excluding the above comparable companies cannot be disputed. 45. With respect to the direction for the inclusion of Toxsl Technologies Private Limited, the reason given by the taxpayer for inclusion was that the comparable is engaged in software development services, including application development, mobile development, web application development, and automation testing. 46. The learned transfer pricing officer held that ToXSL Technologies primarily offers services in web and mobile app development, ERP solutions, dig....
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....g and developing software applications tailored to client needs, as well as developing off-theshelf software products. They offer customization services to adapt their software solutions to specific client requirements. They are not limited to a single solution like the taxpayer, which addresses only one issue, personal finance. GS Lab specializes in the design and development of software applications. GS Lab provides a broad range of digital product engineering services, which are very different from the functions performed by the taxpayer. They assist Independent Software Vendors (ISVs) and enterprises in building, deploying, and managing their digital products. Their services span the entire software development lifecycle, from ideation through design, development, execution, deployment, and support. This comprehensive approach includes technology solutions using cloud computing, the Internet of Things (IoT), analytics, and machine learning, catering to various industries such as telecommunications, manufacturing, and security. In contrast, the taxpayer focuses exclusively on personal finance management software. Their product suite is designed to address specific needs related ....
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....red expenses of rupees one .03 crores towards related parties and has also earned income of Rs. 4.56 crores from related parties. Therefore, the aggregate level of transactions with related parties exceeds 15% of the total turnover of the company, and this company fails the related party filter. The learned authorised representative also referred to the chart given separately. This could not be controverted by the learned departmental representative. Therefore, as it fails the filters adopted by the learned transfer pricing officer, we direct the learned assessing officer to remove this comparable company as it fails the related party transaction filter of 15%. 58. The next comparable company was stated to be net4NutLtd, and the learned transfer pricing officer included this comparable company after it passed all the filters, a finding also confirmed by the learned dispute resolution panel. However, before us, the learned authorised representative submitted that it is engaged in providing consultancy services, including product engineering and software development, to its clients. Further, he referred to the company's website, which states that it is engaged in offshore engi....