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Facts
The appeals filed by the Revenue are against the orders of the CIT(A) which excluded certain companies from the list of comparables used by the Transfer Pricing Officer (TPO). The assessee, a software development services provider, had its transactions benchmarked using the Cost Plus Method (CPM) in its Transfer Pricing Study Report (TPSR). However, the TPO rejected CPM and substituted it with TNMM, using its own set of comparables, leading to an upward adjustment. The assessee argued for the use of its comparables and for TNMM to be applied.
Held
The Tribunal noted that the assessee accepted the use of TNMM but insisted on using its own set of comparables from the TPSR. The CIT(A) had accepted the assessee's contention to include its comparables, excluding only Thirdwave Solutions Ltd. The Tribunal directed the TPO to analyze the comparables adopted by the assessee, excluding Thirdwave Solutions Ltd., and also directed the assessee to conduct fresh research for comparables using the TPO's filters. The matter was remitted back to the TPO/AO for a revised determination.
Key Issues
Whether the CIT(A) erred in excluding certain comparables from the list used for benchmarking by the TPO, and whether the matter should be remitted back to the TPO for fresh analysis with specific directions regarding comparable selection.
Sections Cited
143(3), 144C(3), 92CA(1), Rule 92C, Rule 108
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
These two appeals filed by the Revenue are against the orders of CIT (A) 58, Mumbai, vide order nos. ITBA/APL/S/250/2024- 25/1074419252(1) and ITBA/APL/S/250/2024-25/1074418247(1), dated 12.03.2025 passed against the assessment orders by NFAC, Delhi, u/s. 143(3) r.w.s 144C(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 23.11.2021 for AY 2018-19 and dated 09.06.2021 for AY 2017-18.
Grounds taken by the Revenue are reproduced as under:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Comviva Technologies Ltd from the list of comparables on the basis of minute differences in the functionality without appreciating the fact that strict comparison of functions is not a requirement in TNMM method? In TNMM strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Comviva Technologies Ltd., R. Systems International Ltd. from the list of comparables because it has Intangible assets without considering that Independent comparables always have intangible assets but comparables without intangibles are mostly subsidiaries of their AEs and get rejected as comparables due to high related party transactions? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude R. Systems International Ltd from the list of comparables without analyzing the fact that it is an accepted principle that In TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude R. Systems International Ltd from the list of comparables without considering the fact that comparables without intangibles are mostly subsidiaries of their AEs and get rejected as comparables due to high related party transactions? 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Nihilent Ltd., from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least sofas compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Tata Elxsi Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 7. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Infobeans Technologies Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entitles engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 8. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cygnet Infotech Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that In TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 9. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cadsys (India) Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 10. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cybage Software Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 11 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cybage Software Pvt. Ltd from the list of comparables for having high margin without analyzing the fact that the company is having stable profit margin for the last 3 assessment years? 12. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Interglobe Technology Quotient Pvt. Ltd. from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 13. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Dun & Bradstreet Technologies & Data Services Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 14. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude E-Infochips Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 15. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude the Comviva Technologies Ltd., R. Systems International Ltd., Nihilent Ltd., Tata Elxsi Ltd., Infobeans Technologies Ltd., Cygnet Infotech Pvt. Ltd., Cadsys (India) Ltd., Cybage Software Pvt. Ltd., Interglobe Technology Quotient Pvt. Ltd., Dun & Bradstreet Technologies & Data Services Pvt. Ltd. and E-Infochips Pvt. Ltd companies from the list of comparables without appreciating the fact that the assessee has not demonstrated through documentary evidences that the comparables are dissimilar to the assessee company? 16. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude the comparables from the list of comparables without appreciating all the comparables selected by the TPO are broadly engaged in development of software products similar to the assessee, by going into strict comparison like CUP method? 17. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude the above comparables from the list of comparables without appreciating that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? 18. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing the TPO to include the comparables selected by the assessee without appreciating that the TPO has clearly stated that assessee has not applied the Cost Plus Method as per the provisions of Rule 92C r.w.r. 108? The Ld. CIT(A) failed to appreciate that the comparables selected under CPM by the assessee cannot be simply combined with the comparables selected by the TPO under TNMM.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to provide an opportunity to the TPO to analyse assessee's comparables as per the search process employed under TNMM method?
(1) "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Comviva Technologies Ltd from the list of comparables on the basis of minute differences in the functionality without appreciating the fact that strict comparison of functions is not a requirement in TNMM method? In TNMM strictness of functional comparubility is least as and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (ii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Comviva Technologies Ltd., R. Systems International Ltd.from the list of comparables because it has intangible assets without consideringthat independent comparables always have intangible assets but comparables without intangibles are mostly subsidiaries of their AEs and get rejected us comparables due to high related party transactions? (iii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude R. Systems International Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (iv) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude R. Systems International Ltd from the list of comparables without considering the fact that comparables without intangibles are mostly subsidiaries of their AEs and get rejected as comparables due to high related party transactions? (v) Whether on the facts and circumstances of the case and in law, the Ld CIT(A) is correct in directing to exclude Nihilent Ltd., from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (vi) Whether on the facts and circumstances of the case and in lave, the L.d. CIT(A) is correct in directing to exclude Tata Elxsi Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entitles engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (vii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Infobeans Technologies Ltdfrom the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (viii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cygnet Infotech Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (ix) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cadsys (India) Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (x) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cybage Software Pvt. Ltd from the list of comparables without analyzing the fact that it is un accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (xi) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Cybage Software Pvt. Ltd from the list of comparables for having high margin without analyzing the fact that the company is having stable profit margin for the last 3 assessment years? (xii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Interglobe Technology Quotient Pvt. Ltd. from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysts the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (xiii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude Dun & Bradstreet Technologies & Data Services Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TAMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (xiv) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude E-Infochips Pvt. Ltd from the list of comparables without analyzing the fact that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 (xv) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude the Comviva Technologies Ltd., R. Systems International Ltd., Nihilent Ltd., Tata Elxsi Ltd., Infobeans Technologies Ltd., Cygnet Infotech Pvt. Ltd., Cadsys (India) Ltd., Cybage Software Pvt. Ltd., Interglobe Technology Quotient Pvt. Ltd., Dun & Bradstreet Technologies & Data Services Pvt. Ltd. and E-Infochips Pvt. Ltdcompanies from the list of comparables without appreciating the fact that the assessee has not demonstrated through documentary evidences that the comparables are dissimilar to the assessee company? (xvi) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing to exclude the comparables from the list of comparables without appreciating all the comparables selected by the TPO are broadly engaged in development of software products similar to the assessee, by going into strict comparison like CUP method? xvii) Whether on the facts and circumstances of the case and in lave, the Ld. CIT(A) is correct in directing to exclude the above comparables from the list of comparables without appreciating that it is an accepted principle that in TNMM analysis the strictness of functional comparability is least as compared to other methods and under this method net margin of entities engaged in similar function is compared and the minute differences in the functioning of comparables cannot become a reason for exclusion of comparables? (xviii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in directing the TPO to include the comparables selected by the assessee without appreciating that the TPO has clearly stated that assessee has not applied the Cost Plus Method as per the provisions of Rule 920 r.w.r 108? The Ld. CIT(A) failed to appreciate that the comparables selected under CPM by the assessee cannot be simply combined with the comparables selected by the TPO under TNMM. (xix) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to provide an opportunity to the TPO to analyse assessee's comparables as per the search process employed under TNMM method?
2.1. Issues involved in both the appeals are common and therefore taken up together by passing a consolidated order. The grounds raised by the Revenue in both the appeals are in respect of exclusion allowed by ld. CIT from the list of comparables, adopted by ld. Transfer Pricing Officer (TPO). We take up appeal for AY 2018-19 as the lead case for drawing the facts. Our observations and findings in this year shall apply mutatis mutandis for the other assessment year. and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18
3. Brief facts of the case as culled out from records are that assessee is a provider of software development and related services to its Associate Enterprises, namely, Xoriant US and Xoriant UK. Xoriant US holds 99.99% shareholding of the assessee. Throughout AY 2018-10, Xoriant US owned directly or indirectly 100% of assessee. Xoriant UK is a subsidiary of Xoriant US and is a corporate body incorporated under the laws of United Kingdom, tax resident of UK. Assessee’s software development and international service line offers a full life cycle software development, engineering services, producing implementation and integration services. Assessee’s entire export sales are to its Associate Enterprises which in the year under consideration amounts to Rs.278,70,80,737/-. The same was benchmarked in its Transfer Pricing Study Report (TPSR) under Cost Plus method (CPM) as the Most Appropriate Method (MAM).
3.1. Reference was made to ld. TPO u/s 92CA(1) by the ld. Assessing Officer for computation of arms’ length price in relation to international transactions. According to ld. TPO, assessee has not properly applied the CPM. However, according to the assessee, since inception, it had been following CPM in respect of transactions with its foreign associated enterprises as MAM while working out Arm’s Length Price (ALP). The said method has been accepted by the Department in Asst Year 2007- 08 and Asst Year 2008-09 though a different view was taken in Asst Year 2009-10, Asst Year 2010-11. Further, according to the ld. TPO, cost claimed by the assessee to be attributable towards rendering software services to its Associated Enterprises are not certified by way of segmental accounts audited and duly certified by an auditor as a result of which the claim of the assessee is not verifiable. Ld. TPO thus, rejected the TP Study carried out by the assessee as unreliable and and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 conducted his own study with TNMM as the MAM and Operating Profit / Operating Cost (OP/OC) as the Profit Level Indicator (PLI). He benchmarked ALP by bringing in new set of comparable which resulted in an upward adjustment of Rs.49,38,83,325/- to the total income of the assessee.
3.2. Ld. TPO obtained his set of comparable from the Prowess database by carrying out the following search criteria: Sr. Criteria No. i. Current year's data (FY 2017-18) if available or immediately preceding financial year has been used. The financials of companies shall be for the year ending on 31st March 2018. ii. Companies engaged in provision of software development service iii. Companies having operating income between 1/10th to 10 times turnover as that of assessee iv. Companies with related party transactions less than 25% are selected v. Companies with persistent losses are rejected vi. Companies with Peculiar Economic Circumstances are rejected vii. Companies those are functionally different from you are rejected 3.3. Based on this search, he listed the following comparable with OP/OC as PLI to arrive at ALP margin of 25.62%. Since assessee had reported the margin of 7.78%, he worked out the upward adjustment to be made on account of provision of software development services. The list of comparable and the ALP margin arrived at by ld. TPO is tabulated below: and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 Sr. No. Company Name OP/OC 1 R Systems International Ltd. 18.26% 2 Gwynniebee India Pvt. Ltd. 18.30% 3 Comviva Technologies Ltd. 20.23% 4 Nihilent Ltd. 21.74% 5 Cadsys (India) Ltd. 24.12% 6 Cygnet Infotech Pvt. Ltd. 25.09% 7 Persistent Systems Ltd. 25.62% 8 Infobeans Technologies Ltd. ; 26.82% 9 Tata Elxsi Ltd. 28.20% 10 Cybage Software Pvt. Ltd. 56.49% 11 Interglobe Technology Quotient Pvt. Ltd. 70.73% 12 E-lnfochips Pvt. Ltd. 75.58% 13 Dun & Bradstreet Technologies & Data Services Pvt. 84.80% Ltd. Count 13 35th 24.12% Median 25.62% 65th 28.20% 3.4. In the first appeal, assessee contented on the rejection of CPM by the ld. TPO and substitution of TNMM as the MAM which is against the principle of consistency. Assessee raised objection to selection of following comparable by the ld. TPO holding that these companies cannot be considered as comparable by the assessee:
Sr. No. Company Name PLI(OP/OC) % A.Y. 2018-19 01 R Systems International Ltd. 18.26 02 Comviva Technologies Ltd. 20.23 03 Nihilent Ltd. 21.74 04 Cadsys (India) Ltd. 24.12% 05 Cygnet Infotech Pvt. Ltd. 25.09 06 Infobeans Technologies Ltd. ; 26.82 08 Tata Elxsi Ltd. 28.20 09 Cybage Software Pvt. Ltd. 56.49 10 Interglobe Technology Quotient Pvt. Ltd. 70.73 11 E-lnfochips Pvt. Ltd. 75.58 12 Dun & Bradstreet Technologies & Data 84.80% Services Pvt. Ltd.
3.5. Ld. CIT(A) excluded the above tabulated comparable while giving his findings, based on the submissions made by the assessee. However, assessee had requested to include all the comparable as mentioned in its TPSR which are comparable to it in all respects. The list of comparable considered by the assessee for application of TNMM as the MAM forming part of its TPSR is extracted below: Sr Name of Company Turnover Total Cost Interest Cost Operating Cost Operating OP/O no Profit C % Xoriant Solutions Pvt 2,97,70,49,174 2,77,04,50,030 26,86,268 2,76,77,63,762 20,92,85,412 756 Ltd.
Comparables 1 31 infotech Limitless 2,37,51,00,000.00 3,81,43,00,000.00 82,80,00,000.00 2,98,63,00,000 (61,12,00,000) -20.47 excellence 2 Cybertech system and 51.06,74,000.00 56,46,81,000.00 1,86,95,000.00 5459,86,000 (3,53,12,000) -6.47 software 3 AX1SCADES 2,32,58,02,000.00 2,47,37,22,000.00 7,20,32,000.00 2,40,16,90,000 (7,58,88,000) -3.16 Engineering Technologies Limited 4 Evoke Tech 87,89,47,939.00 85,56,87,646.00 16,93,339.00 85,39,94,307 2,49,53,632 2.92 5 Mindtec 88,41,53,000.00 86,03,25,000.00 22,13,000.00 85,81,12,000 2,60,41,000 3.03 6 ASM technologies Ltd 76,19,10,000.00 70,84,20,000.00 22,10,000.00 70,62,10,000 5,57,00,000 7.89 7 Sasken 4,21,39,78,000.00 3,74,53,01,000.00 3,74,53,01,000 46,86,77,000 12.51 communication - technologies Ltd. 8 Thirdware Solution 2,13,52,80,000.00 1,70,20,00,000.00 - 1,70,20,00,000 43,32,80,000 25.46 9 Ramco Systems 2,84,97,70,000.00 2,13,41,40,000.00 1,19,50,000.00 2,12,21,90,000 72,75,80,000 34.28 35% 3.15 2.92 65% 5.85 7.89 50% 45 3.03 3.6. Ld. CIT(A) thus, concluded in para-10.24 by holding that assessee’s contentions were accepted to include its final comparable except for Thirdwave Solutions Ltd. as it was held to be a product company by the Coordinate Bench in assessee’s own case for AY 2010- 11. While giving this findings, ld. CIT(A) observed that “he had made detailed study and analysis to accept the contention of assessee on the comparable listed by it.”
We have perused the orders of the authorities below and observed that ld. TPO rejected the CPM adopted by the assessee in its TPSR and replaced it with TNMM for making an upward adjustment by bringing in its own set of comparable. Before us, ld. Counsel for the assessee accepted that application of TNMM is agreeable but the comparable to be used for benchmarking ALP be taken from its TPSR as assessee had already carried out the benchmarking exercise by applying TNMM in the alternate to CPM. We note that ld. CIT(A) has accepted this contention and 3676/Mum/2025 Xoriant Solutions Pvt. Ltd. AYs 2018-19 and 2017-18 of the assessee whereby TNMM adopted by ld. TPO as MAM had been accepted but comparables listed by the ld. TPO have been excluded and those taken by the assessee in the alternate has been held to be considered.
4.1. From the perusal of TPSR, it is not discernable as to the filters adopted by the assessee for benchmarking the ALP while adopting TNMM. Further, we find that even though ld. CIT(A) observes about his detailed study and analysis, there is nothing on record which suggests of any such “detailed analysis or study” undertaken on the set of comparable considered by the assessee. The comparable taken by the assessee while adopting TNMM remained to be tested at all stages of the proceedings below.
4.2. In these set of facts and circumstances of the present case, without rejecting the findings of ld. CIT(A), we direct the ld. TPO to analyze the comparable adopted by the assessee for benchmarking ALP under TNMM excluding the comparable Thirdwave Solutions Ltd. as noted by ld. CIT(A) in his findings. We also direct the assessee to conduct fresh research using the same filters as taken by ld. TPO when he drew his list of comparable and submit the same before the ld. TPO, so as to have a comprehensive coverage of comparable for benchmarking of ALP. Ld. TPO would consider the set of comparable as per the TPSR as well as fresh set of comparable to be furnished by the assessee based upon fresh research as directed above for the purpose of arriving at Arm’s Length Margin. Accordingly, the matter is remitted back to the file of ld. TPO/AO in terms of the directions noted above. Assessee be given reasonable opportunity of being heard to represent
In the result, appeal of the Revenue is allowed for statistical purposes.
These findings apply mutatis mutandis to appeal for AY 2017-18.
In the result, both the appeals of the Revenue are allowed for statistical purposes. Order pronounced in the open court on 31.10.2025. d/- Sd Sd/- Sd/- Sd/- [Amit Shukla] [Girish Agrawal] Judicial Member Accountant Member Dated: 31st October, 2025. MP, Sr.P.S. Copy to: 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,