OPLUS INDIA RESEARCH AND DEVELOPMENT PRIVATE LIMITED,TELANGANA vs. DCIT, CENTRAL CIRCLE (1)(1), BANGALORE, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER

IT(TP)A No.780/Bang/2026 Assessment Year: 2022-23

Oplus India Research and The Dy. Commissioner of Vs. Development Pvt. Ltd., Income Tax, 16 & 17th Floor, Sohini Tech Park, Central Circle – 1(1), Trendseet Apartments Road No.2, Bengaluru. Financial District, Nanakramguda Village, Gachibowli, K.V Rangareddy, Seri Lingampally, Telangana – 500 032. PAN – AAFCE 1617 D APPELLANT RESPONDENT Assessee by : Shri Darpan Kirpalani, Advocate Revenue by : Smt. Divya K.J, CIT(DR) Date of hearing : 29.04.2026 Date of Pronouncement : 25.05.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal has been instituted by the assessee against the order of the Ld. AO/TPO u/s 143(3) r.w.s. 144C(13) of the Act dt. 29.12.2025 for the AY 2022-23.

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addition made on the Transfer pricing adjustment, which we for the sake of brevity and convenience, are not inclined to reproduce the same here.

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2 Evoke 3.38% 8.00% 3.59% 5.02% Technologies Pvt. Ltd. 3 Yudiz Solutions 2.97% 7.14% 7.14% 6.14% Pvt Ltd. 4 Kcube 10.20% NC 7.70% 8.92% Consultancy Services Pvt. Ltd. 5 Microland Ltd. 4.99% 13.78% 10.42% 9.78% 6 Mindtree Ltd. 10.87% 21.26% 23.04% 16.32% 7 R Systems 19.30% 22.27% 20.84% 20.86% International Ltd. 8 Sasken 23.80% 41.97% 41.52% 34.93% Technologies Ltd. 9 C G-V A K 24.92% 39.56% 43.64% 37.14% Software & Exports Ltd. Counts 9 Median 9.78% 35th Percentile 5.02% 65th Percentile 16.32%

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5.1 However, the TPO during the assessment proceeding alleged that the assessee is not a SWD company but an entity engaged in activities of providing Research and Development (R&D) in software development services.

5.2 The TPO referred to TP study report of assessee and the agreements furnished by the assessee which according to TPO consistently described the assessee’s services as R&D services. To substantiate the same, the TPO also referred to Master Service Agreement (MSA) dated 01.09.2001 that defines scope of services as R&D services such as “Android Operating system-related software development” & “AI- Algorithm pre-research”.

5.3 The TPO rejected all the comparables selected by the assessee. Thereafter, the TPO applied his own set of filters and selected 24 comparable companies. Subsequently, after selection of the said 24 comparables, the TPO further applied the R&D filter and selected 6 additional comparable companies. Accordingly, the final set of comparables selected by the TPO is detailed as under: (i) Mindtree Ltd. (ii) Happiest Minds Technologies Ltd. (iii) Wipro Ltd. (iv) Infosys Ltd. (v) Tata Elxsi Ltd. (vi) Tata Consultancy Services Ltd. 5.4 The average PLI/margin of the comparable companies was computed by the TPO at 29.99% for the SWD segment. Based on the said

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margin, the TPO made an upward transfer pricing adjustment of Rs. 14,32,00,000 in respect of the SWD segment. Note: At the outset, we note that the assessee before us only pressed the ground of turnover filter. Therefore, this order contains contentions regarding the turnover filter only, we have not dealt with other contentions such as functional comparability, segmental information, intangible assets etc.

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• Undertakes R&D activity • Substantial onsite revenue • Subcontractor charges • Owns Brand and Patents • High Turnover 5 Wipro Ltd • Functionally dissimilar • Diversified business activities – Segment information not available • Owns IP • Undertakes R&D activity • Presence of brand • Impact of branding on profit margin • Substantial foreign expenditure • Extraordinary events • High Turnover

7.1 The Ld. DRP, regarding the turnover criteria, observed that high turnover does not have an impact on margins of the company. The Ld. DRP in support of his view relied on various judicial precedents in this regard. Consequently, the ld. DRP rejected the plea of assessee in this regard as well.

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9.1 The assessee further submitted that the TPO rejected all the comparables selected by the assessee and carried out a fresh search. Based on his own filters, the TPO initially selected 24 comparable companies. Thereafter, after selection of these 24 companies, the TPO further applied the R&D filter on the said set of 24 companies and retained only 6 companies as the final set of comparables. The Ld. AR submitted that this approach is not proper. The R&D filter, if applicable, ought to have been applied at the first stage itself along with the other filters. Applying the R&D filter later, after selecting 24 companies, makes the search process inconsistent and unreliable.

9.2 The assessee relied on judicial precedent in the case of DNV Business Assurance India (P.) Ltd. vs. Assistant Commissioner of Income- tax reported in [2024] 158 taxmann.com 263 (Mumbai - Trib.) dated 22- 12-2023 wherein it has been held that Turnover filter cannot be applied as a tool for cherry picking comparables at later stage after completion of search process with the object of excluding comparables which were otherwise found to be functionally comparables after Functions Assets Risks (FAR) Analysis. In view of the above, the assessee requested that the said comparables be deleted from the final list of comparables.

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10.1 The Ld. DR further submitted that the decision in DNV Business Assurance India (P.) Ltd. vs. ACIT [2024] 158 taxmann.com 263 (Mumbai - Trib.), relied upon by the assessee, is distinguishable on facts. In that case, the turnover filter was applied by the TPO after completion of the search process and after applying the other filters. However, in the present case, the R&D filter was duly disclosed by the TPO and was thereafter applied as part of the comparability analysis. In this regard, the Ld. DR referred to page 11 of the TPO order. The ld. DR supported the order of authorities below.

11.1 In our considered view, such an approach is not proper. If the TPO intended to apply the R&D filter, the same ought to have formed part of the search criteria at the initial stage itself. Once the search process was completed and 24 comparables were identified, the TPO could not subsequently introduce a fresh filter and alter the final set of comparables. If such an approach is accepted, the initial search process and filters applied by the TPO would become otiose and the comparability analysis would be rendered nugatory.

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11.2 Therefore, even though the facts of the present case may not be identical in every respect to the decision of the Mumbai Tribunal in DNV Business Assurance India (P.) Ltd. (supra), the basic principle laid down therein squarely supports the case of the assessee that filters cannot be applied selectively after completion of the search process. Accordingly, we do not find merit in the objection raised by the Revenue. The relevant para of the order in the case of Mumbai Tribunal in DNV Business Assurance India (P.) Ltd. (supra)is reproduced below: “We concur the observations made by the Tribunal that turnover filter cannot be applied as a tool for cherry picking the comparables at the later stage after completion of the search process with the object of excluding comparables which was otherwise found to be functionally comparables after the Functions Assets Risks (FAR) Analysis. After taking into facts and circumstances of the present case, we are of the view that the application of the second lower turnover filter by the TPO without rejecting the first turnover filter adopted by the Appellant resulted exclusion of two companies which were otherwise functionally comparable and thus, resulted in cherry picking. It is not the case of the Revenue that the comparables excluded were not functionally comparable with the Appellant. The lower turnover of filter adopted by the Appellant and the explanation provided by the Appellant for adopting the same was not rejected by the TPO. The CIT(A) upheld the adoption of additional turnover filter on the incorrect premise that in the Transfer Pricing Study Report the Appellant did not apply any filters while selecting the comparables. Accordingly, we find merit in the contentions advanced on behalf of the Appellant and direct the TPO/Assessing Officer to re-compute the ALP and transfer pricing adjustment, if any, after including (a) APITCO Limited and (b) IDMA Laboratories Limited in the final set of comparables. In terms of the aforesaid, Ground No. 3 to 3.3 raised by the Appellant are allowed, while Ground No. 3.4 & 3.5 raised by the Appellant are dismissed as being infructuous.”

11.3 Further, with regard to the companies/comparables to be excluded on the basis of turnover, we note that it is well settled that turnover is a relevant criterion for determining comparability, as the scale of operations has a direct bearing on profitability owing to economies of scale. Companies having significantly higher turnover enjoy cost efficiencies and market advantages which are not available to smaller entities.

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11.4 It is pertinent to note that companies with very high turnover operate on a different scale and benefit from economies of scale, better market position and cost advantages, which directly affect their profitability. Size of the company is a recognized factor for comparability, as differences in turnover and market share influence pricing and margins. Though in our considered view turnover filters cannot be applied mechanically and must depend on the facts of each case, keeping in mind the turnover of the tested entity. The purpose is to select companies with a broadly similar scale of operations, assets and risk profile. This approach is in line with the OECD Transfer Pricing Guidelines in para 3.43 which states that Size criteria in terms of Sales, Assets or Number of Employees. The size of the transaction in absolute value or in proportion to the activities of the parties might affect the relative competitive positions of the buyer and seller and therefore comparability. Similarly, the guidance notes on transfer pricing issued by ICAI in para 5.50 states that under TNMM where margins are to be compared, the margin of a 1,000 crores company cannot be compared with that of a 10 crores company. The two most obvious reasons are the size of the two companies and the relative economies of scale under which they operate.

11.5 Further paragraph 15.4 of the ICAI Guidance Note on Transfer Pricing emphasizes significant differences in company size and turnover, such as comparing Rs. 1,000 crore entity to a Rs. 10 crore entity materially affects profitability and comparability under Rule 10B(2) of Income Tax Rule.

11.6 In the present case, the assessee’s turnover from software development services is Rs. 114.15 crores, whereas several of the

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comparables selected by the TPO have substantially higher turnover. In such circumstances, the application of an upper turnover filter becomes necessary to ensure a fair comparison. The Tribunal has taken a consistent view that large or medium scale companies with substantially higher turnover cannot be compared. For the ready reference, the view taken by the coordinate bench of this Tribunal in Autodesk India (P) Ltd. v. DCIT reported in (2018) 96 taxmann.com 263 reads as under: "17.7. We have considered the rival submissions. The substantial question of law (Question No. 1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.) Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the Ld. counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of CIT v. Pentair Water India (P.) Ltd. Tax Appeal No. 18 of 2015 judgment dated 16-9-2015 has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumstances, following the principle that where two views are available on an issue, the view favourable to the Assessee has to be adopted, we respectfully follow the view of the Hon'ble Bombay High Court on the issue. Respectfully following the aforesaid decision, we uphold the order of the DRP excluding 5 companies from the list of comparable companies chosen by the TPO on the basis that the 5 companies turnover was much higher compared to that the Assessee. 17.8. In view of the above conclusion, there may not be any necessity to examine as to whether the decision rendered in the case of Genisys Integrating (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5-8-2011. The decisions rendered by the ITAT Mumbai Benches cited by the Ld. DR before us in the case of Willis Processing Services (supra) and Capegemini India (P.) Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the Ld. counsel for the Assessee supports the plea of the Ld. counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of

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time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the Ld. DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra)".

11.7 Further, we find that this Tribunal subsequently in the case of Robert Bosch Engineering and Business Solutions Pvt. Ltd. vs. DCIT in IT(TP)A No. 593/Bang/2020 followed the decision in the case of Autodesk India (P) Ltd. (Supra) and excluded the company with turnover exceeding 200 crores from the comparable set. Against the order of the Tribunal, the revenue filed an appeal before the Hon’ble Karnataka High Court in ITA No. 146/2025. In the said case, the Hon’ble High Court did not admit the Revenue’s grounds of appeal on this issue by observing as under: “10. Indisputably, a company that has a significantly large turnover cannot be considered as a comparable with an assessee, whose turnover is a small fraction of that of the said entity. 11. The question whether the entities are comparable is required to be determined on the basis of similar FAR [Functions, Assets and Risks] profile. It would be erroneous to assume that the size of an entity and its turnover has no bearing on the FAR profile. It is erroneous to suggest that a company of a huge size and a large turnover would be subjected to the same risks as that of a smaller entity, whose turnover is a small fraction of the other entity. The entities would also not be comparable when one considers the value of assets. Additionally entities having a large turnover, would have the benefit of economies of scale, which would not be available to companies with a relatively lower turnover.

11.8 The Hon’ble High Court has categorically observed that a company having significantly large turnover cannot be compared with a small entity and that size and turnover have a direct bearing on FAR analysis, asset base, risk profile and economies of scale.

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are much higher that of the assessee. Accordingly, relying on the judicial discipline supra, we note that he turnover of the companies viz. Mindtree Ltd., Wipro Ltd., Infosys Ltd., Tata Elxsi Ltd. and Tata Consultancy Services Ltd., are far higher than that of the assessee company. Since the assessee falls under category of companies having significantly higher turnover than that of the assessee, the above comparables need to be excluded.

12.1 We also find force in the contention of the assessee regarding application of an upper turnover filter of 10 times. The Hon’ble Bombay High Court in the case of CIT vs. Pentair Water (India) Pvt. Ltd. (381 ITR 216) has held that turnover is a relevant factor for determining comparability, as companies operating at different scales cannot be compared on a like-to-like basis. Further, the coordinate benches of the

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Bangalore Tribunal in the case of McAfee Software (India) Pvt. Ltd. reported in [2016] 68 taxmann.com 293 (Bangalore - Trib.) dated 18-03- 2016 have accepted the application of a turnover range of up to 10 times for ensuring proper comparability. In view of the above, we direct the AO/TPO to apply an upper turnover filter of 10 times of the assessee’s turnover and recompute the list of comparables accordingly. The relevant para of Bangalore ITAT judgment is reproduced below: “10.9 These two companies are found comparable in many orders of the Coordinate Benches, but excluded on the basis of turnover filter of Rs. 200 Crores limit in Sunquest Information Systems (India) (P.) Ltd.'s case (supra), we have considered the same. Assessee's turnover is about 63 Crores. The turnover of Igate Global Solutions Ltd., (Seg) is about 405 crores and L & T Infotech Ltd is of 562 Crores. This is with the range of ten times the upper limit. Moreover, Assessee Counsel has not pressed on turnover filter of Rs. 200 Crores. Therefore, these two are retained."

12.2 Regarding Happiest Minds Technologies Ltd., ee also note that the turnover of Happiest Minds is not more than ten times the upper limit of the turnover filter. However, it is still significantly higher than that of the assessee. Considering the substantial difference in scale of operations, we are of the view that the said company should be excluded from the list of comparables.

12.3 Before parting, we note that the coordinate bench of this Tribunal in the case of Scancafe Digital Solutions (P.) Ltd. v. Income-tax Officer reported in 94 taxmann.com 515 followed the decision of Mumbai bench order in the case of Willis Processing Services (I) (P.) Ltd. vs. Deputy Commissioner of Income-tax - 2(3), reported in [2013] 30 taxmann.com 350 (Mumbai). The Mumbai bench held the classification of large, medium and small companies based on turnover of more than 2000, 200 to 2000 crores and 1 to 200 by Dun & Bradstreet was not made in the context of comparables under TP Regulations. It was observed that as per such

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classification of small, medium and large-scale company-based on the range of turnover, an entity having Rs. 1 crore of turnover can be compared to the entity having turnover of Rs. 200 crores. But another entity having turnover of Rs. 199 crores cannot be compared with the entity having turnover of Rs. 201 crores. Therefore, it was held by the Mumbai bench that such classification of turnover range cannot be applied for selection or rejection of comparable entity. In addition, the bench also found that in the said case the company having higher turnover had average margin of 30.74% as compared to company having lower turnover having average margin of 31.36%. Hence the Mumbai bench, considering the aforesaid observation rejected the assessee’s grounds for exclusion of comparable companies having turnover exceeding Rs. 200 crores, from the comparable set.

12.4 In our considered opinion, the coordinate bench of Mumbai Tribunal in the above-mentioned case was more focused on mechanical application of range of turnover for classification of small, medium and large-scale companies. By mechanical application of such range, it was rightly pointed out by the bench that the entity with turnover of Rs. 199 crores will be classified as small scale whereas other entities, with turnover of Rs. 201 crores would be classified as medium scale. However, we beg to differ from the view of Hon’ble Mumbai bench. We agree that upper turnover cannot be applied mechanically as per the classification of range of turnover as discussed above, but at the same time a company having substantially low turnover such as appellant assessee with turnover of Rs. 114.15 crores with other companies having higher turnover than that of assessee cannot be compared. In the present case, the assessee’s turnover from software development services is Rs. 114.15 crores,

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whereas several of the comparables selected by the TPO have substantially higher turnover. In view of the above discussion, we reject the order of the TPO/AO insofar as it relates to the exclusion and inclusions of the comparables. As such we direct the TPO/AO to exclude the comparables as mentioned in the table below: S. No. Name of Comparable 1. Mindtree Ltd 2 Happiest Minds Technologies Ltd. 3 Wipro Ltd. 4 Infosys Ltd. 5 Tata Elxsi Ltd 6 Tata Consultancy Services Ltd.

12.5 Considering the above detailed discussion, we reverse the order of the authorities below to the extent and in the manner discussed above. Hence, the grounds raised by the assessee are partly allowed.

Order pronounced in court on 25th day of May, 2026

(SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 25th May, 2026 / vms /

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Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore