DECISION MINDS INDIA PRIVATE LIMITED,BANGALORE vs. DCIT CORPORATE CIRCLE 1(1) CHENNAI, CHENNAI

On the facts and circumstance of the case and in law, the Ld. AO has erred in making a reference to the Deputy Commissioner Of Income Tax DC/ACIT TP 1(2) (1) Bangalore [Ld. TPO'], inter alia, since he has not recorded an opinion that any of the conditions in section 92C(3) of the Act, were satisfied in the instant case. Accordingly, the order passed by the Ld. TPO/Ld. AO is without jurisdiction. The Ld. DRP erred in confirming the same.

On the facts and circumstance of the case and in law, the order passed by the Ld. AO is without jurisdiction, inter alia, insofar as it purports to give effect to an invalid order of the Ld. TPO/Ld. AO.

On the facts and circumstance of the case and in law, the Ld. AO/Ld. TPO erred in arbitrarily rejecting the transfer pricing analysis carried out by the Appellant which was consistent with the Indian Transfer Pricing Regulations ("Indian Regulations") prescribed under the Act and Income-tax Rules, 1962 ("the Rules"). The Ld. DRP erred in confirming the same.

On the facts and circumstance of the case and in law, the Ld. AO/Ld. TPO erred on facts and in law in conducting a fresh benchmarking analysis using "non-contemporaneous data and substituting the Appellant's analysis with the fresh benchmarking analysis on his own conjectures and surmises. Thereby accepting Happiest Minds Technologies Limited, Infosys Limited, Wipro Limited, Tata Consultancy Services Limited, Systango Technologies Limited, Tata Elxsi Limited, Robosoft Technologies Private Limited, I D S Infotech Limited, CG-VAK Software & Exports Limited, Cybage Software Private Limited. The Ld. DRP erred in confirming the same.

On the facts and circumstance of the case and in law, the Ld. AO/Ld. TPO has erred in law in using data, which was not contemporaneous, and which was not available in the public domain at the time of conducting the transfer pricing study by the Assessee. The Ld. DRP erred in confirming the same.

On the facts and circumstance of the case and in law, the Ld. AO/ Ld. TPO erred in law in following the directions of the Ld. DRP, wherein certain comparable companies were specifically rejected viz. Infosys Limited. However, the same was not excluded and suitable relief was not provided

On the facts and circumstance of the case and in law, the Ld. AO/ Ld. TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional comparability. The Ld. DRP erred in confirming the same.

On facts and circumstances of the case and in law, the Ld. AO/Ld. TPO erred in not applying an appropriate upper limit to reject companies having high turnover when compared to the Appellant and thereby, erred in accepting companies without considering the turnover and size of the Appellant and the comparable companies.

On the facts and circumstance of the case and in law, the Ld. AO/Ld. TPO erred in fact and law in not allowing necessary economic adjustments like working capital adjustments, depreciation adjustments and risk adjustments. The Ld. DRP erred in confirming the same.

On the facts and circumstance of the case and in law, the Ld. AO erred in initiating penalty proceedings u/s 270A and u/s 271AA(1) of the Act.

The above grounds are independent and with prejudices to one another. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of the hearing of appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to Law.

Brief facts of the case are that the assessee is a captive service provider engaged in rendering software development services to its Associated Enterprises (AEs). During the previous year relevant to the assessment year (AY) 2022-23, it entered into international transactions of provision of software development services amounting to Rs.33,15,54,485/-. The TPO passed an order u/s.92CA(3) determining a transfer pricing adjustment of Rs.2,51,85,029/- by selecting 21 comparables and determining the median margin at 23.87%. The TPO rejected the transfer pricing study undertaken by the assessee and conducted an independent benchmarking analysis under TNMM by selecting twenty-one comparable companies. While applying various quantitative filters such as employee cost filter, export revenue filter, related party transaction filter, persistent loss filter, etc., the TPO did not apply any upper turnover filter. Consequently, companies having turnover many times higher than that of the assessee, including Infosys Ltd., Wipro Ltd., Tata Consultancy Services Ltd., Tata Elxsi Ltd., LTI Mindtree Ltd., Happiest Minds Technologies Ltd., Cybage Software Pvt. Ltd. and other large companies were retained in the final set of comparables. The TPO computed the assessee's margin at 15.18% as against the median margin of 23.87% and proposed an adjustment of Rs.2,51,85,029/-. The DRP directed exclusion of Infosys Ltd. from the final set of comparables and remanded the

We have heard the rival submissions and perused the material available on record. The limited controversy raised in Ground No.10 relates to the applicability of an upper turnover filter while selecting comparables for benchmarking the international transaction of software development services.

The ld. Authorised Representative (AR) submitted that the assessee's turnover from software development services is only Rs.33.37 crores, whereas several companies selected by the TPO have turnover ranging from several hundred crores to more than one lakh crores. According to the assessee, such giant companies enjoy substantial economies of scale, possess valuable brands and intangibles, undertake significant research and development activities and operate in diversified business verticals, and therefore cannot be compared with a routine captive software development service provider. It was further submitted that the issue is squarely covered by the decision of the coordinate Bench of the Tribunal in the assessee's own case for assessment year 2021-22 in IT(TP)A No.67/Chny/2024 dated 24.09.2025 which held as under:

Based on the referred cases supra, we agree with the Assessee's contention that turnover is a valid quantitative filter in determining comparability, especially in cases involving software development services. Further, the coordinate benches of this Tribunal have been consistently holding that the upper turnover filters of Rs. 200 crore or 10 times is essential in the turnover reflects economies of scale which has significant impact on the Functions, Assets and Risks, FAR analysis.

It is also relevant to note that the above decision has attained significance as it has been rendered in the assessee's own case on substantially identical facts. The Revenue has not placed before us any material to demonstrate that there is any material difference either in the functional profile of the assessee or in the nature of the international transaction for the year under consideration so as to

In the present year also, the assessee is a captive software development service provider operating on a limited-risk model. The turnover of the assessee is only about Rs.33.37 crores, whereas several companies selected by the TPO have turnover far exceeding ten times the turnover of the assessee. Such companies derive advantages on account of economies of scale, market leadership, ownership of valuable intangibles and diversified operations. Therefore, applying the ratio laid down by the coordinate Bench in the assessee's own case for assessment year 2021-22, we hold that companies having turnover exceeding ten times the turnover of the assessee cannot be regarded as appropriate comparables. Accordingly, following the decision of the coordinate Bench in the assessee's own case for assessment year 2021-22 in IT(TP)A No.67/Chny/2024 dated 24.09.2025, we direct the Assessing Officer/TPO to apply the upper turnover filter of ten times the turnover of the assessee while finalising the set of comparables. Consequently, all companies whose turnover exceeds ten times the turnover of the assessee shall stand excluded from the final list of comparables. The Assessing Officer/TPO shall thereafter recompute the arm's length price after granting adequate opportunity of hearing to the assessee.