ACIT, CIRCLE-1(1)(1), BENGALURU vs. ALTISOURCE BUSINESS SOLUTIONS PRIVATE LIMITED, BENGALURU

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ITTPA 2406/BANG/2024Status: DisposedITAT Bangalore16 March 2026AY 2013-148 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal. Regarding the exclusion of CG-VAK Software & Exports Ltd., Larsen & Toubro Infotech Ltd., and Persistent Systems Ltd. (Grounds 2, 3, 7), the Tribunal noted that the CIT(A) had relied on a Coordinate Bench order in IT(TP)A No. 2861/Bang/2017 for the same AY. This order directed the exclusion of these three companies for various reasons, including reliance on earlier Tribunal and Hon'ble Hyderabad Tribunal orders, and a Hon'ble Delhi Tribunal order concerning CG-VAK Software & Exports Ltd. The Tribunal found no contrary decisions from higher forums and agreed with the CIT(A)'s decision to exclude these companies, thus dismissing these grounds. Concerning the inclusion of comparable companies (Grounds 13, 14, 15, 16), the Tribunal observed that the CIT(A) had relied on the same Coordinate Bench order in NXP India Pvt. Ltd. vs. DCIT (IT(TP)A No. 2861/Bang/2017) for the AY 2013-14, which directed the inclusion of three specific companies for transfer pricing adjustment. As this order had attained finality, the Tribunal found no error in the CIT(A)'s decision to include these companies and dismissed these grounds. The Tribunal did not explicitly address grounds 1, 4, 5, 6, 8, 9, 10, 11, 12, and 17, as the Revenue had submitted they were general grounds, and the core issues of exclusion and inclusion were decided based on the Coordinate Bench's precedent.

What were the facts?

This appeal by the Revenue challenges the order of the CIT(A) for Assessment Year 2013-14. The assessee, M/s. Altisource Business Solutions Pvt. Ltd., provides contract software development and support services and IT-enabled services to its overseas associated enterprises. The Transfer Pricing Officer (TPO) made an adjustment under Section 92CA of the Income Tax Act, 1961, after considering comparable companies. The assessee appealed to the CIT(A), disputing the TPO's inclusions and exclusions of comparables. The CIT(A) allowed the assessee's appeal, leading to the present appeal by the Revenue before the ITAT. The Revenue's grounds primarily concern the CIT(A)'s interpretation of functional similarity and the exclusion/inclusion of specific companies as comparables.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the CIT(A) erred in adopting an overly narrow interpretation of functional similarity by excluding companies reasonably comparable in terms of primary business functions, contrary to established transfer pricing principles (Grounds 1, 4, 5, 6, 9, 10, 11, 12). 2. Whether the CIT(A) was correct in excluding CG-VAK Software & Exports Limited, Larsen and Toubro Infotech Limited, and Persistent Systems Limited on the grounds of functional dissimilarity, when their core operations involve software development services, which are the primary functions of the assessee (Grounds 2, 3). 3. Whether the CIT(A) was correct in excluding CG-VAK Software & Exports Limited, Larsen and Toubro Infotech Limited, and Persistent Systems Limited based on them operating in multiple segments, when their core software development activities are highly comparable (Ground 3). 4. Whether the CIT(A) was correct in excluding Larsen and Toubro Infotech Limited on the ground of brand value and presence of intangible, without establishing revenue generated from them, and without acknowledging that brand value does not necessarily increase profit margin (Grounds 7, 8). 5. Whether the CIT(A) was correct in including Akshay Software Technologies Limited and Cigniti Technologies Limited, which are functionally dissimilar to the taxpayer's business (Grounds 13, 14, 15). 6. Whether the CIT(A) was correct in including CAT Technologies Ltd. when revenue from Software Development services was only 74% of total revenue without segmental details (Ground 16). 7. Whether the CIT(A) was correct in including comparables without carrying out necessary enquiry pertaining to functions vis-à-vis the tested party (Ground 17). Assessee's Contention: The CIT(A) provided elaborate reasons for arriving at conclusions on functional similarity/dissimilarity, relying on a Coordinate Bench order in IT(TP)A No. 2861/Bang/2017 for the same AY. This order attained finality, and the AO had given effect to the CIT(A)'s order, resulting in a Nil demand. The assessee prayed to follow the Coordinate Bench order. Revenue's Contention: Grounds 1, 4, 5, 6, 8, 9, 10, 11, 12, and 17 were general grounds not requiring adjudication. The Revenue challenged the exclusion of CG-VAK Software & Exports Limited, Larsen and Toubro Infotech Limited, and Persistent Systems Limited, arguing they have core software development operations. The Revenue also argued that the inclusion of certain companies by the CIT(A) was incorrect due to functional dissimilarity. The CIT(A) adopted a narrow interpretation, and the TPO conducted a detailed study.

Which sections of the Income-tax Act were involved?

Section 92CA,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.

For Appellant: Shri Ketan Ved, CA
For Respondent: Dr. Divya K.J, CIT-DR

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. 2406/Bang/2024 Assessment Year : 2013-14

M/s. Altisource Business Solutions Pvt. Ltd., The Assistant Vaishnavi Tech Park, Commissioner of Income Ground Floor, Tax, Tower C, Circle – 1(1)(1), Outer Ring Road, Bengaluru. Vs. Bellandur, Bengaluru – 560 103. PAN: AAACO9467A APPELLANT RESPONDENT

Assessee by : Shri Ketan Ved, CA Revenue by : Dr. Divya K.J, CIT-DR

Date of Hearing : 16-12-2025 Date of Pronouncement : 16-03-2026

ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER

This is an appeal filed by the revenue challenging the order of the Ld.CIT(A), Bengaluru – 12 dated 15/10/2024 in respect of the A.Y. 2013-14 and raised the following grounds: “1. Whether the CIT (A) is correct in adopting an overly narrow interpretation of functional similarity by excluding companies that are reasonably comparable in terms of primary business functions. It is a well-established principle in transfer pricing that the comparables should

Page 2 of 8 IT(TP)A No. 2406/Bang/2024 reflect similar core business functions, even if there are minor variations or ancillary services. 2. Whether the exclusion of comparables such as CG-VAK Software & Exports Limited, Larsen and Toubro Infotech Limited and Persistent Systems Limited on the grounds of functional dissimilarity is correct, when on adequately considering the fact that these companies' core operations involve software development services, which is the primary function of the assessee? 3. Whether the CI7' (A) is correct in exclusion of companies such as CG-VAK Software & Exports Limited, Larsen and Toubro Infotech Limited and Persistent Systems Limited based on the fact that they operated in multiple segments. The core activities of these companies, including software development, are highly comparable to the tested entity, and the presence of additional segments should not lead to automatic exclusion. 4. Whether the CIT(A) is correct in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the income tax Act. 5. Whether the CIT(A) is correct in imposing conditions is beyond the scope of law and business reality by rejecting all close comparables on one or the other ground, without appreciating that not two companies can ever be same. 6. Whether the CIT(A) is correct in trying to find out exact replica of the assessee for determining the Arm's length price based on such replica, even when the law and the international jurisprudence itself recognize that there cannot be an exact comparable to a given situation, especially with TNMM as the most appropriate method. 7. Whether the exclusion of comparable such as Larsen and Toubro Infotech Limited on the ground of brand value and presence of intangible is right, when it is not established as to what is the revenue generated from such brand value or intangible. 8. Whether the CIT(A) was right in not acknowledging that there is no direct relationship between brand value and the margin earned by the company. Brand may generate the revenue of the company but does not increase the profit margin.

Page 3 of 8 IT(TP)A No. 2406/Bang/2024 9. Whether the CIT(A) was right in seeking exact comparability, while searching for comparable companies of the assessee under TNMM whereas the requirement of law and international jurisprudence require seeking similar comparables companies? 10. Whether while seeking the exact comparability as mentioned above the CIT(A) was right in imposing condition beyond law whereas the requirement of law is to acknowledge only those differences that are likely to materially affect the margin. 11. Whether the CIT(A) was right in not acknowledging that determination of ALP by carrying out comparability analysis of the comparable companies is an art and not exact science as no two companies are exactly same. 12. Whether the CIT(A) was in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the Income Tax Act. 13. Whether the CIT (A) is right in including companies Akshay Software Technologies Limited and Cigniti Technologies Limited that are functionally dissimilar to the taxpayer's business in the set of comparables for determining the arm's length price? 14. Whether the CIT(A) is right in the inclusion of comparables Akshay Software Technologies Limited that operate in specialized segments of the software industry, such as ERP implementation, under the legal framework of transfer pricing comparability analysis? 15. Whether the CIT(A) is right in the inclusion of comparables Cigniti Technologies Limited that operate in specialized segments of the software industry, such as software testing, under the legal framework of transfer pricing comparability analysis? 16. Whether the CIT(A) is right in the inclusion of comparables CAT Technologies Ltd when the revenue from Software Development services is only at 74% of the total revenue without segmental details? 17. Whether the CIT(A) is right in inclusion of the comparables without carrying out necessary enquiry pertaining to functions vis-à-vis tested party.

Page 4 of 8 IT(TP)A No. 2406/Bang/2024 18. The Appellant craves to add, alter, delete, modify or withdraw any of the above grounds of appeal.” 2. The brief facts of the case are that the assessee is a company providing contract software development and support services and information technology enabled services (ITeS) to its overseas AEs. The assessee filed their return of income on 30/11/2013. Since the assessee had international transactions with its AEs, the AO had made a reference to the transfer pricing officer for determining the arms length price. The Ld.TPO also considered the comparables given by the assessee company in its TP report and made some exclusions as well as inclusions of the comparable companies and thereafter the transfer pricing adjustment was made u/s. 92CA of the Act. The AO had also done the transfer pricing adjustment made by the Ld.TPO and also disallowed the ESI / LWF remittances as belated and made the assessment u/s. 143(3) of the Act.

3.

As against the said order, the assessee filed an appeal before the Ld.CIT(A), Bengaluru – 12 and disputed the Ld.TPO’s inclusion as well as exclusion of the comparable companies. The Ld.CIT(A) had considered the objections of the assessee and also after going through the annual report of the respective companies and also by following the precedent given by this Tribunal in which the Coordinate Bench of this Tribunal had ordered to exclude some companies as well as to include some companies and finally allowed the appeal filed by the assessee. The revenue had challenged the said order of the Ld.CIT(A) before this Tribunal.

4.

At the time of hearing, the Ld.DR submitted that ground nos. 1,4,5,6,8,9,10,11,12 & 17 are general grounds and therefore the same need not be adjudicated. The Ld.DR relied on the ground nos. 2,3 and 7 in which the revenue had challenged the exclusion of the comparables on the ground that the said companies are having core operations involving software development services. The Ld.DR therefore submitted that the exclusion ordered by the Ld.CIT(A) is not in order. Similarly, the Ld.DR submitted that the inclusion of the three companies are also not correct since the said

Page 5 of 8 IT(TP)A No. 2406/Bang/2024 companies are functionally dissimilar to the assessee’s business and therefore prayed to allow the appeal filed by the revenue.

5.

The Ld.AR submitted that the Ld.CIT(A) in his order had given elaborate reasons for arriving the conclusion that the comparables are functionally different and functionally similar by relying on the order of the Coordinate Bench of this Tribunal in IT(TP)A No. 2861/Bang/2017 dated 27/04/2020 in respect of the very same A.Ys. and therefore the order of the Ld.CIT(A) is in accordance with the findings given by the Coordinate Bench of this Tribunal and therefore it does not require any interference. The Ld.AR also submitted that the Coordinate Bench order of this Tribunal attained finality and therefore the order of the Ld.CIT(A) is in order. The Ld.AR also invites our attention to the order giving effect to the orders of the Ld.CIT(A) dated 12/12/2024 in which the AO had accepted the directions given by the Ld.CIT(A) and a Nil demand has been made for the A.Y. under dispute. The Ld.AR also filed a paper book enclosing the various proceedings taken by the authorities and also filed another compilation of the financial statements of the various companies. The Ld.AR also filed a chart showing the findings of the Coordinate Bench order and also enclosed the order of the Coordinate Bench dated 27/04/2020 and prayed to follow the said order of the Tribunal.

6.

The Ld.DR also filed the written submissions and submitted that the Ld.CIT(A) has adopted a narrow interpretation when the transfer pricing officer had conducted a detailed study and therefore prayed to set aside the order of the Ld.CIT(A).

7.

We have heard the arguments of both sides and perused the materials available on record.

8.

In the present appeal, the Ld.TPO had added the five comparable companies while arriving the TP adjustment. Out of the said five comparables, the assessee had not pressed for inclusion of the two

Page 6 of 8 IT(TP)A No. 2406/Bang/2024 companies viz. ICRA Techno Analytics Ltd. and Tech Mahindra Ltd. and therefore the Ld.CIT(A) had not adjudicated about the exclusion of the said companies.

9.

Insofar as the three companies viz., CG-VAK Software & Exports Ltd., Larsen & Toubro Infotech Ltd. and Persistent Systems Ltd., the Ld.CIT(A) had considered the findings given by this Tribunal in the order dated 27/04/2020 in IT(TP)A No. 2861/Bang/2017 in the case of NXP India Pvt. Ltd. vs. DCIT wherein this Tribunal had directed the Ld.TPO to exclude the three companies on the ground that the said companies would not be taken as a comparable in view of the various reasons stated in the Tribunal’s order. In respect of the three companies, the Coordinate Bench of this Tribunal had given the reasons for excluding the said companies and also relied on the earlier order of this Tribunal as well as the Hon’ble Hyderabad Tribunal to arrive such a conclusion. The Coordinate Bench also relied on the Hon’ble Delhi Tribunal order in respect of the CG-VAK Software & Exports Ltd. and on that basis, the Tribunal had directed the TPO to exclude the above said three companies. The Ld.CIT(A) had considered the said order of the Tribunal and by relying on the said findings, the Ld.CIT(A) had directed the TPO to exclude the said three companies for the purpose of making the TP adjustment. In so for as the Ld.DR’s submission that the Ld.CIT(A) on narrow view had allowed the appeal when the Ld.TPO has conducted a detailed study on the comparable companies, We do not find that the said argument can be sustained because the Coordinate Bench of this Tribunal as well as the other Tribunals for the very same A.Y. had considered the said companies and thereafter directed the Ld.TPO to exclude the said companies. The revenue had not brought any contrary decisions of the higher forums in order to take a different view. In such circumstances, we are inclined to accept the order of the Ld.CIT(A) insofar as the exclusion of the three companies are concerned. We, therefore dismiss the ground nos. 2,3 and 7.

Page 7 of 8 IT(TP)A No. 2406/Bang/2024 10. Insofar as the grounds raised in respect of the inclusion of the comparable companies, the Ld.CIT(A) had given the reasons for including the said comparables in his order in paragraph number 5.1.4.1. The Ld.CIT(A) had also relied on the order of the Coordinate Bench of this Tribunal in the case of NXP India Pvt. Ltd. vs. DCIT in IT(TP)A No. 2861/Bang/2017 dated 27/04/2020 for the very same A.Y. 2013-14 in which the Coordinate Bench had directed the TPO to include these three companies for the purpose of arriving the transfer pricing adjustment. The said order attains finality and therefore the Ld.CIT(A) had correctly followed the said findings of the Coordinate Bench of this Tribunal and directed the Ld.TPO to include the three companies as comparable companies for arriving the TP adjustment. We do not find any error in the order of the Ld.CIT(A) which is based on the earlier findings given by the Coordinate Bench of this Tribunal which had attained finality. In such circumstances, we are not accepting the ground nos. 13,14,15 and 16 also.

11.

In the result, the appeal filed by the revenue is dismissed.

Order pronounced in the open court on 16th March, 2026.

Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member

Bangalore, Dated, the 16th March, 2026. /MS /

Page 8 of 8 IT(TP)A No. 2406/Bang/2024 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order

Assistant Registrar, ITAT, Bangalore

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