ASSISTANT COMMISSIONER OF INCOME TAX, BANGALORE vs. ALTIOSTAR NETWORKS INDIA PRIVATE LIMITED, BANGALORE

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ITTPA 892/BANG/2025Status: DisposedITAT Bangalore17 March 2026AY 2017-1811 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the appeal filed by the Revenue. The Tribunal noted that the CIT(A) had excluded certain companies from the list of comparables by relying on earlier orders of the Tribunal for the very same Assessment Year 2017-18. The Tribunal found that these earlier orders had attained finality. Therefore, the Tribunal agreed with the CIT(A)'s decision to exclude these companies, stating that there was no error in following the prior Tribunal decisions. The Tribunal also observed that the Revenue had not disputed the chart filed by the assessee regarding these exclusions. Regarding the inclusion of companies, the Tribunal noted that the CIT(A) had also relied on earlier orders of the Tribunal, which the assessee had supported with case law compilations. The Tribunal was satisfied that the CIT(A) had followed these earlier orders and granted the necessary relief. The Tribunal also noted that the TPO had passed an order giving effect to the CIT(A)'s order, accepting it and revising the demand to Nil. The Tribunal explicitly stated that it was deciding the appeal on merits based on the earlier orders of the Tribunals and therefore, it was not adjudicating the limitation ground raised by the Revenue. The Tribunal concluded that the order of the CIT(A) required no interference.

What were the facts?

This appeal by the Revenue challenges the order of the CIT(A) for Assessment Year 2017-18 concerning transfer pricing adjustments. The assessee, M/s. Altiostar Networks India Pvt. Ltd., is engaged in software development and research services for its US parent company. The Assessing Officer (AO) made a transfer pricing adjustment of Rs. 10,03,30,153/-. The assessee did not file objections to the draft assessment order, leading the AO to confirm the additions in the final assessment order. The assessee appealed to the CIT(A), disputing the inclusion and exclusion of comparable companies. The CIT(A) reviewed the comparables, excluding some and including others, relying on previous Tribunal orders. The Revenue is now appealing the CIT(A)'s order regarding these inclusions and exclusions.

What were the issues?

1. Whether the CIT(A) erred in adopting an overly narrow interpretation of functional similarity by excluding companies based on minor variations or ancillary services, when their core business functions are similar to the assessee's software development services? (Assessee's contention: The CIT(A) correctly applied functional similarity. Revenue's contention: The CIT(A) applied an overly narrow interpretation, excluding reasonably comparable companies like Cygnet Infotech Pvt Ltd., Infosys Ltd, Mindtree Ltd., Tata Elxsi Ltd, Great Software Laboratory Pvt. Ltd, and Cybage Software Pvt. Ltd. based on minor variations or ancillary services, despite their core operations involving software development. The Revenue also argues that excluding companies operating in multiple segments is incorrect if their core activities are comparable and that demanding exact replicas defeats the purpose of determining ALP. The Revenue further argues that turnover is not a relevant criterion for comparability unless it directly impacts profitability, and exclusion based on lack of segmental data is unjustified if functional comparability exists. The Revenue also questions the exclusion of Great Software Laboratory Pvt Ltd due to intangible assets without demonstrating material effect, and the inclusion of Sagarsoft (India) Ltd. which is functionally dissimilar and lacks segmental data for software development. The Revenue relies on the principle that comparability analysis is an art, not an exact science, and differences that do not materially affect margins should be acknowledged. 2. Whether the CIT(A) erred in excluding comparables such as Cygnet Infotech Pvt Ltd., Infosys Ltd, Mindtree Ltd., Tata Elxsi Ltd, Great Software Laboratory Pvt. Ltd and Cybage Software Pvt. Ltd on the grounds of functional dissimilarity or operating in multiple segments, when their core operations involve software development services, which is the primary function of the assessee? (Revenue's contention: As above, these companies are functionally similar and their core operations align with the assessee's. Assessee's contention: Not explicitly recorded, but implied agreement with CIT(A)'s order which followed earlier Tribunal decisions.) 3. Whether the CIT(A) erred in excluding comparables based on turnover differences or lack of segmental data, without demonstrating that these factors materially affect profitability or comparability? (Revenue's contention: Turnover and lack of segmental data are not sufficient grounds for exclusion if functional comparability exists. Assessee's contention: Not explicitly recorded, but implied agreement with CIT(A)'s order.) 4. Whether the CIT(A) erred in excluding Great Software Laboratory Pvt Ltd on the grounds of having intangible assets without demonstrating the material effect of such assets on the price of services provided? (Revenue's contention: As above. Assessee's contention: Not explicitly recorded, but implied agreement with CIT(A)'s order.) 5. Whether the CIT(A) erred in including comparables such as Sagarsoft (India) Ltd. which are functionally dissimilar and lack segmental data pertaining to software development? (Revenue's contention: As above. Assessee's contention: Not explicitly recorded, but implied agreement with CIT(A)'s order.)

Which sections of the Income-tax Act were involved?

Section 92CA,Section 40(a)(ii)

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 Nageshwar Rao, Advocate
For Respondent: Dr. Divya K.J, CIT-DR

per Section 92 CA, hence all orders are time barred. This aspect is being raised for first time before Hon'ble ITAT — relies on Paragraphs 15 &16 of S Shivaraj Reddy (Died) Thr His Lrs and Another Vs S Raghu Raj Reddy and Others, SLP (Civil) No(s) 4237 of 2015. Submitted for kind consideration.”

9.

As seen from the said chart, the companies are excluded by the Ld.CIT(A) by relying on the earlier orders of the Tribunals. We understand that the said orders of the Tribunals had attained finality and no further proceedings were taken or concluded and in such circumstances, we are in full agreement view of the Ld.CIT(A) in excluding the above said companies from the list of comparables as held by the various Tribunals. It is also to be noted that the earlier orders of the Tribunal are also related to the A.Y. 2017-18 and therefore there is no error in the order of the Ld.CIT(A) by following the above said orders. The revenue had also not disputed the chart filed by the assessee. Even though the Ld.DR submitted that the other orders of the Tribunal were not followed in considering the turnover filter etc, we do not agree for that proposition for the reason that the Tribunals had already considered the comparables in the various orders passed by it and therefore the said argument does not merit for consideration.

10.

Similarly, the assessee had also shown the company which was included by the Ld.CIT(A) in the chart which was also included by the Ld.CIT(A) based on the earlier order of the Tribunal. We have also perused the case law compilation filed by the assessee in which the earlier orders of the Tribunals were enclosed and satisfied ourselves that the Ld.CIT(A) had followed the earlier orders and granted the necessary relief.

11.

We have also gone through the additional evidence filed by the assessee in which the Ld.TPO had passed an order giving effect to the order of the Ld.CIT(A) and accepted the order of the Ld.CIT(A) and revised the demand as Nil.

Page 11 of 11 IT(TP)A No. 892/Bang/2025

12.

We have decided the appeal on merits and based on the earlier orders of the Tribunals and therefore we are not adjudicating the limitation ground.

13.

Considering the totality of the facts and circumstances, we are of the view that the order of the Ld.CIT(A) requires no interference and therefore the appeal filed by the revenue is dismissed.

14.

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

Order pronounced in the open court on 17th March, 2026.

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

Bangalore, Dated, the 17th March, 2026. /MS /

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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