PR. COMMISSIONER OF INCOME TAX-7 vs. M/S VERISIGN SERVICES INDIA PRIVATE LIMITED

PDF · subscribers
ITA/5/2021HC KarnatakaKAHC01020547202010 September 2026Bench: S.G.PANDIT,CHILLAKUR SUMALATHA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial questions of law were answered against the Revenue and in favour of the assessee. Regarding substantial questions 1 and 3, the Court referred to a co-ordinate bench decision which held that the adoption of an upper turnover filter is rational and legally sustainable, as turnover, brand value, economies of scale, bargaining power, and ownership of intangible materials influence comparability and profitability. Therefore, the Tribunal's finding on these questions could not be considered perverse. Concerning substantial question 2, the Court found that the Tribunal's exclusion of M/s. Infosys Technologies Limited and M/s. Persistent Systems Limited were factual findings that did not suffer from perversity. While the Tribunal had included M/s. Akshay Software Technologies Limited and remanded the matter for reconsideration, the Court found the Tribunal's reasons for exclusion of Infosys and Persistent Systems to be sound. As the Tribunal's findings were factual and not perverse, the High Court was not inclined to interfere with the ITAT's order.

What were the facts?

The appeal was filed by the Revenue against an order dated 15.11.2019 passed by the Income Tax Appellate Tribunal (ITAT) in IT(TP)A No.2532/Bang/2017 for Assessment Year 2010-2011. The ITAT had directed the Transfer Pricing Officer (TPO)/Assessing Authority to exclude certain comparables based on functional dissimilarity and turnover filters, even though the TPO had selected comparables based on FAR analysis and Rule 10B of the Income Tax Rules. The specific comparables directed for exclusion were M/s. Infosys Ltd, M/s. Persistent Systems Ltd, and M/s. Akshay Software Technologies Pvt. Ltd. The Revenue challenged these directions as perverse and contrary to law.

What were the issues?

The Tribunal had to decide three substantial questions of law: 1. Whether the Tribunal's order was perverse in directing the exclusion of comparables based on functional dissimilarity and turnover filters, despite the TPO's selection based on FAR analysis and Rule 10B parameters. 2. Whether the Tribunal was correct in directing the exclusion of M/s. Infosys Ltd, M/s. Persistent Systems Ltd, and M/s. Akshay Software Technologies Pvt. Ltd, even though they satisfied the TPO's qualitative and quantitative filters. 3. Whether the Tribunal was correct in directing the exclusion of Infosys Ltd as a comparable based on the turnover filter, despite its selection being in accordance with Rule 10B(2) parameters. Assessee's Contention: The assessee argued that in view of a co-ordinate bench decision in ITA No.10/2011 and connected appeals dated 28.08.2026, the substantial questions of law raised in the present appeal would not remain for consideration and were answered in favour of the assessee. Revenue's Contention: The revenue contended that the Tribunal's order was perverse and contrary to law in directing the exclusion of comparables based on functional dissimilarity and turnover filters, and that the selected comparables met the prescribed criteria.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 10B

AI-generated summary — verify with the full judgment below

- 1 -

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10TH DAY OF SEPTEMBER, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA INCOME TAX APPEAL NO. 5 OF 2021 BETWEEN: 1. PR. COMMISSIONER OF INCOME TAX-7 BMTC COMPLEX, KORAMANGALA, BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 14(5), BENGALURU. …APPELLANTS (BY SRI. SANMATHI E I., ADVOCATE A/W SRI. DILIP M., ADVOCATE) AND: M/S VERISIGN SERVICES INDIA PRIVATE LIMITED NO 52, 3RD FLOOR, 100 FT ROAD, KORMANGALA, BANGALORE - 560034. …RESPONDENT (BY SRI. T. SURYANARAYANA, SR. COUNSEL, FOR MISS. TANMAYEE RAJKUMAR, ADVOCATE) Digitally signed by AASEEFA PARVEEN Location: HIGH COURT OF KARNATAKA THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 15/11/2019 PASSED IN IT(TP)A NO.2532/BANG/2017, FOR THE ASSESSMENT YEAR 2010-2011 PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 15/11/2019 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, BENGALURU, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS NO. IT(TP)A NO. 2532/BANG/2017 (ANNEXURE- A) FOR A.Y.2010-2011.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S.G.PANDIT) Heard Sri.E.I.Sanmathi, learned counsel for the appellants-revenue and learned Senior counsel Sri.T.Suryanarayana for Sri.Tanmayee Rajkumar for respondent-assessee.

2.

The above appeal is filed questioning the order of ITAT dated 15.11.2019 in IT(TP)A No.2532/Bang/2017 for the assessment year 2010-2011. The above appeal was admitted on 10.06.2021 to examine the following three substantial questions of law: "(1) Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in nature since Tribunal has directed the Transfer Pricing Officer/Assessing authority to exclude certain comparable's on basis of functional dissimilarity ad Turnover Filter even though the Transfer Pricing officer has chosen comparable's on basis of FAR analysis and in accordance with parameters set out Rule 10B of the I.T.Rules?

(2) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to exclude comparable's namely, M/s.Infosys Ltd, M/s.Persistent Systems Ltd, M/s.Akshay Software Technologies Pvt. Ltd even though the said comparable's satisfied qualitative and quantitative filters applied by Transfer Pricing Officer?

(3) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in directing the Transfer Pricing Officer to exclude Infosys Ltd as comparable on the basis of Turnover filter by even though the said comparable chose by the Transfer Pricing Officer is in accordance with parameter set out in Rule 10B(2) of I.T.Rules?" 3. At the outset, learned Senior Counsel Sri.T.Suryanarayana would submit that in view of the

- 4 -

decision of Co-ordinate Bench in ITA No.10/2011 and connected appeals dated 28.08.2026, the substantial questions of law raised in the present appeal would not remain for consideration. It is further submitted that the substantial questions are answered in favour of the respondent-assessee.

4.

We have gone through the order of ITAT and appeal papers as well as the decision of the Co-ordinate Bench supra. With regard to substantial question Nos.1 and 3, the Co-ordinate Bench has held that adoption of upper turnover filter is rational and legally sustainable, as turnover, brand value, economies of scale, bargaining power and ownership of intangible materials influence comparability and profitability. In view of the above finding of the Co-Ordinate Bench, the finding of the Tribunal on the above questions cannot be said to be perverse.

5.

Insofar as substantial question No.2 is concerned, the same is factual finding and in fact the Tribunal has rightly excluded comparables namely M/s.Infosys Technologies Limited and M/s.Persistent Systems Limited. From the order of the Tribunal, it is seen that the Tribunal has included the comparable of M/s.Akshay Software Technologies Limited and remanded the matter for reconsideration. The Tribunal at paragraph No.8 of its order has assigned reasons for comparables with regard to M/s.Infosys Technologies Limited and M/s.Persistent Systems Limited. With regard to inclusion of M/s. Akshay Software Technologies Limited, the Tribunal has recorded its reasons at paragraph No.9. Since the findings recorded by the Tribunal are factual findings and the same would not suffer from perversity, we are not inclined to interfere with the order passed by the ITAT.

6.

Accordingly, appeal stands rejected.

7.

The substantial questions of law are answered against the appellants-revenue and in favour of the respondent - assessee. Sd/- (S.G.PANDIT) JUDGE Sd/- (DR.CHILLAKUR SUMALATHA) JUDGE NS CT:TSM List No.: 1 Sl No.: 3

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →