INVESCO (INDIA) PRIVATE LIMITED,HYDERABAD vs. DCIT., CIRCLE 2(1), HYDERABAD

(िनधा�रण वष�/Assessment Year: 2021-22) INVESCO (INDIA) (P) Ltd Vs. Dy.CIT Hyderabad Circle 2(1) PAN:AACCH8216L Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: CAs Shri K.C.Devdas, Kranthi Pallivelu & Mrudulatha राज� व �ारा/Revenue by:: Dr. Narendra Kumar Naik, CIT(DR) सुनवाई की तारीख/Date of hearing: 10/09/2025 घोषणा की तारीख/Pronouncement: 08/10/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by M/s. Invesco (India) (P) Ltd, (“the assessee”), feeling aggrieved by the assessment order pass by the Learned Assessing Officer (“Ld. AO") u/s 143(3) r.w.s. 144C(13) r.w.s 144B of the Income Tax Act (“ the Act”), dated 29.10.2024 for the A.Y 2021-22.

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Page 7 of 24 have adopted a consistent approach and the operating margins were computed on the entity-level basis, which according to the Ld. DR, reflects the true profitability of the assessee.

Page 8 of 24 applied a 25% RPT filter, whereby any company having aggregate related party transactions in excess of 25% of sales was rejected as a comparable. The assessee had computed this filter by aggregating related party revenue and related party expenditure, and dividing the same by the total revenue. It was further contended that in the assessee’s own case for Assessment Years 2017–18 and 2018–19, the Ld. TPO had applied the same method of working, i.e., aggregate basis. However, for the year under consideration, the Ld. TPO has changed the approach by computing RPT filter separately for revenue and for expenditure. The Ld. AR argued that such a change in methodology is not permissible in the absence of any change in facts or law. In support of this contention, reliance was placed on the decision of the coordinate bench of Bangalore Tribunal in the case of Toyota Kirloskar Motor Pvt. Ltd. vs. ACIT [147 Taxmann.com 558], wherein it was held that the RPT filter has to be computed on an aggregate basis by considering both revenue and expenditure together. The Ld. AR therefore submitted that the action of the Ld. TPO in altering the method is contrary to the rule of consistency and deserves to be set aside.

“28. Ground Nos. 3 & 4 is related to RPT Filter as contested by the AR of the assessee as per his written synopsis. A similar issue has been decided by the coordinate bench of the Tribunal in assessee's own case in vide order dated 18-8-2021 for assessment year 2013-14 by holding as under:- "7.4 We have heard rival submissions and perused the material on record. There is nothing on record to suggest how RPT ratio has been calculated for all the comparable companies. The learned AR has argued that the TPO in order to retain Tata Motors Ltd. and Maruti Suzuki India Limited has deviated and adopted a new mechanism for computing RPT ratio. On a query from the Bench how RPT ratio has been calculated for other comparables, the learned AR has unable to point out the same. The RPT ratio has to be consistently calculated on an aggregate

Page 10 of 24 basis taking the ratio of RPT income plus RPT expenses by sales. The said position was adopted by the Revenue in the past years. In this regard, the TPOs order in assessee's own case for assessment year 2007- 2008 has been placed on record. A perusal of the same it is clear that RPT ratio has been calculated taking both RPT income transactions plus RPT expenses transactions on aggregate basis. On the facts of this case, it is not clear how RPT ratio has been calculated for Tata Motors Limited vis-à-vis other comparable companies. Therefore, this issue is restored to the files of the A.O. The A.O. is directed to calculate RPT ratio on an aggregate basis taking the ratio of RPT income plus RPT expenses by sales across the board for all the comparable companies (including Tata Motors Ltd. and Maruti Suzuki India Limited." 28.1 On perusal of the order of the CIT (A), he has followed the order of the co-ordinate bench of the Tribunal in assessee's own case for the AY 2013-14 and directed the AO for fresh consideration as per his direction. Respectfully following the above judgment, we also direct the AO/TPO to calculate RPT ratio in above terms as per assessee's own case in the assessment year 2013-14 cited supra considering the direction of the CIT (A), accordingly, this issue is allowed for statistical purposes.”

Page 11 of 24 filter if it is applied on an aggregate basis by considering both revenue and expenditure. It was further submitted that Infosys BPM Ltd cannot be compared functionally as it enjoys significant brand value and intangibles, giving it an advantage over captive service providers like the assessee. 13.1 With respect to exclusion of Sutherland Global Services Pvt. Ltd., it was submitted that this company too fails the RPT filter for AY 2019-20 if the aggregate method is applied. Hence, its margin for AY 2019-20 should be excluded while computing the average margin of comparables. 13.2 Regarding exclusion of Integra Software Services Pvt. Ltd. and MPS Ltd., the Ld. AR relied on the decision of this very Tribunal in the case of Infor India Pvt. Ltd. vs. DCIT [ITA No.1341/Hyd/2024, order dated 05.05.2025] for A.Y 2021-22. He submitted that, at para 14.3 of that order, the Tribunal has categorically held that both Integra Software Services and MPS Limited are not comparable to companies engaged in providing ITES. Relying on the said precedent, the Ld. AR prayed for their exclusion.

15.1 As regards the exclusion of Sutherland Global Services Pvt. Ltd., the assessee has claimed that this company fails the RPT filter for AY 2019–20 when computed on aggregate basis. In line with our earlier direction, we direct the Ld. AO/TPO to apply the aggregate method of RPT filter for AY 2019-20, and if Sutherland Global Services Pvt. Ltd. fails the test, its margin for AY 2019-20 shall be excluded while arriving at the average margin of comparables.

15.2 As regards exclusion of Integra Software Services Pvt. Ltd. and MPS Limited, we have gone through para nos.14.2 and 14.3 of the Tribunal’s order in Infor India Pvt. Ltd. vs. DCIT (supra), which is to the following effect:

“14.2 We have heard the rival contentions and gone through the records in the light of the submissions made by either side. We have gone through the Page Nos. 2332 to 2334 & 2337 of the paper book forming part of the annual financial statement of Integra and found that, Integra is engaged in Accounting, Health and E- Publishing services. We have also gone through Page Nos. 2356 to 2359 forming part of the annual financial statements of Vitae and found that Vitae is involved in Accounting, Auditing & Book keeping Services. We have also gone through Page Nos. 2376 to 2382 of the paper book forming part of the annual financial statements of MPS and found that MPS is involved in content development

Page 13 of 24 and transformation. We have also gone through Par No.6 of the decision of the Coordinate Bench of the Tribunal in the case of Rage Frameworks India (P) Ltd v/s ACIT (Supra), which is to the following effect: “6. We now proceed to deal with the assessee’s ground no.2.1 seeking to exclude the foregoing comparable companies in its Information Technology Enabled Services [in short “ITES”] segment. It emerges during the course of hearing that this tribunal’s recent coordinate bench’s order in Schlumberger India Technology Centre (P.) Ltd. vs. DCIT [2022] 142 taxmann.com 243 (Pune-Tribunal) has already excluded M/s. Manipal Digital Systems Private Ltd., Domes e-Data Private Ltd., and MPS Ltd., i.e. three of the above comparable entities as not functioning in “ITES segment”. The other entities included by the learned lower authorities i.e., Vitae International Accounting Services Private Limited, Access Healthcare Services Private Limited and Integra Software Services Private Limited are also found to be not engaged in the assessee’s segment since they have been carrying-out their business activities and deriving revenues from accounting, healthcare services and e-publishing services, respectively and, therefore, do not have even broader comparability in the segment in issue before us. This is indeed coupled with the fact that M/s. Integra Software Services Private Limited had undergone a merger scheme with M/s. Integra Infotech Private Limited as per the National Company Law Tribunal’s [in short “NCLT”] order to this effect in the relevant previous year. Faced with the situation, we direct the learned Transfer Pricing Officer [in short “TPO”] to exclude all the instant six comparables and compute the assessee’s arm’s length price [in short “ALP’] adjustment accordingly.” 14.3 On perusal of the above, we found that, the Coordinate Bench of the Tribunal in case of Rage Frameworks India (P) Ltd v/s ACIT (supra) held that Integra, Vitae and MPS are not comparable to the company engaged in ITES. Further, no contradictory evidence has been produced by the Revenue before us. Therefore, we hold that Integra, Vitae and MPS are not comparable to the assessee. Accordingly, we direct the Ld. AO/TPO to exclude Integra, Vitae and MPS from the set of comparables.”

Page 14 of 24 15.3 On perusal of the above, we found that it has been categorically held by the Tribunal that Integra Software Services Pvt. Ltd. and MPS Limited are not comparable to companies engaged in ITES. Respectfully following the same, we hold that Integra Software Services Pvt. Ltd. and MPS Limited cannot be considered as comparables for the assessee engaged in ITES. Accordingly, we direct the Ld. AO/TPO to exclude these two companies from the final set of comparables.

Page 16 of 24 that Cheers Interactive India Pvt. Ltd. be directed to be included in the set of comparables. 16.2 With regard to inclusion of Maa Business Solutions Pvt. Ltd. and Virinchi Ltd., the Ld. AR submitted that the assessee had included Maa Business Solutions Pvt. Ltd. and Virinchi Ltd. in its TP study as valid comparables. However, both these companies were excluded by the Ld. TPO on the ground that they did not appear in the search process adopted by the Ld. TPO. It was argued that this reasoning is not factually sustainable, since the Ld. TPO restricted his search only to the ProWess database, whereas the assessee had carried out its search both in the ProWess as well as Capitaline databases. In the Capitaline search process, both Maa Business Solutions Pvt. Ltd. and Virinchi Ltd. appeared as valid comparables. Therefore, the exclusion of these companies merely on the ground of “not appearing in search process” of the Ld. TPO is incorrect. Accordingly, the Ld. AR prayed for a direction to the Ld. AO/TPO to also carry out a search in the Capitaline database and if both these companies are found in the search results, to consider them for inclusion in the final list of comparables after applying the usual FAR analysis.

Page 18 of 24 India Pvt. Ltd. in the final list of comparables after due verification of the audited figures. 18.2 With regard to inclusion of Maa Business Solutions Pvt. Ltd. and Virinchi Ltd., we note that the Ld. TPO excluded both these companies solely on the ground that they did not appear in his ProWess database search. At the same time, the assessee has placed on record that both these companies are appearing in the search conducted through the Capitaline database, which is also a recognized source for transfer pricing analysis. In our considered view, exclusion of comparables merely on the ground of “not appearing in one database” cannot be sustained when they appear in another validly recognized database. What is relevant is whether the company satisfies the functional comparability (FAR) test and filters applied, and not the mere database in which it is traced. Accordingly, we direct the Ld. AO/TPO to carry out a fresh search in the Capitaline database, and if Maa Business Solutions Pvt. Ltd. and Virinchi Ltd. are found therein, the Ld. AO/TPO shall consider their inclusion in the list of comparables after carrying out FAR analysis.

“14. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The TPO has benchmarked interest receivable on trade receivables from AE by applying SBI short term deposit rate on the ground that, if the assessee had received the amount from the AE which would have reduced cost of borrowings in India which is always at Indian prime lending rate or short term deposit rate of Indian banks. It was the argument of the Counsel for the Assessee CA Sriram Seshadri, that, the assessee has allowed credit to it's AE which is a non- resident. Therefore, the benefits that the assessee derives from enjoying long credit period for payment of interest in respect of services has to be measured in terms of the interest that would have been incurred by the AE in the Page 20 of 24 country of residence. Since the receivable from AE is in foreign Currency from outside India, in our considered view, the internationally recognized rate of interest is appropriate for benchmarking interest receivable from AE. This legal position is supported by the decision of Hon'ble Bombay High Court in the case of Principal CIT 13, Mumbai vs., Tecnimont (P.) Ltd., (supra). Similar view has been taken by the ITAT Chennai Bench in the case of M/s. Serviont Global Solutions Ltd., vs., The ACIT, Corporate Circle-6(1), Chennai (supra). Therefore, we are of the considered view that, the Assessing Officer and TPO has erred in benchmarking the interest receivable on trade receivables from AE by applying SBI short term deposit rate. The DRP without appreciating the relevant facts, simply sustained the addition made by the Assessing Officer. Thus, we set aside the order of the Assessing Officer and direct the Assessing Officer/TPO to compute interest receivable on outstanding receivables from AE by applying LIBOR plus 200 basis points after allowing credit period of 30 days. In So far as the argument of the Learned Counsel for the Assessee on the issue of weighted average credit period, in when the TP0 is able to compute the exact number of days credit period, then, aggregating the invoices for the purpose of computing credit period is contrary to the procedure provided u/sec.92CA of the Income Tax Act, 1961. Thus, we reject the arguments of Counsel for the Assessee on the issue of computing the weighted average credit period”.

21.1 On perusal of the above, we found that this Tribunal in assessee’s own case has categorically held that LIBOR plus 200 basis points is the appropriate benchmark for determining arm’s length interest on delayed receivables from AEs. Therefore, respectfully following the said decision, we direct the Ld. AO/TPO to recompute the interest on overdue receivables by applying LIBOR + 200 basis points. As regards the assessee’s request for adopting a weighted average credit period, we note that this specific plea was considered and rejected by the Tribunal in assessee’s own case in AY

Page 21 of 24 2017–18 (Supra). Therefore, following the same, we reject the request of the assessee for adopting weighted average period.

Page 22 of 24 have gone through the decision of Special Bench of this Tribunal in the assessee’s own case for AYs 2015–16 and 2018–19 (Supra), wherein at para no. 23 of its order, the Special Bench of this Tribunal has held as under:

24.1 On perusal of above, we find that the Special Bench of this Tribunal in the assessee’s own case for AYs 2015–16 and 2018– 19 (Supra),has categorically held that interest paid or payable on FCCDs/NCDs/other debentures denominated in Indian currency should be benchmarked by applying SBI PLR. In the present case, it is an admitted position that the CCDs issued by the assessee are Page 23 of 24 denominated in Indian currency. Therefore, respectfully following the binding decision of the Special Bench in assessee’s own case, we hold that SBI PLR is the appropriate benchmark. Accordingly, we direct the Ld. AO/TPO to recompute the arm’s length interest on CCDs by applying SBI PLR instead of SIBOR.