2023 (9) TMI 980 - AT - Income Tax

TP Adjustment - Comparable selection - exclusion of Infosys Ltd. as a comparable on account of high turnover, having business segments of software development and sale of products, diversified business operations, substantial intangible assets, brand value, intangible and R D expenses etc. - HELD THAT - The coordinate Bench in assessee s own case in assessment year 2007-08 has excluded Infosys Ltd. as a comparable while deciding assessee s appeal 2015 (9) TMI 1398 - ITAT DELHI . Identical view was expressed by the coordinate Bench while deciding assessee s appeal in assessment year 2008-09 2016 (6) TMI 1259 - ITAT DELHI . Learned counsel appearing for the assessee has made a statement at bar that in assessment year 2014-15, the Dispute Resolution Panel(DRP) has excluded Infosys Ltd. as a comparable. Whereas, in assessment year 2015-16 and 2016-17, TPO himself did not consider Infosys Ltd. as a comparable. Thus, keeping in view the decision taken by the coordinate Benches in assessee s own cases in assessment years 2007-08 and 2008-09 and the further fact that the departmental authorities themselves have excluded Infosys Ltd. as a comparable in assessment year 2014-15, 2015-16 and 2016-17 in assessee s own case, we decline to interfere with the decision of the first appellate authority on the comparability of Infosys Ltd.

Summary

Issues involved:
The core issue pertains to the rejection of certain comparables, specifically Infosys Ltd., for transfer pricing analysis.

Issue 1: Comparability of Infosys Ltd.
The assessee, engaged in software development services, benchmarked its international transactions using TNMM. The TPO rejected some comparables, including Infosys Ltd., resulting in a transfer pricing adjustment. The CIT(A) upheld the exclusion of Infosys Ltd. based on previous tribunal decisions and the company's characteristics such as high turnover, diversified operations, and intangible assets. The ITAT affirmed the CIT(A)'s decision, noting consistent exclusion of Infosys Ltd. in prior assessments.

Issue 2: Other comparables disputed by the Revenue
The assessee argued that rejecting Infosys Ltd. alone would keep its margin within tolerance range. The ITAT agreed with this submission, rendering the issue of taxability of other comparables academic. The ITAT left the question of comparability of these other disputed comparables open for future consideration if disputes arise in subsequent assessment years.

Conclusion:
The ITAT dismissed the appeal, upholding the exclusion of Infosys Ltd. as a comparable based on past decisions and the company's characteristics. The issue of other comparables was deemed academic, with their comparability left open for future assessment years.