HighRadius Tecnologies Private Limited Vs DCIT (ITAT Hyderabad)
Transfer Pricing – Captive Software Development Services – Exclusion of Giant & Functionally Dissimilar Comparables – TP Adjustment Deleted
Tribunal held that Assessee is a low-risk captive SDS provider with no IP, no R&D & no market risk. TPO/DRP had wrongly included giant, diversified companies like L&T Infotech, Tata Elxsi, Infosys & Wipro. Tribunal found all these comparables to be functionally dissimilar due to huge turnover, ownership of IP/brands, diversified IT consulting, product engineering, embedded design & global operations. Following consistent judicial precedent, Tribunal directed their exclusion from the final set, effectively knocking out the TP adjustment of ₹10.58 crore.
Leave-encashment paid before due date of filing ROI was held allowable u/s 43B. Penalty u/s 270A marked as consequential.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeal filed by the assessee company is directed against the order passed by the A.O under Section 143(3) r.w.s.144C(13) of the Income Tax Act, 1961 (“the Act”) dated 25.02.2024, which in turn arises from the directions issued by the Dispute Resolution Panel-1, Bengaluru (for short, “DRP”) for the assessment year 2020–21. The assessee company has assailed the impugned order on the following grounds of appeal before us:
“1. Erroneous transfer pricing adjustment of INR 10,58,23,162 in respect of international transaction of provision of software development and support services
1.1. The learned AO erred, on the facts and circumstances of the case and in law, in proposing a transfer pricing adjustment of INR 10.58,23,162/- to the income of the Appellant in relation to the international transection of provision of software development and support services (“SDS services”), vide Assessment Order under section 143(3) r.w 144C(13) read with section 144B of the Income-tax Ac, 1961 (“he Ac”
1.2. The learned AO/Transfer Pricing Officer (“TPO”) erred in law and in facts in rejecting the Appellant’s transfer pricing documentation without any cogent reasons.
1.3 The learned AO/TPO erred in law and in facts by inappropriately rejecting some of the comparability filters adopted by the Appellant in its TP study report and applying additional filters and proceeded to undertake a fresh search for benchmarking the said international transaction of SOS services.
1.4 The learned AO/TPO erred in law and in facts in rejecting the following comparable companies accepted by the Appellant in its transfer pricing study report for benchmarking the said international transaction of provision of SDS services:
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