SAP India Private Limited Vs DCIT (ITAT Bangalore)
ITAT Bangalore Grants Partial Relief by Excluding Own-Product/R&D-Heavy Comparables & Directs Correct Compucom Segment Margin, While Upholding TP Adjustment on Interest for AE Receivables
In SAP India Pvt Ltd’s appeal against the final assessment order u/s 143(3) r.w.s. 144C/144B, the Bangalore ITAT dealt with two primary issues- TP adjustment in the distribution segment & interest on overdue AE receivables. SAP India acts as a distributor of SAP software products while also providing consulting, implementation, & training services. The TPO rejected the assessee’s TP study & selected fresh comparables, arriving at a median margin of 11.08% & proposing a huge adjustment exceeding ₹1,800 crore, later revised by the DRP.
On comparability, ITAT held that Compucom Software Ltd. must be re-examined using only the Learning Solutions segment margin, as directed earlier by the DRP. The Tribunal also excluded Quick Heal Technologies Ltd., Innovana Think Labs Ltd., & Tally Solutions Pvt Ltd, finding these companies to be product-owning, R&D-driven software developers & thus not comparable to SAP’s distribution model. However, DesignTech Systems Pvt Ltd & Daffodil Software Pvt Ltd were retained, being functionally similar with significant traded-product revenue. Requests to include new comparables were rejected as impermissible “cherry picking.”
