DCIT Vs Indianic Infotech Limited (ITAT Ahmedabad)
PSM Accepted on Consistency; All Key Comparables Rejected—TNMM Fails; Entire TP Adjustment of ₹2.81 Cr Deleted Revenue’s Appeal Dismissed
The Department filed appeal against the CIT(A)-11, Ahmedabad order dated 20.07.2024 deleting the entire transfer-pricing adjustment of ₹2,81,24,107 made in the case of Indianic Infotech Ltd, a software-development & export company having international transactions with its AE.
Background
Assessee adopted Profit Split Method (PSM) as the MAM, which was accepted by the TPO in the immediately preceding AY on identical facts.
However, for AY 2014-15, TPO rejected PSM, held that assessee alone developed software while the AE only marketed it, and applied TNMM, selecting six comparables and computing a margin of 22.73%, leading to the above adjustment.
CIT(A)’s Findings (after remand)
CIT(A) issued detailed queries, called for a remand report, and found:
- Three high-turnover companies—L&T Infotech, Tech Mahindra & Mindtree—were wrongly included by TPO; TPO himself admitted their exclusion since their turnover (₹3,000–₹16,000 crore) violated his own ₹1–₹500 crore filter.
- R.S. Software (India) Ltd. was functionally incomparable, engaged in e-payment gateway & cyber-security, with turnover 15–20× higher.
- Cigniti Technologies Ltd. was primarily into software testing & product development—functionally distinct.
- CG-Vak Software & Exports Ltd.: TPO used standalone accounts; consolidated PLI is only 5.45%, well within tolerance of assessee’s 4.89%.
Once these companies are removed, no valid comparable remains, wiping out the basis of TNMM.
CIT(A) also held that PSM cannot be rejected because:
