Captive service provider cannot be compared with Infosys Technologies Limited- Delhi ITAT

ITAT Delhi held that a captive service provider assuming minimal risks, cannot be compared to a large company like Infosys Technologies Limited which assumes all risks leading to greater rewards.

Facts of the case

• · The taxpayer is a wholly owned subsidiary of Bay Packets Inc., USA and is engaged in the business of software development in the field of telecommunication for its parent company. The taxpayer also enjoys a tax holiday.
• · The taxpayer operating at a net profit margin of 17 percent over costs, identified 23 comparable in the TP documentation resulting in arm’s length net profit margin of 10 percent over costs.

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