Quotient Technology India Private Limited Vs ITO (ITAT Bangalore)
A Captive Software Unit Cannot Be Benchmarked With Branded Giants-FAR Differences, Intangibles & Aggregate RPT Filter Matter U/s 92CA: Bangalore ITAT
The Bangalore ITAT has held that companies possessing substantial brands, intangibles, diversified operations or materially different assets cannot be compared with a captive software development service provider merely because all of them operate broadly within the software sector.
The Tribunal also held that, for applying the Related Party Transaction filter, transactions appearing on both the income & expenditure sides must be aggregated. Further, no notional interest can be imputed on an outstanding receivable where the agreed payment date had not expired before the end of the relevant FY.
Facts of the Case
Quotient Technology India Pvt. Ltd., a wholly owned subsidiary of Quotient Technology Inc., USA, provided captive software development services to its parent company.
For AY 2022-23, it returned income of ₹4.81 crore. The assessee reported software development services of approximately ₹75.39 crore, employee-related recoveries, reimbursements & other international transactions.
The assessee adopted TNMM with OP/OC as the Profit Level Indicator. Its margin of 14.81% fell within the arm’s-length range of the ten comparables selected in its transfer-pricing study.
