Costrategix Technologies Pvt. Ltd. Vs DCIT (ITAT Bangalore)
Summary: The Bangalore Bench of the Income Tax Appellate Tribunal considered the assessee’s appeal for Assessment Year 2021-22 against the assessment order dated 11 October 2024, under which a transfer pricing upward adjustment of ₹2,83,35,615 was made. The assessee, Costrategix Technologies Pvt. Ltd., was engaged in providing Software Development and Support Services, being delivery services in Digital and Data Analytics, to its Associated Enterprise, CoStrategix Inc., USA. The value of the international transaction was ₹10,11,49,530.
The assessee had benchmarked the international transaction using the Transactional Net Margin Method (TNMM), adopting Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator. In its transfer pricing study, the assessee reported a PLI of 13.54% and selected six comparable companies. The TPO revised the assessee’s PLI to -2.28%, rejected the assessee’s comparables on various filters and selected 18 comparable companies with a weighted average median margin of 25.09%. The TPO consequently proposed an upward adjustment of ₹2,83,35,615. The Dispute Resolution Panel (DRP) rejected the assessee’s objection concerning the absence of an upper turnover filter, following which the AO finalised the assessment with the transfer pricing adjustment.
The assessee challenged, among other matters, the inclusion of companies having turnover exceeding ₹200 crore. It submitted that, considering its own turnover of ₹10,11,49,530, comparable companies should fall within the ₹1 crore to ₹200 crore range. The assessee identified nine companies with turnover exceeding ₹200 crore: Mindtree Ltd., Great Software Laboratory Pvt Ltd., Nihilent Ltd., Larsen and Toubro Infotech Ltd., Wipro Ltd., Tata Elxsi Pvt Ltd., Infosys Ltd., Tata Consultancy Services Ltd. and Cybage Software Pvt Ltd. The Tribunal considered the turnover-filter issue in light of its earlier decision in CIT Vs. M/s. Pentair Water India Pvt. Ltd. and the decision in Autodesk India Private Limited Vs. DCIT, reported in 96 taxmann.com 263. The Tribunal also considered the coordinate Bench decision in Dotgo Pvt Ltd.
