KBACE Technologies Pvt. Ltd. Vs DCIT (ITAT Bangalore)
The appeal arose from the assessment order for Assessment Year 2013-14 pursuant to the directions of the Dispute Resolution Panel (DRP). The assessee, a wholly owned subsidiary of KBACE Technologies Inc., USA, was engaged in providing software development services to its associated enterprise. During the year, it entered into international transactions comprising software development service income and deferred receivables. The assessee benchmarked the transactions under the Transactional Net Margin Method (TNMM), whereas the Transfer Pricing Officer (TPO) rejected the transfer pricing study, selected a fresh set of comparable companies, and proposed a transfer pricing adjustment. The DRP excluded one comparable but upheld the remaining comparables selected by the TPO. Before the Tribunal, the assessee confined its arguments to the selection of comparable companies.
The Tribunal first considered the application of the turnover filter. Since the assessee’s turnover was ₹16.19 crore, it accepted the contention that companies having turnover exceeding ₹200 crore could not be treated as comparable. The Revenue also agreed with this position. Accordingly, the Tribunal directed the Assessing Officer/TPO to exclude Larsen & Toubro Infotech Ltd., Mindtree Ltd., Persistent Systems Ltd., R.S. Software (India) Ltd., and Tech Mahindra Ltd. from the final set of comparables.
