ITAT Bangalore: Software TP Adjustment Remanded Using ₹200 Crore Turnover Filter

MWYN Tech Private Ltd. Vs ITO (ITAT Bangalore)

The Bangalore Bench of the ITAT partly allowed the assessee’s appeal against the final assessment order passed under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 for AY 2018-19. The assessee, a wholly owned subsidiary of MyCash Fintech Pte Limited, Singapore, provided software development services to its Associated Enterprise. It had reported a loss of Rs.5.45 crore. The TPO determined a transfer pricing adjustment of Rs.52.16 lakh for the software development segment, which was subsequently reduced by the DRP to Rs.45.08 lakh. The assessment also included an addition of Rs.96.23 crore under Section 69 concerning time deposits, a disallowance of Rs.2.14 crore representing 20% of advertisement and information technology expenses, and an addition of Rs.64,800 relating to employees’ provident fund contribution deposited after the prescribed statutory due date.

For transfer pricing, the assessee had adopted TNMM and reported a 16% operating margin. The TPO rejected most of the assessee’s comparables and selected a new set, resulting in a 23.60% median margin and the original Rs.52.16 lakh adjustment. The DRP included CG-VAK Software and Exports Ltd., reducing the adjustment to Rs.45.08 lakh. Before the Tribunal, the assessee principally challenged exclusion of Isummation Technologies Pvt. Ltd. and Yudiz Solutions Pvt. Ltd., and sought exclusion of 11 comparables based on the upper turnover filter.