ACIT Vs Mphasis Software And Services (India) Private Limited (ITAT Bangalore)
No Grounds, Wrong Papers & No Surviving Grievance: Bangalore ITAT Dismisses Revenue’s ₹2.34 Crore TP Appeal
Summary: The assessee, Mphasis Software & Services (India) Private Limited, was engaged in software development, IT consultancy, IT-enabled services & business process outsourcing. It filed its return declaring total income of ₹24,06,00,006.
Since the assessee entered into international transactions with associated enterprises, the matter was referred to the TPO. The disputed transaction concerned selling commission of ₹2,34,35,294 paid to associated enterprises for marketing assistance, business development & securing offshore software contracts.
The assessee benchmarked its software development segment under the Transactional Net Margin Method, treating the selling commission as part of the operating cost of that segment. The TPO accepted TNMM as the most appropriate method & accepted the software development transaction as being at arm’s length. However, he isolated the selling commission, treated it as a separate intra-group service, applied the CUP method & determined its arm’s-length price at Nil.
The adjustment of ₹2.34 crore was incorporated in the final assessment order passed u/s 143(3) r.w.s. 144C. The CIT(A), following Tribunal decisions in the assessee’s group cases, restored the matter to the AO/TPO to verify whether the selling commission formed part of operating expenses benchmarked at the entity or segmental level.
