INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Selection of comparables - Huge intangibles and diversified services

Assessee rendered software development services to AE abroad. TPO considered Infosys Ltd. as comparable to assessee's case. Assessee challenged this Tribunal deleted said entity from set of comparbales. Revenue challenged this by way of appeal before High Court pleading that comparable had been excluded on the ground of high turnover alone. Held: Infosys Ltd., possessed huge tangibles of more than Rs. 1,00,000 Crores. It was a full-fledged risk bearer with a turnover of more than Rs. 12,000 Crores. The functions of Infosys Ltd.were highly diversified, and branching out into product conceptualization, core design, research & development to marketing and sales of products, etc. No such function were carried out by assessee. Being a captive service provider, its function was completely confined to software development services for its AE. There were no intangibles owned by assessee and it incurred no expenditure on research & development. The contractual terms of transaction would be heavily influenced by this and other factors, such as, overall economic standing of Infosys Ltd. ion the market, thereby affecting cost of transaction that it enters into. Furthermore, this company has been deleted in case of assessee's sister concern in Fiserv India Ltd. Accordingly, Infosys Ltd. could not be + considered as suitable comparable to assessee's case.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 92C

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