ASSISTANT COMMISSIONER OF INCOME TAX, BANGALORE V. ALTIOSTAR NETWORKS INDIA PRIVATE LIMITED, BANGALORE

ITTPA 892/BANG/2025

AI Insights

The case involves the Assistant Commissioner of Income Tax, Circle
(1)(1), Bangalore as the appellant and M/s. Altiostar Networks India Pvt. Ltd. as the respondent. The dispute centered on the transfer pricing adjustments made by the Assessing Officer (AO) and the subsequent exclusions and inclusions of various comparables by the Ld.CIT(A) in the appeal against the AO's order. The revenue challenged the Ld.CIT(A)'s decisions on the grounds that the functional similarities and the criteria for comparability were not correctly applied. The Tribunal examined the precedents and the functional analyses conducted by the Ld.CIT(A) and found them to be consistent with earlier Tribunal decisions, leading to the dismissal of the revenue's appeal.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 844361 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 18-03-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 16-04-2025
• Other Referred Cases: M/s Societe Generale Global Solution Centre Pvt Ltd. in IT (TP) A No. 1188/BANG/2011, M/s. Vmoksha Technologies Pvt. Ltd. in IT (TP) A No. 595/BANG/2013, Intuit India Product Development Centre Pvt Ltd Vs. DCIT [IT( TP)A No. 956/Bang/2022], AMD India Private Limited Vs. ACIT [IT(TP)A Nos. 238/Bang/2021 & 262/Bang/ 2022), Varian Medical Systems International (India) (P.) Ltd. vs. Deputy Commissioner of Income-tax, Xchanging Solutions Limited Vs. ACIT [IT(TP)A No.292/Bang/2022]
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIVYA K.J
• Assessee Lawyers: NAGESHWAR RAO
• Keywords: Additional evidence; Transfer pricing

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER IT(TP)A No. 892/Bang/2025 Assessment Year : 2017-18 The Assistant Commissioner of Income Tax, Circle – 1(1)(1), Bangalore. Vs. M/s. Altiostar Networks India Pvt. Ltd., No. 65/2, Tridib Building, 1st Floor, Bagmane Tech Park, CV Raman Nagar, Bengaluru – 560 093. PAN: AAFCR6706E APPELLANT RESPONDENT Assessee by : Shri Nageshwar Rao, Advocate Revenue by : Dr. Divya K.J, CIT-DR Date of Hearing : 18-12-2025 Date of Pronouncement : 18-03-2026 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the revenue challenging the order of the Ld.CIT(A), Bengaluru-12 dated 27/02/2025 in respect of the A.Y. 2017-18 and raised the following grounds: “1. Whether the CIT (A) is correct in adopting an overly narrow interpretation of functional similarity by excluding companies that are reasonably comparable in terms of primary business functions. It is a well-established principle in transfer pricing that the comparables should reflect similar core business Printed from counselvise.com Page 2 of 11 IT(TP)A No. 892/Bang/2025 functions, even if there are minor variations or ancillary services. 2. Whether the exclusion of comparables such as Cygnet Infotech Pvt Ltd., lnfosys Ltd, Mindtree Ltd., Tata Elxsi Ltd, Great Software Laboratory Pvt. Ltd and Cybage Software Pvt. Ltd on the grounds of functional dissimilarity is correct, when on adequately considering the fact that these companies' core operations involve software development services, which is the primary function of the assessee? 3. Whether the C1T (A) is correct in exclusion of companies such as Cygnet Infotech Pvt Ltd., Infosys Ltd, Mindtree Ltd., Tata Elxsi Ltd, Great Software Laboratory Pvt. Ltd and Cybage Software Pvt. Ltd based on the fact that they operated in multiple segments. The core activities of these companies, including software development, are highly comparable to the tested entity, and the presence of additional segments should not lead to automatic exclusion. 4. Whether the CIT(A) correct is demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the income tax Act. 5. Whether the CIT(A) is correct in imposing conditions is beyond the scope of law and business reality by rejecting all close comparables on one or the other ground, without appreciating that not two companies can ever be same. 6. Whether the CIT(A) is correct in trying to find out exact replica of the assessee for determining the Arm's length price based on such replica, even when the law and the international jurisprudence itself recognize that there cannot be an exact comparable to a given situation, especially with TNMM as the most appropriate method. 7. Whether the CIT(A) is right in not following the decision of ITAT, Bangalore rendered in the case of M/s Societe Generale Global Solution Centre Pvt Ltd. in IT (TP) A No. 1188/BANG/2011 and M/s. Vmoksha Technologies Pvt. Ltd. in IT (TP) A No. 595/BANG/2013 dated 26.08.2016 for AY 2005-06 where the Tribunal has held that turnover is not a relevant criteria for deciding the comparability. 8. Whether the CIT(A) is right in holding that there exists a co-relation between turnover and operating margin of an entity. Printed from counselvise.com Page 3 of 11 IT(TP)A No. 892/Bang/2025 9. Whether the Transfer pricing guidelines mandate the exclusion of comparables purely based on turnover differences unless the turnover has a direct impact on profitability (e.g., economies of scale). In the case of Cybage Software Pvt. Ltd, R Systems International Ltd Nihilent Ltd, Larsen & Toubro Infotech Ltd and Persistent Systems Ltd, no evidence has been provided to suggest that turnover affects its software development margins to the extent that it becomes incomparable with the assessee. 10. Whether the learned CIT(A) is right in excluding comparable Cybage Software Pvt. Ltd solely on the grounds of absence of segmental data. This exclusion disregards the fact that functional comparability is the primary criterion for determining the suitability of comparables in transfer pricing analysis 11. Whether the learned CIT(A) is right to not give due consideration to the functional comparability of the excluded companies, when functional comparability is the cornerstone of transfer pricing analysis, and companies should not be excluded solely due to the absence of segmental data if their core operations are comparable to those of the tested entity. 12. Whether the learned CIT(A) is right in not demonstrating that the excluded comparables were having extraordinary functional non-comparability that would justify their exclusion due to the lack of segmental data. 13. Whether the exclusion of comparables due to lack of segmental data has resulted in an unreasonably narrow pool of comparables, which skews the transfer pricing analysis. 14. Whether by focusing solely on the availability of segmental data, the learned CIT(A) has unjustly limited the scope of comparables, potentially leading to distorted results. 15. Whether the CIT(A) is right in exclusion of Great Software Laboratory Pvt Ltd on the grounds of having intangible assets without demonstrating the material effect of intangible assets which is not internally generated will have on the price of the service provided as required by Rule 10B. Printed from counselvise.com Page 4 of 11 IT(TP)A No. 892/Bang/2025 16. Whether while seeking the exact comparability as mentioned above the CIT(A) was right in imposing condition beyond law whereas the requirement of law is to acknowledge only those differences that are likely to materially affect the margin. 17. Whether the Hon'ble Tribunal was right in not acknowledging that determination of ALP by carrying out comparability analysis of the comparable companies is an art and not exact science as no two companies are exactly same. 18. Whether the Hon'ble Tribunal was in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the Income Tax Act. 19. Whether the CIT (A) is right in including companies Sagarsoft (India) Ltd that are functionally dissimilar to the taxpayer's business in the set of comparables for determining the arm's length price? 20. Whether the CIT(A) is right in the inclusion of comparables Sagarsoft (India) Ltd that operate in diverse segments of the software development and consultancy without segmental details pertaining to software development, under the legal framework of transfer pricing comparability analysis? 21. Whether the CIT(A) is right in inclusion of the comparables without carrying out necessary enquiry pertaining to functions vis-à-vis tested party. 22. The Appellant craves to add, alter, delete, modify or withdraw any of the above grounds of appeal.” 2. The brief facts of the case are that the assessee is an Indian company and a subsidiary of Altiostar Networks Inc., USA. The assessee is primarily engaged in software development services relating to the US company and its related research services. The US company is in the business of embedded of high technology solutions in respect of telecommunications equipment, electronic devices (including mobile phones) and mobile communication. The assessee filed its return of income on 27/11/2017. Thereafter the case was selected for scrutiny and the TP adjustment Printed from counselvise.com Page 5 of 11 IT(TP)A No. 892/Bang/2025 addition of Rs. 10,03,30,153/- and the disallowance u/s. 40(a)(ii) were made. When the AO had issued a draft assessment order, the assessee had not filed their objections and therefore the AO had confirmed the said additions in the final assessment order. Thereafter, the assessee had challenged the said final assessment order before the Ld.CIT(A). In the said appeal, the assessee had disputed the inclusions as well as the exclusion of the various comparables from the list of comparables. The Ld.CIT(A) after going through the various records as well as the earlier order of this Tribunal had excluded some companies and included some companies from the list of comparable companies. In coming to the said conclusion, the Ld.CIT(A) had relied on the various orders of this Tribunal as well as other Tribunals. 3. The said exclusions and inclusions are now disputed by the revenue before this Tribunal. 4. At the time of hearing, the Ld.AR submitted that the Ld.CIT(A) had considered the various companies and its functionality and thereafter concluded that the companies are to be excluded or included. The Ld.AR, therefore, submitted that when the same companies were added or excluded by the Tribunal in respect of the very same A.Y., the Ld.CIT(A) having no other alternate except to follow the earlier orders, and therefore there is nothing wrong in the order of the Ld.CIT(A). The Ld.AR further submitted that when the earlier orders of this Tribunal had attained finality, the revenue cannot now challenge the said exclusions or inclusions. The Ld.AR also filed a quick reference chart and also a paper book enclosing the several documents. The Ld.AR also filed a case law compilation in which the Tribunal had considered the companies and granted the necessary reliefs. The assessee also filed an application for admission of the additional evidences in which the assessee had enclosed the copy of the orders giving effect to the Ld.CIT(A)’s order by the TPO were enclosed, to show that the Printed from counselvise.com Page 6 of 11 IT(TP)A No. 892/Bang/2025 Ld.TPO had accepted the order of the Ld.CIT(A) and therefore prayed to dismiss the appeal filed by the revenue. 5. The Ld.DR reiterated the grounds raised in form 36 and also filed a report of the AO and explained that how the order of the Ld.CIT(A) is not correct. The Ld.DR further submitted that when there are orders in which the turnover filter could not be a criteria for the purpose of inclusion or exclusion, the order of the Ld.CIT(A) without considering the said orders is bad in law and therefore prayed to allow the appeal filed by the revenue. 6. In the present appeal, the revenue had objected the exclusion of the comparables such as Cygnet Infotech Pvt. Ltd., Infosys Ltd., Mindtree Ltd., Tata Elxsi Ltd., Great Software Laboratory Pvt. Ltd. and Cybage Software Pvt. Ltd., R Systems International Ltd., Nihilent Ltd., Larsen & Toubro Infotech Ltd. and Persistent Systems Ltd. 7. Insofar as the inclusion of the company viz., Sagarsoft (India) Ltd., the revenue had objected for the same. 8. We have also perused the chart given by the assessee which are extracted hereunder for easy reference: Printed from counselvise.com Page 7 of 11 IT(TP)A No. 892/Bang/2025 SL. No/ GOA Name of Comparable excluded by CIT(A) CIT (A) Order Decisions of Coordinate Benches for AY 2017-18 Excluded by CIT(A)/ Inclusions being requested by Department 1. GoA 2,3 Cygnet Infotech Pvt. Ltd. CIT(A) relied on Coordinate bench decision in AMD [Paragraph 5.1.1, Page 3 to Page 4 of CIT(A) Order/Page 569 to Page 570 of Factual Paperbook & Conclusion at Paragraph 5.1.1.3 on Internal Page 7, Running Page 573]  Intuit India Product Development Centre Pvt Ltd Vs. DCIT [IT( TP)A No. 956/Bang/2022] — Paragraph 5.3H, Page 28 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India Private Limited Vs. ACIT [IT(TP)A Nos. 238/Bang/2021 & 262/Bang/ 2022)] - Paragraph 40.7 to 40.10, Page 89 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Varian Medical Systems International (India) (P.) Ltd. vs. Deputy Commissioner of Income-tax, [2024] 158 taxinann.com 84, Paragraph 33.7 & 34 Page 143 of Case Law Compilation [Excluded by Hon'ble Tribunal] 2 GoA 2,3 Infosys Limited CIT(A) relied on Coordinate bench decision in AMD [Paragraph 5.1.1, Page 4 to Page 5 of CIT(A) Order/Page 570 to Page 571 of Factual Paperbook & Conclusion at Paragraph 5.1.1.3 on Internal Page 7, Running Page 573]  Intuit India (Supra) Paragraph 5.3 B, Page 18 to Page 19 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Xchanging Solutions Limited Vs. ACIT [IT(TP)A No.292/Bang/2022] Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India (Supra), Paragraph 11.7 to 11.9, Page 49 to 51 of Case Law Compilation [Excluded by Hon'ble Tribunal] 3 GoA 2,3 Mindtree Limited CIT(A) relied on Coordinate bench decision in AMD [Paragraph 5.1.1, Page 5 to Page 6 of CIT(A) Order/Page 570 to Page 571 of Factual Paperbook & Conclusion at Paragraph 5.1.1.3 on Internal Page 7, Running Page 573]  Intuit India (Supra), Paragraph 5.3 F, Page 23 to 27 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India (Supra), Paragraph 40.20 to 40.28 on Page 90 to 92 of Case Law Compilation [Excluded by Hon'ble Tribunal] Printed from counselvise.com Page 8 of 11 IT(TP)A No. 892/Bang/2025 4 GoA 2,3 Tata Elxsi limited CIT(A) relied on Coordinate bench decision in AMD [Paragraph 5.1.1, Page 7 of CIT(A) Order/Page 573 of Factual Paperbook & Conclusion at Paragraph 5.1.1.3 on Internal Page 7, Running Page 573]  Intuit India (Supra) Paragraph 5.3 E, Page 22 to 23 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India (Supra), Paragraph 40.32 to 40.34, Page 93 of Case Law Compilation [Excluded by Hon'ble Tribunal] 5 GoA 2,3,15 Great Software Laboratory Private Limited CIT(A) relied on Coordinate bench decision in Intuit [Paragraph 5.1.2, Page 7 to Page 8 of CIT(A) Order/Page 573 to Page 574 of Factual Paperbook & Conclusion at Paragraph 5.1.2.3 on Internal Page 10, Running Page 576]  Intuit India (Supra), Paragraph 5.3 G, Page 27 to 28 of Case Law Compilation [Excluded by Hon'ble Tribunal] 6 GoA 2,3,9,10 Cybage Software Private Limited CIT(A) relied on Coordinate bench decision in Intuit [Paragraph 5.1.2, Page 8 to Page 10 of CIT(A) Order/Page 574 to Page 576 of Factual Paperbook & Conclusion at Paragraph 5.1.2.3 on Internal Page 10, Running Page 576]  Intuit India (Supra), Paragraph 5.3 I, Page 28 to 29 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India (Supra), Paragraph 14 to 14.1, Page 56 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Varian Medical (Supra), Paragraph 33.4, Page 142 of Case Law Compilation [Excluded by Hon'ble Tribunal] 7 GoA 9 R Systems Internationa l Limited CIT(A) relied on Coordinate bench decision in Xchanging [Paragraph 5.1.3, Page 10 of CIT(A) Order/Page 576 of Factual Paperbook & Conclusion at Paragraph 5.1.3.2 on Internal Page 10, Running Page 576]  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal] Printed from counselvise.com Page 9 of 11 IT(TP)A No. 892/Bang/2025 8 GoA 9 Nihilent Limited CIT (A) relied on Coordinate bench decision in Xchanging [Paragraph 5.1.3, Page 10 of CIT(A) Order/Page 576 of Factual Paperbook & Conclusion at Paragraph 5.1.3.2 on Internal Page 10, Running Page 576]  Intuit India (Supra). Paragraph 5.3 F, Page 23 to 27 of Case Law Compilation. [Excluded by Hon'ble Tribunal]  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Varian Medical (Supra), Paragraph 33.10, Page 143 of Case Law Compilation [Excluded by Hon'ble Tribunal] 9 GoA 9 Larsen and Tourbo Infotech Limited CIT (A) relied on Coordinate bench decision in Xchanging [Paragraph 5.1.4, Page 10 to Page 15 of CIT(A) Order/Page 576 to Page 581 of Factual Paperbook & Conclusion at Paragraph 5.1.4.2 on Internal Page 15, Running Page 581]  Intuit India (Supra), Paragraph 5.3A, Page 17 to 18 of Case Law Compilation [Excluded by Hon'ble Tribunal] - Conclusion after Paragraph 5.3 B.  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India (Supra), Paragraph 11.7 to 11.9, Page 49 to 51 of Case Law Compilation [Excluded by Hon'ble Tribunal] - Companies under consideration of tribunal can be seen from Paragraph 11.1 on page 49 of compilation 10 GoA 9 Persistent Systems Limited CIT (A) relied on Coordinate bench decision in Xchanging [Paragraph 5.1.4, Page 10 to Page 15 of CIT(A) Order/Page 576 to Page 581 of Factual Paperbook & Conclusion at Paragraph 5.1.4.2 on Internal Page 15, Running Page 581]  Intuit India (Supra), Paragraph 5.3C, Page 19 to 20 of Case Law Compilation [Excluded by Hon'ble Tribunal]  Xchanging Solutions (Supra), Paragraph 10 to 13, Page 109 to 112 of Case Law Compilation [Excluded by Hon'ble Tribunal]  AMD India (Supra), Paragraph 11.7 to 11.9, Page 49 to 51 of Case Law Compilation [Excluded by Hon'ble Tribunal] - Companies under consideration of Hon'ble Tribunal can be seen from Paragraph 11.1 on page 49 of compilation CIT(A) included / Exclusion being requested by Department 11. GoA 19,20 Sagarsoft (India) Limited Included by CIT(A) - [Paragraph5.2.2.1, Page 15 to Page 17 of CIT(A) Order/Page 581 to Page 583 of Factual Paperbook]  Varian Medical (Supra), Sub- paragraph 3 under Paragraph 36, Page 143 of Case Law Compilation [Included by Hon'ble Tribunal] Separately, it will be noticed from TP Order Paragraph 1 that TPO reference date is 07.05.2019 and approval of PCIT is mentioned as 23.11.2020 i.e., invalid reference as Printed from counselvise.com Page 10 of 11 IT(TP)A No. 892/Bang/2025 per Section 92 CA, hence all orders are time barred. This aspect is being raised for first time before Hon'ble ITAT — relies on Paragraphs 15 &16 of S Shivaraj Reddy (Died) Thr His Lrs and Another Vs S Raghu Raj Reddy and Others, SLP (Civil) No(s) 4237 of 2015. Submitted for kind consideration.” 9. As seen from the said chart, the companies are excluded by the Ld.CIT(A) by relying on the earlier orders of the Tribunals. We understand that the said orders of the Tribunals had attained finality and no further proceedings were taken or concluded and in such circumstances, we are in full agreement view of the Ld.CIT(A) in excluding the above said companies from the list of comparables as held by the various Tribunals. It is also to be noted that the earlier orders of the Tribunal are also related to the A.Y. 2017-18 and therefore there is no error in the order of the Ld.CIT(A) by following the above said orders. The revenue had also not disputed the chart filed by the assessee. Even though the Ld.DR submitted that the other orders of the Tribunal were not followed in considering the turnover filter etc, we do not agree for that proposition for the reason that the Tribunals had already considered the comparables in the various orders passed by it and therefore the said argument does not merit for consideration. 10. Similarly, the assessee had also shown the company which was included by the Ld.CIT(A) in the chart which was also included by the Ld.CIT(A) based on the earlier order of the Tribunal. We have also perused the case law compilation filed by the assessee in which the earlier orders of the Tribunals were enclosed and satisfied ourselves that the Ld.CIT(A) had followed the earlier orders and granted the necessary relief. 11. We have also gone through the additional evidence filed by the assessee in which the Ld.TPO had passed an order giving effect to the order of the Ld.CIT(A) and accepted the order of the Ld.CIT(A) and revised the demand as Nil. Printed from counselvise.com Page 11 of 11 IT(TP)A No. 892/Bang/2025 12. We have decided the appeal on merits and based on the earlier orders of the Tribunals and therefore we are not adjudicating the limitation ground. 13. Considering the totality of the facts and circumstances, we are of the view that the order of the Ld.CIT(A) requires no interference and therefore the appeal filed by the revenue is dismissed. 14. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 18th March, 2026. Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 18th March, 2026. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore Printed from counselvise.com "