GOTO TECHNOLOGIES INDIA PRIVATE LIMITED ,BANGALORE V. DEPUTY COMMISSIONER INCOME TAX, CIRCLE-3(1)(1), BANGALORE

ITTPA 1484/BANG/2024

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The case involves Go To Technologies India Pvt. Ltd., which appealed against the final assessment order concerning transfer pricing adjustments made by the Deputy Commissioner of Income Tax. The Tribunal examined issues related to the comparability analysis for benchmarking international transactions in the Software Development Services (SWD) and Data Centre Management Services (DCM/ITeS) segments. The Tribunal found merit in excluding certain comparables based on turnover and functional dissimilarity, and also addressed the incorrect disallowance related to employee contributions to EPF and the computation of interest under section 234C.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 824945 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 31-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Appeal Filed On: 08-08-2024
• Other Referred Cases: Autodesk India private limited versus DCIT, Dotgo (P) ltd. versus CIT, AMD India Pvt ltd versus CIT, Genisys Integrating Systems (I) (P.) Ltd. versus CIT, Pentair Water India (P.) Ltd. versus CIT, Willis Processing Services versus CIT, Capegemini India (P.) Ltd. versus CIT, NTT Data versus CIT, Societe Generale Global Solutions versus CIT, LSI Technologies versus CIT, Infor (India) Pvt Ltd versus CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DIVYA K.J
• Assessee Lawyers: SHARATH RAO; VAIDHEHI; DHIRAJ
• Keywords: Transfer pricing; International transaction; Question of law; Initiation of penalty proceedings; Wholly owned subsidiary
• Section: 143(3); 234B; 10B

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.1484/Bang/2024 Assessment Years: 2020-21 Go To Technologies India Pvt. Ltd., (formerly known as LogMein Systems India Pvt. Ltd., No.5, Prestige Khoday Tower, 1st, 2nd & 3rd Floor, Raj Bhavan Road, Bangalore – 560 001. PAN : AAGCG 4171 K Vs. The Dy. Commissioner of Income Tax, Circle – 3(1)(1), Bengaluru. APPELLANT RESPONDENT Assessee by : Shri Sharath Rao, CA & Ms. Vaidhehi CA & Shri Dhiraj, Advocate Revenue by : Dr. Divya K.J, CIT-DR Date of Hearing : 18-12-2025 Date of Pronouncement : 31-12-2025 ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER The present appeal is filed by the assessee against the order of the Ld. AO/TPO u/s 143(3) r.w.s. 144C(13) of the Act dt. 11.06.2024 for the Assessment year 2020-21. 2. The facts in brief are that assessee is a wholly owned subsidiary of LogMein Ireland Limited and engaged in the business of rendering Software Development Services (SWD Segment), Data Centre Management Services (DCM/ITes Segment) and Marketing Support Services (MSS Segment) to the AEs. The Assessee filed its Printed from counselvise.com Page 2 of 19 IT(TP)A No.1484/Bang/2024 ROI for the subjected AY offering an income of Rs. 27,30,61,340. The case of the assessee was selected for complete scrutiny under CASS and during the assessment proceeding a reference was made by the AO to TPO to determine the ALP of international transactions entered by the assessee with its AE. 3. The TPO passed an order u/s 92CA(3) of the Act, dated 31.05.2023 making TP upward adjustment under SWD segment and DCM segment which were characterised by the TPO as ITes Segment. The adjustment proposed by the TPO was incorporated by the AO in the draft assessment order under section 143(3) r.w.s. 144C(5) of the Act. In the draft assessment order, the AO also incorporated the addition/disallowances under section 36(1)(va) of the Act made by the CPC while processing the return under section 143(1) of the Act for the year under dispute. 4. Against the draft assessment order, the assessee filed objections before the learned DRP and got partial relief on the TP issue. Accordingly, the final assessment order u/s 143(3) r.w.s. 144C(13) of the Act was passed after making following addition on account of TP adjustment in the SWD segment and ITes Segment: (i) SDS – Rs. 4,27,86,905/- (ii) ITeS – Rs. 92,32,893/- 5. Being aggrieved by the final assessment order, the assessee is in appeal before us. 6. Before us the assessee has raised several grounds of appeal numbered as Ground Nos. 1 to 11 and sub grounds therein which are running into multiple pages. Hence, we, for the sake of brevity and convenience, are not inclined to reproduce the same here and proceed to adjudicate each grounds here under. 7. The Ground Nos. 1 & 2 and sub grounds thereunder of the assessee’s appeal are general grounds and do not require any separate adjudication. Hence, the same are hereby dismissed as infructuous. 8. The issue raised in Ground No. 3.1 to 3.2 pertains to the recategorization of DCM Segment to ITeS Segment. Printed from counselvise.com Page 3 of 19 IT(TP)A No.1484/Bang/2024 9. At the outset, we note that the learned AR before us submitted that the assessee not willing to press this issue raised in the grounds of appeal. Hence, we dismiss the same as not pressed. 10. The issue raised by the assessee through Ground Nos. 4.1 to 4.8 of the appeal pertains to comparability analysis adopted by the TPO for benchmarking the international transaction under SWD segment and DCM segment. 11. At the outset, we note that the learned AR before us submitted that the assessee is not willing to press the issues raised in these grounds of appeal. Hence, we dismiss the same as not pressed. 12. The issue raised by the assessee through Ground No. 4.9 of the appeal pertains to not applying the upper turnover filter by the TPO in comparability analysis adopted for benchmarking the international transaction under SWD segment and DCM segment and accordingly seeking exclusion of certain TPO’s comparables on the basis of turnover filter. 13. The relevant facts are that the assessee benchmarked its international transactions with the AEs under different segment viz SWD, DCM/ITeS using TNMM and taken OP/OC as PLI which computed at 15% for both segments. The adoption of TNMM and PLI is not in dispute. 13.1 Further, the assessee in its comparability analysis initially selected 8 comparables for SWD segment. However, after certain observation by the TPO, the assessee made fresh search and selected 14 comparables. However, the TPO accepted only 7 comparables out of 14 selected by the assessee. The details of the assessee’s comparable and reason for rejection or acceptance of the same are available at pages 11 to 12 of the TPO order in tabular form. Thus, the TPO accepted only following the assessee’s comparable: 1. iSummation Technologies Pvt Ltd 2. Evoke Technologies Pvt Ltd 3. Infomile Technologies Ltd 4. Mindtree Ltd Printed from counselvise.com Page 4 of 19 IT(TP)A No.1484/Bang/2024 5. Great Software Laboratory Ltd 6. Sagrosoft India Ltd 7. CG-Vak Software and Export Ltd 14. Thereafter, the TPO made fresh comparability analysis and selected 11 new comparable in-addition to 7 assessee’s comparables accepted. Accordingly, the TPO’s selection of 18 comparables in the final set for SWD segement are detailed as under: 1. iSummation Technologies Pvt Ltd 2. Evoke Technologies Pvt Ltd 3. Infomile Technologies Ltd 4. Mindtree Ltd 5. Great Software Laboratory Ltd 6. Sagrosoft India Ltd 7. CG-Vak Software and Export Ltd 8. Hurix Systems Pvt Ltd 9. Daffodil Software Pvt Ltd 10. Larsen & Turbo Infotech Ltd 11. Nihilent ltd 12. Wipro Ltd 13. Tata Elxsi Ltd 14. Infosys Ltd 15. Threesixty Logica Testing Service Ltd 16. Tata Consultancy Services Ltd 17. Cybage Software Pvt Ltd 18. Consilient Technologies Pvt Ltd 14.1 The median of the weighted average margin of the above-mentioned comparables was arrived at 23.56% and 35th percentile at 19.91% as the 35th percentile exceeded the assessee’s margin/PLI of 15.3%, the TP adjustment of Rs. 4,43,43,628/- was made by the TPO in the SWD segment. Printed from counselvise.com Page 5 of 19 IT(TP)A No.1484/Bang/2024 14.2 Likewise, the assessee for the DCM/ITeS segment has selected 8 comparables. However, the TPO rejected the entire comparability analysis of the assessee for DCM/ITeS segment and made fresh search. The TPO on the basis of fresh search and after considering the objection and submission of the assessee finally selected 17 comparables which are detailed as under: 1. Anderson Business Solutions Pvt Ltd 2. CES Ltd. 3. Sundaram Business Services Ltd. 4. Datamatics Business Solutions Ltd. 5. Infosys BPM Ltd. 6. M O L Information Processing Services (India) Pvt. Ltd. 7. Tech Mahindra Business Services Ltd. 8. E Care India Pvt. Ltd. 9. Ultramarine & Pigments Ltd. (ITES Segment) 10. Virnichi Ltd. 11. Savitriya Technologies Pvt. Ltd. 12. Vitae International Accounting Services Pvt. Ltd. 13. Domex E-Data Pvt. Ltd. 14. Lagnaum Infotech Solutions Pvt. Ltd. 15. M P S Ltd. 16. Motif India Infotech Pvt. Ltd. 17. Brickworks India Pvt. Ltd. 14.3 The median of the weighted average margin of the above mentioned comparable was arrived at 23.71% and 35th percentile at 18.49%. As the 35th percentile exceeded the assessee’s margin/PLI of 15.3%, the TP adjustment of Rs. 1,91,70,640/- was made by the TPO in the DCM/ITeS segment. 15. Being aggrieved the assessee preferred to file objection before the learned DRP. The ld. DRP vide order dated 28th May 2024 directed to exclude one company namely Threesixty Logica Testing Service Pvt Ltd from the final set of comparable for SWD segment and directed to recompute the margin of Tata Consultancy. Accordingly, the TPO recomputed the median of weighted average margin of final Printed from counselvise.com Page 6 of 19 IT(TP)A No.1484/Bang/2024 set of comparables at 23.7% and reduced the TP adjustment under SWD segment from Rs. 4,43,43,628/- to Rs. 4,27,86,905/-. 15.1 Likewise, the learned DRP regarding the benchmarking of DCM/ITeS segment directed to exclude two companies namely M/s Ultramarine & Pigments Ltd and Virinchi Ltd from final set of comparables and directed to include 2 more companies namely E-Zest Solution Ltd and Microland Ltd. The learned DRP also directed to recompute the margins of certain other comparables companies. Accordingly, the TPO recomputed the median of weighted average margin of final set of comparables at 19.35% and reduced the TP adjustment under DCM segment from Rs. 1,91,70,640/- to Rs. 92,32,893/-. 16. Being aggrieved by the order of the learned DRP and consequent final assessment order, the assessee is in appeal before us. 17. The learned AR before us filed a synopsis of arguments running from 1 to 13 pages and contended that certain comparable selected by the TPO for SWD segment as well as for DCM segment should be rejected based on the turnover filter. As per the ld. AR, the turnover of the assessee company under SWD segment is at ₹ 61 crores and under DCM segment at ₹ 26 crores and overall turnover at entity level stand at Rs. 131 crores only. Therefore, the assessee company is a small size company and accordingly the comparable company should have turnover between ₹ 1 crore to ₹ 200 crores only. Accordingly, the comparable companies outside the said range of turnover should be excluded. There were 8 companies selected by the TPO under SWD segment and 3 companies under DCM segment, having turnover exceeding ₹ 200 crores, hence these 8 & 3 companies under respective segment should not be considered as comparable for working out the ALP of the assessee. In contending so, the ld. AR relied on the order of this Tribunal i.e. Bangalore ITAT in the case of Autodesk India private limited versus DCIT reported in 96 taxmann.com 263 and other recent decision in the cases such as Dotgo (P) ltd. reported 177 taxmann.com 450 and AMD India Pvt ltd reported in 180 taxmann.com 324. Such lists of the comparable companies for SWD Segment having turnover more than 200 crores are detailed as under: Printed from counselvise.com Page 7 of 19 IT(TP)A No.1484/Bang/2024 1. Mindtree Ltd** 2. Great Software Laboratory Ltd 3. Larsen & Turbo Infotech Ltd 4. Nihilent ltd 5. Wipro Ltd 6. Tata Elxsi Ltd 7. Infosys Ltd 8. Tata Consultancy Services Ltd 9. Cybage Software Pvt Ltd **Note: Mindtree is not in ground of appeal. In the synopsis of argument, the ld. AR has also given table of 8 companies only which are having turnover exceeding 200 Crores. However, in the table provided in the synopsis for final set of comparable for exclusion, Mindtree name also noted as excessive turnover. Further, in several other cases, where we have held that Mindtree have been excluded based on upper turnover filter. 17.1 Similarly, such lists of the comparable companies for DCM Segment having turnover more than 200 crores are detailed as under: 1. Infosys BPM Ltd. 2. Tech Mahindra Business Services Ltd. 3. Motif India Infotech Pvt. Ltd. 18. On the contrary, the learned DR before us vehemently supported the order of the lower authorities. 19. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have been elaborated in the preceding paragraph which are not in dispute, therefore for the sake of brevity and convenience, we are not inclined to repeat the same. The controversy arises whether the companies having turnover exceeding ₹ 200 crores should be excluded while calculating the ALP of the assessee. In this regard, we find pertinent to refer the order of this Tribunal in the case of Autodesk India Private limited (supra) wherein it was held as under: 17.7 We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt. Ltd., (supra) was as to whether comparable can be Printed from counselvise.com Page 8 of 19 IT(TP)A No.1484/Bang/2024 rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non-jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of Pentair Water India (P.) Ltd. (supra) has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumstances, following the principle that where two views are available on an issue, the view favourable to the Assessee has to be adopted, we respectfully follow the view of the Hon'ble Bombay High Court on the issue. Respectfully following the aforesaid decision, we uphold the order of the DRP excluding 5 companies from the list of comparable companies chosen by the TPO on the basis that the 5 companies turnover was much higher compared to that the Assessee. 17.8 In view of the above conclusion, there may not be any necessity to examine as to whether the decision rendered in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India (P.) Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra). 19.1 Based on the above finding of the ITAT, we are inclined to exclude the companies having turnover exceeding ₹ 200 crores as comparable while calculating the ALP for the transactions international transactions carried out by the assessee Printed from counselvise.com Page 9 of 19 IT(TP)A No.1484/Bang/2024 with the AE. As per the assessee, the list of such companies having turnover exceeding Rs. 200 crores stand as under: For SWD Segment (i) Mindtree Ltd (ii) Great Software Laboratory Pvt Ltd (iii) Larsen and Toubro Infotech (iv) Nihilent Analytics (v) Wipro Ltd (vi) Tata Elxsi Ltd (vii) Infosys Limited (viii) Tata Consultancy Services Ltd (ix) Cybage Software Ltd. For DCM Segment 1. Infosys BPM Ltd. 2 Tech Mahindra Business Services Ltd. 3 Motif India Infotech Pvt. Ltd. 19.2 Hence, we direct the TPO/AO to exclude the companies stated above from the list of comparable while calculating the ALP with respect to the international transaction carried out by the assessee if they are having turnover exceeding Rs. 200 crores after necessary verification. Accordingly, the ground of appeal of the assessee is hereby allowed. 20. The issue raised by the assessee in Ground No. 5 pertains to computation of net cost-plus markup of the comparable companies. 21. At the outset, we note that the learned AR before us submitted that the assessee is not willing to press this issue raised in the grounds of appeal. Hence, we dismiss the same as not pressed. 22. The issue raised by the assessee in Ground No. 6 pertains to the rejection of assessee’s comparable by the TPO. Printed from counselvise.com Page 10 of 19 IT(TP)A No.1484/Bang/2024 23. At the outset, we note that the learned AR before us submitted that the assessee is not willing to press this issue raised in the grounds of appeal. Hence, we dismiss the same as not pressed. 24. The issue raised by the assessee in Ground No. 7.1 pertains to the inclusion of certain companies in the final list of comparable for SWD segment by the TPO. 25. At the outset, we note that the learned AR before us submitted that the assessee is not willing to press this issue raised in the ground of appeal. Hence, we dismiss the same as not pressed. 26. The issue raised by the assessee in Ground No. 7.2 pertains to the inclusion of certain companies in the final list of comparable for DCM/ITeS segment by the TPO. 27. As discussed, in the earlier paragraph while adjudicating Ground 4.9 of this appeal, the assessee has selected 8 comparables for benchmarking the transaction under DCM segment which was rejected by TPO. Thereafter the TPO made fresh search and selected 17 new comparables and based on same made TP adjustment under DCM segment. 28. Upon appeal/objection filed by the assessee before learned DRP, the learned DRP directed to excluded two companies from final list and directed to include two more company in the final list of comparable. Hence, after the direction of learned DRP 17 comparables remained under DCM segment which at the cost of repetition are reproduced as under: 1. Mcroland Limited 2. Anderson Business Solutions Pvt Ltd 3. CES Ltd. 4. Datamatics Business Solutions Ltd. 5. E-Zest Solutions Ltd 6. Infosys BPM Ltd. 7. M O L Information Processing Services (India) Pvt. Ltd. 8. Sundaram Business Services Ltd. Printed from counselvise.com Page 11 of 19 IT(TP)A No.1484/Bang/2024 9. Tech Mahindra Business Services Ltd. 10. E Care India Pvt. Ltd. 11. Saviteiya Technologies Pvt. Ltd. 12. Vitae International Accounting Services Pvt. Ltd. 13. Domex E-Data Pvt. Ltd. 14. Lagnaum Infotech Solutions Pvt. Ltd. 15. M P S Ltd. 16. Motif India Infotech Pvt. Ltd. 17. Brickworks India Pvt. Ltd. 29. Now, the assessee before us through the ground under consideration seeks exclusion of following TPO’s comparables: 1. Sundaram Business Services Ltd. 2. E Care India Pvt. Ltd. 3. Infosys BPM Ltd. 4. M O L Information Processing Services (India) Pvt. Ltd. 5. Tech Mahindra Business Services Ltd. 6. Saviteiya Technologies Pvt. Ltd. 7. Vitae International Accounting Services Pvt. Ltd. 8. Domex E-Data Pvt. Ltd. 9. Lagnaum Infotech Solutions Pvt. Ltd. 10. M P S Ltd. 11. Motif India Infotech Pvt. Ltd. 12. Brickworks India Pvt. Ltd. 30. The learned AR before us submitted that assessee not willing to press the issue of exclusion of following 4 companies 1. Sundaram Business Services Ltd. 2. E Care India Pvt. Ltd. 3. Saviteiya Technologies Pvt. Ltd. 4. M O L Information Processing Services (India) Pvt. Ltd. Printed from counselvise.com Page 12 of 19 IT(TP)A No.1484/Bang/2024 31. Hence, we dismissed the assessee’s ground of appeal to the extent of exclusion of above mentioned 4 companies from the final list of comparable as not pressed. 31.1 We further note that we have already excluded the 3 companies namely Infosys BPM Ltd, Tech Mahindra Business Services Ltd and Motif India Ltd on account of upper turnover filter. Thus, at this stage dispute remains before us for only 5 comparable companies which are as under: 1. Vitae International Accounting Services Pvt. Ltd. 2. Domex E-Data Pvt. Ltd. 3. Lagnaum Infotech Solutions Pvt. Ltd. 4. M P S Ltd. 5. Brickworks India Pvt. Ltd. 31.2 Before us the learned AR submitted that company namely Vitae International Accounting Services Pvt Ltd involved in accounting, auditing and bookkeeping activity. Hence, the same is functionally different and not comparable to the assessee company on account of functionality. The learned AR further argued that the impugned company lacks segmental information. In this regard the learned AR also placed reliance on the decision of Hyderabad Tribunal in the case of Infor (India) Pvt Ltd in IT(TP)A No. 1341/Hyd/2024. 31.3 The learned AR further submitted that company namely Domex E-Data Pvt Ltd, Brickworks India Pvt Ltd and Lognam Infotech Solutions Pvt Ltd are KPOs whereas the assessee company’s DCM segment has been categorised as ITeS by the TPO and learned DRP. The learned AR referred the provision of rule 10TA(e) and 10TA(g) of the Income Tax Rule 1961 where ITeS and KPO have been defined differently. Accordingly, the learned AR argued that the company engaged in KPO services cannot be compared to the assessee company. It was also submitted that Domex E-Data Pvt Ltd lacks segmental information and earn insufficient margin. Likewise, Brickworks India Pvt Ltd also lacks segmental information but earn abnormal profit whereas Lagnam Infotech Solutions earns fluctuating margins. Therefore, these companies cannot be relied upon for comparability. Printed from counselvise.com Page 13 of 19 IT(TP)A No.1484/Bang/2024 31.4 Regarding the MPS Ltd., the learned AR submitted that impugned company is engaged in publishing solutions, including creation, development and distribution of digital learning content, platforms and services. The activities of MPS involve content creation, full-service publishing, digital platforms, learning solutions and aggregation of content, which clearly shows that it is engaged in knowledge-intensive and diversified activities, falling in the nature of KPO services. The assessee, on the other hand, is a routine ITES service provider rendering low-end services and therefore the assessee cannot be compared with a company like MPS Ltd. The learned AR further drew attention to the Annual Report of MPS Ltd. for FY 2019-20, wherein the nature of activities clearly demonstrates that the company derives revenue from multiple verticals and diversified operations. Thus, MPS Ltd. does not satisfy the functional similarity test as required under Rule 10B of the Income-tax Rules. The learned AR also pointed out that there is no reliable segmental information available in respect of the ITES activities of MPS Ltd. In the absence of proper segmental data, it is not possible to isolate margins relatable to comparable services, which itself is a sufficient ground for exclusion. The learned AR also placed reliance on the decision of Hyderabad Tribunal in the case of Infor (India) Pvt Ltd in IT(TP)A No. 1341/Hyd/2024 wherein MPS held as not comparable to ITeS segment. 35. On the contrary, the learned DR before us reiterated the findings contained in the order of the lower authorities. 36. We have heard the rival contentions of both the parties and perused the materials available on record. The issue before us is confined to the exclusion of five comparable companies, namely Vitae International Accounting Services Pvt. Ltd., Domex E-Data Pvt. Ltd., Lagnaum Infotech Solutions Pvt. Ltd., MPS Ltd. and Brickworks India Pvt. Ltd., in the DCM/ITeS segment. 36.1 So far as Vitae International Accounting Services Pvt. Ltd. is concerned, we find force in the contention of the learned AR that the said company is engaged in accounting, auditing and bookkeeping services. These activities are clearly distinct from the routine ITES/DCM services rendered by the assessee. Further, the company Printed from counselvise.com Page 14 of 19 IT(TP)A No.1484/Bang/2024 does not provide reliable segmental information to carve out margins relating to comparable services. In view of the functional dissimilarity and lack of segmental data and respectfully following the decision of the Hyderabad Tribunal in Infor (India) Pvt. Ltd., we hold that Vitae International Accounting Services Pvt. Ltd. cannot be considered as a valid comparable and is liable to be excluded. 36.2 With regard to Domex E-Data Pvt. Ltd., Lagnaum Infotech Solutions Pvt. Ltd. and Brickworks India Pvt. Ltd., it is noted that these companies are engaged in knowledge-based and analytics-driven services. The TPO himself has categorised the assessee’s DCM segment as ITES. As per Rule 10TA(e) and 10TA(g) of the Income- tax Rules, ITeS and KPO services are distinct in nature. Companies rendering KPO services, which involve higher skill, domain expertise and value addition, cannot be compared with a routine ITES service provider. We further note that Domex E-Data Pvt. Ltd. and Brickworks India Pvt. Ltd. do not have proper segmental information, and Brickworks India Pvt. Ltd. also earns abnormal profits. Lagnaum Infotech Solutions Pvt. Ltd. shows fluctuating margins over the years. These factors make the margins of these companies unreliable for benchmarking. Accordingly, we hold that these three companies are not suitable comparables and deserve to be excluded. 36.3 Coming to MPS Ltd., we find that the company is engaged in publishing solutions, digital learning content, platforms and related services. The activities involve content creation, full-service publishing, learning solutions and aggregation of content, which are clearly knowledge-intensive in nature. The Annual Report of MPS Ltd. for FY 2019-20 shows diversified operations across multiple verticals. The assessee, on the other hand, is a routine ITES service provider rendering low-end services. Therefore, MPS Ltd. fails the functional comparability test prescribed under Rule 10B of the Income Tax Rule. We also note that there is no reliable segmental information available to isolate margins relatable to ITES activities. In similar facts, the Hyderabad Tribunal in Infor (India) Pvt. Ltd. has held MPS Ltd. to be not comparable with an ITES provider. Respectfully following the same, we direct exclusion of MPS Ltd. from the final set of comparables. 36.4 In view of the above discussion, we hold that Vitae International Accounting Services Pvt. Ltd., Domex E-Data Pvt. Ltd., Lagnaum Infotech Solutions Pvt. Ltd., Printed from counselvise.com Page 15 of 19 IT(TP)A No.1484/Bang/2024 MPS Ltd. and Brickworks India Pvt. Ltd. are not comparable to the assessee in the DCM/ITeS segment. The AO/TPO is directed to exclude these companies from the final list of comparables and recompute the arm’s length price accordingly. Thus, the ground raised by the assessee on this issue is allowed. 37. The issue raised by the assessee in Ground No. 8 pertains to non- allowances of appropriate adjustment to comparable companies. 38. At the outset, we note that the learned AR before us submitted that the assessee is not willing to press this issue raised in the grounds of appeal. Hence, we dismiss the same as not pressed. 39. The issue raised by the assessee in Ground No. 9 pertains to the disallowance of Rs. 30,30,210/- under section 36(1)(va) of the Act. 40. The relevant facts are that the CPC while processing the return under section 143(1) of the Act made disallowance under section 36(1)(va) of the Act for Rs. 30,30,210/- only on account of delayed deposit of employee contributions of EPF. The disallowance made by the CPC was incorporated by the AO while computing the assessed income in the draft assessment order and final assessment order. 41. Being aggrieved, the assessee is in appeal before us. 42. The learned AR before us submitted that the assessee deposited the employee contribution toward PF for the month of December 2019 before 10 January 2020 and thereby the amount was deposited within the due date prescribed under PF Act. In support of his argument, the learned AR submitted the PF payment challan which is available on pages 2362 to 2363 of the paper book. Therefore, the learned AR argued that the CPC wrongly made the disallowances under section 36(1)(va) of the Act. 42.1 The learned AR further contended that thought the disallowances was part of CPC addition under section 143(1), however it is merged with the order under section 143(3) of the Act. The learned AR in contending so relied on the judicial precedent in the case of Ariba Technologies India Pvt. Ltd. reported in 172 taxmann.com 304. Accordingly, the learned AR argued that the same can be raised Printed from counselvise.com Page 16 of 19 IT(TP)A No.1484/Bang/2024 along with the appeal filed against assessment order under section 143(3) of the Act. 43. On the contrary, the learned DR before us reiterated the findings contained in the order of the lower authorities. 44. We have heard the rival contentions of both the parties and perused the materials placed on record. The issue before us relates to the disallowance of ₹30,30,210/- made under section 36(1)(va) of the Act on account of alleged delayed deposit of employees’ contribution to PF. It is an admitted fact that this disallowance was initially made by the CPC while processing the return under section 143(1) of the Act and the same was later carried forward by the AO in the draft as well as final assessment order. 44.1 On examination of the evidence placed in the paper book, we find that the assessee has deposited the employees’ contribution towards PF for the month of December 2019 on or before 10 January 2020, which is before the due date of 15th January prescribed under the relevant PF Act. The PF challans evidencing such payment are available on pages 2362 to 2363 of the paper book. Thus, the factual position clearly establishes that there was no delay in depositing the employees’ contribution within the statutory due date under the PF law. 44.2 In view of the above factual finding, we hold that the disallowance made under section 36(1)(va) of the Act is not sustainable. Once the contribution is deposited within the due date prescribed under the respective welfare legislation, no disallowance can be made under this provision. Therefore, the adjustment made by the CPC under section 143(1) of the Act was incorrect. 44.3 We also find merit in the contention of the learned AR that though the disallowance originated from processing under section 143(1), the same has been merged with the assessment order passed under section 143(3) of the Act. In this regard, reliance placed on the decision of Ariba Technologies India Pvt. Ltd. is well founded, wherein it was held as under: 25.7 Admittedly the adjustments are made by the CPC under section 143(1) of the Act whereas the assessment is framed by NFAC. However, the NFAC is not unknown to the Printed from counselvise.com Page 17 of 19 IT(TP)A No.1484/Bang/2024 adjustment made by the CPC i.e. automated process under section 143(1) of the Act. Therefore, we are of the view that the NFAC should have taken into cognizance of the adjustment made by the CPC in the intimation generated under section 143(1) of the Act especially in the circumstances where the assessee has brought to the notice to the NFAC about such adjustment. By doing so, the multiple proceedings can be avoided which are certainly cumbersome for the assessee. 25.8 As regards the principles laid down by Bangalore Tribunal in the case of Areca Trust (supra), we note that the assessee in the said case has preferred an appeal before the learned CIT(A) against the adjustment made under section 143(1) of the Act which was subsequently withdrawn by the assessee as the case of the assessee was picked up under scrutiny. In this background the Tribunal, has denied accepting the issue raised in the intimation under section 143(1) of the Act. It is because, once the assessee has withdrawn the appeal filed before the learned CIT(A), the issue arises from the intimation under section 143(1) of the Act reached to the finality. However, the facts of the case on hand are different in as much as the assessee has not filed any appeal before the learned CIT(A) under the bona fide belief that the matter may picked up under scrutiny. Furthermore, the assessee has brought to the notice of the NFAC about the adjustment made under section 143(1) of the Act which can be verified from the details available on pages 367 to 371 of the appeal set. 44.4 In view of the above discussion and considering the factual position supported by documentary evidence, we direct the Assessing Officer to delete the disallowance of ₹30,30,210/- made under section 36(1)(va) of the Act. Accordingly, Ground No. 9 raised by the assessee is allowed. 45. The issue raised by the assessee in Ground No. 10.1 of the appeal pertains to levy of interest under section 234B of the Act. 46. At the outset, we note that levy of interest under section 234B of the Act is consequential in nature and does not require any separate adjudication. Hence, we dismiss the same as infructuous. 47. The issue raised by the assessee in Ground No. 10.2 of the appeal pertains to the levy of interest under section 234C of the Act. 48. The learned AR before us submitted that the AO has wrongly levied interest under section 234C of the Act at ₹51,233/- only. The interest has been computed by the AO on an incorrect basis. The assessee had already correctly computed and paid interest of ₹43,606/- under section 234C on the returned income, which is in accordance with the provisions of the Act. The details of such computation and payment are placed in the paper book. Therefore, the learned AR prayed that the AO be directed to recompute the interest under section 234C strictly on the returned income, as mandated by law. Printed from counselvise.com Page 18 of 19 IT(TP)A No.1484/Bang/2024 49. On the contrary, the learned DR before us reiterated the findings contained in the order of the lower authorities. 50. We have considered the submissions of the learned AR and perused the materials available on record. It is evident that interest under section 234C of the Act is required to be levied with reference to the returned income and not on any other basis. The assessee has already computed and paid interest under section 234C amounting to ₹43,606 on the returned income. The AO has, however, levied higher interest without following the correct statutory basis. In the interest of justice, we direct the AO to recompute the levy of interest under section 234C of the Act strictly in accordance with law after verifying the assessee’s computation. The AO shall grant consequential relief to the assessee. Hence, the ground of appeal of the assessee is allowed. 51. The issue raised by the assessee in Ground No. 11 of the appeal pertains to the initiation of penalty proceedings under section 270A of the Act. 52. We note that impugned issue raised by the assessee is premature and consequential, hence not requiring any adjudication. Therefore, we hereby dismiss the same as infructuous. 53. In the result appeal of the assessee is hereby partly allowed. Order pronounced in the open court on 31st December, 2025. Sd/- Sd/- (SOUNDARARAJAN K.) (WASEEM AHMED) Judicial Member Accountant member Bangalore, Dated, the 31st December, 2025. /Vms / Printed from counselvise.com Page 19 of 19 IT(TP)A No.1484/Bang/2024 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore Printed from counselvise.com "