PR COMMISSIONER OF INCOME TAX - 2 vs M/S GLOBAL E BUSINESS OPERATIONS PVT LTD

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HC-KAR
NC: 2026:KHC:61290-DB
ITA No. 230 of 2021


CNR: KAHC010233602021




IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 8 DAY OF OCTOBER, 2026

PRESENT

THE HON'BLE MR. JUSTICE S.G.PANDIT


AND

THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA

INCOME TAX APPEAL NO. 230 OF 2021

BETWEEN:

1. PR. COMMISSIONER
OF INCOME TAX - 2
BMTC COMPLEX, KORAMANGALA
BANGALORE.

2. THE ASSISTANT COMMISSIONER
OF INCOME TAX CIRCLE-3(1)(2)
BMTC COMPLEX,
KORAMANGALA, BENGALURU.
…APPELLANTS
(BY SRI. SANMATHI E. I., ADV.)

AND:

M/S. GLOBAL E- BUSINESS
OPERATIONS PVT. LTD.,
ND
2 FLOOR, KALYANI PLATINA
PHASE-II, BUILDING
SURVEY NO.16 AND 24
OF KUNDALAHALLI VILLAGE
K R PURAM HOBLI
BANGALORE-560066.
…RESPONDENT
(BY SRI. T SOORYANARAYANA, SR. COUNSEL FOR
MS. TANMAYEE RAJKUMAR, ADV.)

THIS APPEAL IS FILED UNDER SECTION 260-A OF INCOME
TAX ACT 1961, ARISING OUT OF ORDER DATED 04.12.2020 PASSED
IN IT(TP)A NO.725/BANG/2017, FOR THE ASSESSMENT YEAR 2012-
2013, PRAYING TO 1. DECIDE THE FOREGOING QUESTION OF LAW









Digitally signed by
NANJUNDACHARI
Location: High
Court of
Karnataka

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AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE
FORMULATED BY THE COURT AS DEEMED FIT AND 2) SET ASIDE THE
APPELLATE ORDER DATED 04.12.2020 PASSED BY THE INCOME TAX
APPELLATE TRIBUNAL, ‘A’ BENCH, BENGALURU, AS SOUGHT FOR, IN
THE RESPONDENT- ASSESSEE’S CASE, IN APPEAL PROCEEDINGS
NO.IT(TP)A NO.725/BANG/2017 (ANNEXURE-A) FOR A.Y.2012-2013
AND GRANT SUCH OTHER RELIEF AS DEEMED FIT, INTEREST OF
JUSTICE.

THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
AND
HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA

ORAL JUDGMENT

(PER: HON'BLE MR. JUSTICE S.G.PANDIT)

1. The revenue is in appeal under Section 260-A of
the Income-Tax Act, 1961 (for short, hereinafter referred
to as the 'IT Act') questioning the order dated 04.12.2020
passed by the Income Tax Appellate Tribunal "A" Bench,
Bengaluru in IT(TP) No.725/Bang/2017 (Annexure-A) for
the assessment year 2012-13.

2. The above appeal was admitted for hearing on
04.02.2022 on the following substantial questions of law:
"i) Whether the Tribunal was right in directing
Infosys BPO Ltd, TCS E Services Ltd as comparables to
be excluded from list of comparables by holding that

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said companies are functionally different and on the
basis of brand value even when the TPO has chosen
proper comparable by applying qualitative and
quantitative tests and when selection of comparable in a
case depends in transfer pricing on assessee specific
data analysis and the transfer pricing officer has passed
order on the basis of specific facts on record in the case
of the assessee?

ii) Whether on the facts and in the
circumstances of the case, the Tribunal's order can be
said as perverse in nature as Tribunal has directed TPO
to exclude comparables on the ground of functional
dissimilarity and brand value without examining findings
rendered by TPO and materials brought on record by
TPO which are in parameters of Rule 10B of the Act?

3. Heard the learned counsel, Sri.E.I.Sanmathi,
learned counsel appearing for the appellant-revenue and
the learned Senior Counsel, Sri.T.Sooryanarayana
appearing for the respondent-assessee. Perused the
entire writ papers.

4. The subject matter of the above appeal relates
to transfer pricing and determination of Arm's Length price
of the international transaction entered into by the
respondent-assessee. The appellant-revenue questions
the direction of the Tribunal to exclude Infosys BPO

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Limited and TCS E-Service Limited from the list of
comparables and also direction of the Tribunal to treat
foreign exchange fluctuations, gains/loss as operating in
nature.

5. Learned counsel appearing for the appellant-
revenue, Sri.E.I.Sanmathi would submit that the Tribunal
failed to appreciate the material on record and without
properly appreciating the material on record has
erroneously come to the conclusion that the above two
Companies would not performed similar functions to that
of assessee. Further, learned counsel would submit that
the finding of the Tribunal is perverse insofar as it
excluded the above two Companies from the list of
comparable companies.

6. Per contra, learned Senior Counsel,
Sri.T.Sooryanarayana appearing for the respondent-
assessee would submit that the Tribunal rightly directed
exclusion of Infosys BPO Limited and TCS E-Service

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Limited on comparison of functionality of both comparable
companies as well as respondent-assessee company.

7. Learned counsel would submit that comparison
of functionality would depend on the brand value and
other hosts of considerations. Learned Senior Counsel for
the respondent-assessee would submit that the
respondent-assessee company is engaged in ITES Services
and undertakes HP's worldwide accounting and transaction
processing work, provision of back office operation and
customer support services to various associated
enterprises. Therefore, the functionality of the assessee
company canot be compared with Infosys BPO Limited.
Hence, he would pray for dismissal of the appeal.

8. A Co-ordinate Bench of this Court in the case of
SAP LABS INDIA PRIVATE LIMITED VS. THE INCOME TAX OFFICER

in ITA.No.10/2011 and Connected Appeals dated
28.08.2026 on considering the decision of the Hon’ble
Apex Court in the matter of transfer pricing and in the

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matter of determining the arms length price, after detailed
discussion has come to the following conclusion:
(i) The Court concludes that Chapter X of the
Income-tax Act, 1961 constitutes a self-contained
code governing transfer pricing, providing a
complete statutory framework for determination
of the Arm's Length Price (ALP), maintenance of
documentation, and assessment of international
transactions.


(ii) The initial burden of determining the ALP and
maintaining the prescribed documentation rests
upon the taxpayer, while the Transfer Pricing
Officer can interfere with the taxpayer's
determination only upon satisfaction of the
conditions stipulated under Section 92C(3) of the
Act.

(iii) The selection or exclusion of comparables is
essentially a factual and data-driven exercise, and
the TPO cannot reject the taxpayer's comparables
merely to substitute them with a standard
departmental set. Such determination must
strictly conform to the requirements of Rule 10B
of the Rules.

(iv) The Tribunal's adoption of an upper turnover filter
of Rs.200 crores is rational and legally
sustainable, as turnover, brand value, economies

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of scale, bargaining power and ownership of
intangibles materially influence comparability and
profitability.

(v) An RPT filter of 15% is ordinarily preferable,
though a higher threshold of 20% or 25% may be
adopted only upon recording a specific finding
that sufficient comparable companies satisfying
the lower threshold are unavailable.


(vi) Foreign exchange gain or loss can be treated as
an operating item only when it has a direct nexus
with the international transaction. Where such
nexus is absent, it cannot form part of the
operating revenue or operating cost.

(vii) The burden of proof varies according to the nature
of the dispute. While the taxpayer bears the initial
burden of substantiating the ALP, once the TPO
rejects the taxpayer's determination and
substitutes comparables, the burden shifts to the
TPO to justify such inclusion or exclusion.

(viii) There is no legal prohibition against inclusion or
exclusion of comparables at the appellate stage,
provided the subsequently relied upon data is
reliable and the proposed comparables satisfy the
requirements of the Act and the Rules.

(ix) The tolerance of ±5% prescribed under Section
92C of the Act is merely a permissible variation

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and not a standard deduction, and transfer pricing
adjustment becomes necessary whenever the
variation exceeds the prescribed statutory limit.

(x) Working Capital Adjustment is a comparability
adjustment and not a selection filter, and its grant
depends entirely upon the facts of each case.
Findings on such adjustment, like the selection of
comparables, ordinarily remain findings of fact
and do not warrant interference unless shown to
be contrary to the Act or vitiated by perversity.”

From the material on record, it is gathered that the
respondent/assessee company is engaged in providing
low-end ITES services, specially backend accounting and
transaction processing, back office operations, and
customer support services to its associated enterprises.
Whereas, the comparable companies which is directed to
be excluded i.e., M/s. Infosys BPO Ltd., and M/s. TCS E-
Serve Ltd., are the companies engaged in providing
integrated IT and business process outsourcing solutions,
consultancy, management, strategic transformation
services and knowledge process outsourcing (KPO)

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services. They cater to diverse business segments, operate
globally, earning significant revenues from the product
development and sale of licences and subscriptions.
Therefore, taking note of the above functionality and
comparing the functionality with the respondent/assessee
company with the companies directed to be deleted from
comparables, the Tribunal has rightly come to the
conclusion that those companies are not comparable and
there is a material difference between two companies. The
above finding is a factual finding and we do not find any
perversity in the findings recorded by the Tribunal.

9. The Tribunal on meticulous examination of the
functional profile of the assessee and the proposed
comparable companies has rightly come to the conclusion
that M/s. Infosys BPO Ltd., and M/s. TCS E-serve Ltd., are
not comparables for determining the arms length price.

SAP LABS
10. The Co-ordinate Bench of this Court in
INDIA PRIVATE LIMITED
(supra) has made it clear that

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selection or exclusion of comparables is a factual and
data-driven exercise, and such findings ordinarily do not
warrant interference unless vitiated by perversity. The
appellant/Revenue has failed to demonstrate any
perversity in the findings of the Tribunal. The
appellant/Revenue has also failed to point out taking any
irrelevant material or excluding any relevant material
while the Tribunal coming to its conclusion that above
stated two companies are not comparable with the
functionality of respondent/assessee company.

11. The Tribunal has directed to treat foreign
exchange fluctuation gain/loss ted as operating in nature.
In the facts and circumstances of the present case, the
Revenue has not established how this direction is contrary
to law or perverse. The principle that foreign exchange
fluctuation gain or loss to the extent it relates to the
business for which the arms length price is determined, is
operating in nature, is well established and its application

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by the Tribunal in the facts and circumstances of the
present case would not require any interference.

12. For the reasons recorded above, the appeal
stands dismissed by answering the substantial questions
of law in favour of the respondent/assessee and against
the appellant/Revenue.


Sd/-
(S.G.PANDIT)
JUDGE


Sd/-
(DR.CHILLAKUR SUMALATHA)
JUDGE



NC/DH
CT:bms
List No.: 1 Sl No.: 17