THE PR. COMMISSIONER OF INCOME-TAX CIT(A) vs M/S SALESFORCE.COM INDIA PVT LTD

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 15 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. 317 OF 2021
BETWEEN:
1.
THE PR. COMMISSIONER OF
INCOME-TAX CIT(A)
5TH FLOOR BMTC BUILDING,
80 FEET ROAD, KORAMANGALA,
BENGALURU - 560095.
2. THE DEPUTY COMMISSIONER
OF INCOME TAX
CIRCLE - 6 (1) (1)
2ND FLOOR BMTC BUILDING,
80 FEET ROAD KORAMANGALA,
BENGALURU - 560095
…APPELLANTS
(BY SRI. SANMATHI E.I., ADVOCATE FOR
SRI. M. DILIP, ADVOCATE)
Digitally signed
by AASEEFA
PARVEEN
Location: HIGH
COURT OF
KARNATAKA
AND:
M/S SALESFORCE.COM INDIA PVT. LTD.,
NO 10, FIRST FLOOR
12TH MAIN PALACE ROAD
VASANTHNAGAR
BENGALURU - 560052
PAN: AAJCS3582R
…RESPONDENT
(BY SRI. T. SURYANARAYANA, SR. COUNSEL FOR
MISS. TANMAYEE RAJKUMAR, ADVOCATE)

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
THIS ITA / INCOME TAX APPEAL UNDER SEC.260-A OF
INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED
22/03/2021 PASSED IN IT(TP)A NO. 3286/BANG/2018, FOR
THE ASSESSMENT YEAR 2014-2015 PRAYING TO I.
FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED
ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS
PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,
BENGALURU IN IT(TP)A NO. 3286/BANG/2018 DATED
22/03/2021 FOR ASSESSMENT YEAR 2014-2015 ANNEXURE-D
AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER
CONFIRMING THE ORDER PASSED BY THE DEPUTY
COMMISSIONER OF INCOME TAX, CIRCLE-6(1)(1),
BENGALURU.
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 DR. JUSTICE CHILLAKUR SUMALATHA)
Aggrieved by the order passed by the Income Tax
Appellate Tribunal, Bangalore in IT(TP)A
No.3286/BANG/2018 dated 22.03.2021 the Income Tax
Department filed this appeal.
2. Heard E.I.Sri.Sanmathi, who represented the
appellants, as well as Sri.T.Suryanarayana, learned Senior
Counsel for the respondent.

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
3. A draft assessment order under Section 143(3)
r/w Section 144C(1) of the Income Tax Act, was passed by
Assessing Authority on 29.12.2017 by making transfer
pricing adjustment on the basis of Transfer Pricing order
dated 31.10.2017 and other additions in respect of the
assessee. As per the version of assessee, it is engaged in
business of providing marketing, consultation, research
and sales services to the customers. Being aggrieved by
the draft assessment order dated 29.12.2017, assessee
filed objections before DRP. Subsequently, Assessing
Authority passed final assessment order on 23.10.2018
basing on the directions issued by DRP. On the ground
that its objections were not considered, assessee filed an
appeal before the Appellate Authority against the final
assessment order. Tribunal directed exclusion of certain
comparables on the ground of functional dissimilarity and
turnover filter.

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
4. Arguing the matter Sri.E.I.Sanmathi learned
counsel for the appellants contended that the Transfer
Pricing Officer has chosen the comparables after being
satisfied with all required tests and on the basis of data
available in public domain. Therefore, the Tribunal ought
not to have directed the Transfer Pricing Officer/Assessing
Authority to exclude the comparables namely Infosys Ltd.,
Persistent Systems Ltd, Thirdware Solutions Ltd., Mindtree
Ltd., Larsen and Tourbo Infotech Ltd., Cignity
Technologies Ltd. in SWD Segment and I Media Corp Ltd.,
Irunway India Private Limited, Killick Agencies and
Marketing Ltd. in MSS Segment.
5. Learned counsel also stated that as per Section
92C(3)(c) read with Section 92CA of the Income Tax Act if
the Transfer Pricing Officer, on the basis of material
available with him comes to a conclusion that the
information or data used in computation of arm's length
price is not reliable or correct then the TPO may proceed

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
to determine the arm's length price in relation to the
international transactions in accordance with Section
92C(1) and 92C(2). Thus, TPO proceeded to determine
arm's length price by conducting an independent search
for comparables and considering the functions performed,
the assets employed and the risks assumed by the
taxpayer. But without considering the genuine exercise
taken up, the impugned order is passed in respect of the
comparables and certain comparables were sought for
exclusion which indeed are not liable to be excluded. By
stating thus learned counsel sought to allow the appeal
and thereby to set aside the impugned order.
6. Per contra, learned Senior Counsel
Sri.T.Suryanarayana submitted that Tribunal directed to
exclude five companies i.e., Infosys Ltd, Persistent
Systems Ltd, Thirdware Solutions Ltd., Larsen and Tourbo
Ltd. and Cignity Technologies Ltd. in Software
Development Services Segment by placing reliance upon

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
the decision of the Co-ordinate Bench of the Tribunal in
the case of LG Soft India(P.) Ltd vs. Dy. CIT in IT(TP)A
No.3122/Bang/2018. Learned counsel stated that Revenue
preferred appeal against the order of the Tribunal in the
aforementioned case but this Court dismissed the said
appeal. Due to functional dissimilarity, the Tribunal
directed exclusion of Mindtree Ltd. and the decision of the
Tribunal is based on the decision of this Court in Sap Labs
India Private Limited case where it has been held that size
of the company is one of the relevant factors for
determining the comparability of companies.
7. Making his submission in respect of the
exclusion of companies in MSS Segment i.e., I Media Corp
Ltd, IRunway India Pvt. Ltd., Killick Agencies and
Marketing Ltd. learned counsel contended that the Tribunal
gave a fact finding after examining the annual reports of
those companies. Learned counsel by submitting thus
sought to disallow the appeal.

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
8. The appeal was admitted on 17.2.2022 to hear
and decide on the following substantial questions of law:
"i) Whether on the facts and in the
circumstances of the case, the Tribunal is right in
law in directing the Transfer Pricing Officer to
exclude comparables, namely, Infosys Ltd,
Persistent Systems Ltd, Thirdware Solutions Ltd,
Mindtree Ltd, Larsen & Tourbo Infotech Ltd, Cignity
Technologies Ltd in SWD Segment and I Media Corp
Ltd, Runway India Pvt. Ltd, Killick Agencies &
Marketing Ltd in MSS Segment ignoring the
parameters of analysis prescribed under Rule 108
which are exhaustive and Transfer Pricing Officer
has chosen the said comparables after satisfying all
required tests and on basis of Data available in
public domain?
ii) Whether on the facts and in the circumstances
of the case, the Tribunal is right in law in holding
that Infosys Ltd., cannot be taken as comparable as
the company owns significant intangible and has
huge revenue from software products whereas as
seen from Annual Report of the Company for the
A.Y.2014-15, the company is having major, i.e.,
95.92% of the total revenue from software
development services and same segmental value
has been adopted by TPO for computation of Arms
Length Price and as regards intangible, the total
intangibles are Rs.13 Crores which is about 0.23%
of the total assets (Rs.5732 crores) of the Company
resulting in no significant impact on the margin?
iii) 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
ignored the findings of TPO relating to finalizing list
of comparables and has blindly followed its earlier
decision?

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
9. There is no denial of the fact that as per
transfer pricing study, the assessee was required to
perform following functions as per service agreement in
the SWD segment:
"Conceiving, proposing and developing new products
under the directions and instructions of Salesforce
Inc
Analyzing competitive products, evaluating costs and
benefits of competitive or alternative designs and
reporting its findings to Salesforce Inc. and
Providing such other services with respect to the
products as Salesforce Inc. may request from time
to time."
10. So far as MSS services are concerned, the
assessee as per service agreement would be performing
following services as per transfer pricing study:


SIPL shall assist SSPL in marketing Salesforce
Inc's products and services within India.


SIPL shall have full responsibility for the
products and services and shall alone be
responsible for any and all questions relating to
the said products and services.


SIPL is permitted to use trademarks, trade
names, service marks and similar Intellectual
Properties ('IP's") belonging to SSPL or
Salesforce Inc. solely providing services to SSPL.

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021


SIPL identifies customers, generates customer
leads, educates prospective customers about the
solutions/services, compiles market information
hr SSPL so that it ran prepare business plans."
11. There is no denial of the fact that under both
these segments assessee do not assume any market risk.
Assessee is thus a minimal risk bearing company. Thus,
taking into account the functions performed by the
assessee in SWD segment and MSS services and also the
assets owned by the assessee including the risk assumed,
we have gone through the entire material that is brought
on record. The submissions advanced by both the learned
counsel are also considered in the light of the record
placed before us. In the impugned order findings are given
as to why the comparables under respective segments i.e.,
SWD segment and MSS segment were ordered to be
excluded by the Tribunal. Having found the findings given
justifiable and the reasoning being sound, we are unable
to take contrary view to that taken by the Tribunal.
Appellants failed to demonstrate the presence of
perversity in the order of the Tribunal. Therefore, we

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HC-KAR
NC: 2026:KHC:58925-DB
ITA No. 317 of 2021
CNR: KAHC010478752021
answer substantial questions of law formulated for
consideration against the appellants-Revenue and in
favour of respondent-assessee. Thus, the appeal is
dismissed.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(DR.CHILLAKUR SUMALATHA)
JUDGE
DS
CT:TSM
List No.: 1 Sl No.: 12