THE COMMISSIONER OF INCOME-TAX vs M/S IBM INDIA PVT LTD
- Court
- Karnataka High Court
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HC-KAR
NC: 2026:KHC:60238-DB
ITA No. 210 of 2014
CNR: KAHC010216622014
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 29 DAY OF OCTOBER, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
INCOME TAX APPEAL NO.210 OF 2014
BETWEEN:
1. THE COMMISSIONER OF INCOME-TAX,
LTU,
JSS TOWERS, BSK III STAGE,
BANGALORE.
2. THE JOINT COMMISSIONER OF INCOME-TAX,
LTU,
JSS TOWERS, BSK III STAGE,
BANGALORE-560085.
…APPELLANTS
(BY SRI. E.I. SANMATHI, ADVOCATE A/W
MR. NIRMAL MATHEW, ADVOCATE)
AND:
M/S. IBM INDIA PVT. LTD.,
NO.12, SUBRAMANYA ARCADE,
BANNERGHATTA MAIN ROAD,
BANGALORE-560029.
…RESPONDENT
(BY SRI. PERCY PARDIWALA, SENIOR ADVOCATE A/W
SMT. TANMAYEE RAJKUMAR, ADVOCATE;
MS. MAYURI K.V., ADVOCATE)
Digitally signed by
MAHALAKSHMI B M
Location: High Court
of Karnataka
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HC-KAR
NC: 2026:KHC:60238-DB
ITA No. 210 of 2014
CNR: KAHC010216622014
THIS ITA IS FILED UNDER SECTION 260A OF INCOME TAX
ACT, 1961 AGGRIEVED BY THE ORDER DATED 20.12.2013 PASSED
IN IT (TP)A NO.1543/BANG/2012, FOR THE ASSESSMENT YEAR
2008-09 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS
OF LAW STATED ABOVE; ALLOW THE APPEAL AND SET ASIDE
THE ORDERS PASSED BY THE INCOME-TAX APPELLATE
TRIBUNAL, BANGALORE IN IT(TP)A NO.1543/BANG/2012 DATED
20.12.2013 AND CONFIRM THE ORDER OF THE APPELLATE
COMMISSIONER CONFIRMING THE ORDER PASSED BY THE JOINT
COMMISSIONER OF INCOME TAX, LTU, BANGALORE.
THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA
ORAL JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
1. The present appeal was taken up for consideration on
10.09.2026, and this Court passed the following order:
"1. The revenue has filed the present appeal under
Section 260A of the Income Tax Act, 1961 impugning an
order dated 20.12.2023 passed by the learned Income Tax
Appellate Tribunal in IT(TP)A 1543/Bang/2012 in respect of
assessment year 2008-2009. The revenue has projected
the following questions for consideration before this court
which were accepted by an order dated 13.07.2015 :
" 1. Whether the Tribunal was correct in setting
aside the disallowance made by the assessing
officer of the claim u/s.10A & 10AA of the Act, when
the assessee has not maintained separate books of
accounts, not maintained primary documents which
are necessary to determine the income of individual
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ITA No. 210 of 2014
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units and in the absence of the details, the expenses
have been apportioned on the basis of an allocation
ratio which is unverifiable?
2. Whether the Tribunal was correct in holding that
Avani Cincom Technologies, KALS Information
Systems Ltd and Celesial Biolabs Ltd cannot be
considered as comparables being functionally
different without appreciating that the comparables
satisfy all the qualitative and quantitative filers
applied by the TPO?
3. Whether the Tribunal was correct in directing the
exclusion of Infosys technologies and Wipro Ltd-IT
segment by holding that the brand value of the
company is a vital factor in deciding the profit margin
of the company without appreciating that the brand
is not a variable in data mining profit margin of a
comparable?
4. Whether the Tribunal was correct in holding that
Tata Elxsi Ltd cannot be included in the final list of
comparables as it was functionally different without
appreciating that it satisfied all the qualitative and
quantitative filers applied by the TPO especially
when the segmental results have been used?
5. Whether the Tribunal was correct in rejecting the
six comparables included by the TPO in the final list
without appreciating that the selection of
comparables in a case depends upon assesses
specific FAR analysis and without appreciating the
specific facts brought on record by the TPO?
6. Whether the Tribunal was correct in holding that
Birla Technologies should be taken as a
comparables as there was no other basis for
rejecting it as a comparable without appreciating
that the company failed the obvious RPT filters?
7. Whether the Tribunal was right in holding that
the entrance fee for acquiring corporate club
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ITA No. 210 of 2014
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membership incurred by the assessee had to be
allowed as revenue expenditure?
2. The learned counsel for the revenue fairly states that
question No.1 as projected is covered against the revenue
by the decision of this court in The Commissioner of
Income Tax and Another vs M/s IBM Global Services
1
India Pvt. Ltd. He also fairly states that question No.7 is
also covered against the revenue by the decision of the
Supreme Court in Commissioner of Income Tax vs
2
United Glass Mfg. Co. Ltd. and the decisions of this court
in The Commissioner of Income Tax, Hubli vs The
Sandur Manganese and Iron Ores Limited ,
3
Yeshwanthpur, Bellary District and Commissioner of
Income-tax, Central Circle vs Infosys Technologies
4
Limited .
3. List for further proceedings on the remaining
questions of law on 15.09.2026."
2. Thus, this Court is required to consider the remaining five
questions of law.
3. Question No.2 relates to the exclusion of the following
companies as comparables:
a. Avani Cincom Technologies;
b. KALS Information Systems Limited; and
c. Celesial Biolabs Limited.
1
ITA No.286/2010, DD 3.11.2020
2
[2012] 28 taxmann.com 429 (SC)
3
Income Tax Referred Case Nos.13 to 24/2002, DD 21.03.2005
4
[2012] 18 taxmann.com 169 (Karnataka)
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ITA No. 210 of 2014
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4. Question Nos.3 and 4 relate to exclusion of Infosys
Technologies, WIPRO Limited and Tata Elxsi Limited. Concededly,
the exclusion of the aforesaid companies is covered in favour of the
Assessee and against the Revenue by the recent decision of this
Court in The Commissioner of Income-Tax and another Vs. M/s.
5
Logica Private Ltd. .
5. Question No.5 is a general question which covers the specific
companies that have been mentioned in the other questions. Thus, it
does not require to be considered separately.
6. Question No.6, as projected, relates to the inclusion of Birla
Technologies as a comparable. According to the Revenue, the
Tribunal erred in including the said company as a comparable for the
purpose of determining the Arm's Length Price [ ALP ] of international
transactions, on the ground that the company had failed the Related
Party Transaction [ RPT ] filters.
7. However, we note that M/s. Birla Technologies had been
excluded not for the reason that it had failed the RPT filters, but on
the ground that its exports were less than 25%.
5
Income Tax Appeal No.338/2013 D.D. 28.10.2026
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ITA No. 210 of 2014
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8. The Tribunal found that excluding the said company on the
aforesaid ground was factually erroneous, as the said company's
income from software services and license fees was entirely derived
from exports. The relevant extract of the impugned order is set out
below:
" 9.25 The learned counsel for the assessee also submitted
that two comparables excluded by the TPO should be
included as comparable.
1. M/s Birla Technologies: The reason assigned by the
TPO for excluding this company as comparable was that
the exports sales were less than 25%. In this regard, the
learned counsel for the assessee drew our attention to
pages-689 to 698 and page 317 of T.P. Paper book, which
is a compilation of the annual reports of various companies
filed by the assessee. Perusal of page-698 shows that total
income from software services/licence fee of assessee was
Rs.24,12,30,696/-. It is also clear from the Director's report
that the entire income were derived from exports. It thus,
appears that the reason assigned by the TPO for rejecting
this company as comparable which was for the reasons that
the company has export sales of less than 25% of the total
sales is on an erroneous basis. We therefore, hold that this
company should be taken as a comparable as there is no
other basis for rejecting this company as comparable
assigned by the TPO."
9. The question as to whether the income derived by Birla
Technologies from exports is more than 25% is a question of fact.
There is no challenge that the said finding is perverse; therefore, no
substantial question of law in this regard falls for consideration of this
Court.
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ITA No. 210 of 2014
CNR: KAHC010216622014
10. In view of the above, no substantial questions of law arise for
consideration of this Court. The appeal is accordingly dismissed.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(K.S. HEMALEKHA)
JUDGE
MBM
List No.: 1 Sl No.: 23