PR COMMISSIONER OF INCOME TAX-3 vs M/S INFINEON TECHNOLOGIES INDIA PVT LTD

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
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.278 OF 2021
BETWEEN:
1. PR. COMMISSIONER OF INCOME TAX-3,
BMTC COMPLEX,
KORAMANGALA, BANGALORE.
2. THE ASSISTANT COMMISSIONER
OF INCOME TAX,CIRCLE-3(1)(1)
BMTC COMPLEX, KORAMANGALA,
BENGALURU.
APPELLANTS
Digitally signed
by AASEEFA
PARVEEN
Location: HIGH
COURT OF
KARNATAKA
(BY SRI. E I. SANMATHI, ADVOCATE)
AND:
M/S. INFINEON TECHNOLOGIES
INDIA PVT LTD.,
9TH FLOOR, PRESTIGE THIRULAKSHMI,
NO.11, M.G. ROAD,
BANGALORE -560001.
PAN: AABCS6967N
…RESPONDENT
(BY MISS. TANMAYEE RAJKUMAR, ADVOCATE)

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
THIS ITA/INCOME TAX APPEAL UNDER SEC.260-A OF
INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED
19.10.2020 PASSED IN M.P.No. 96/BANG/2020 PREFERRED
AGAINST ORDER PASSED IN IT(TP)A No.656 AND
633/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012
PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW
AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE
FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND
SET ASIDE THE APPELLATE ORDER DATED 19.10.2020 PASSED
BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH,
BENGALURU IN APPEAL PROCEEDINGS IN M.P.No.
96/BANG/2020 PREFERRED AGAINST ORDER PASSED IN
IT(TP)A No.656 AND 633/BANG/2016 (ANNEXURE-A) FOR A.Y.
2011-2012.
THIS APPEAL, COMING ON FOR HEARING, 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)
The present appeal filed under Section 260-A of the
Income Tax Act, 1961 is directed against the order dated
19.10.2020 in M.P.No.96/Bang/2020 in IT(TP)A No.656 &
633/Bang/2016 for the Assessment Year 2011-2012
passed by the Income Tax Appellate Tribunal, 'A' Bench,
Bengaluru.

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
2. Heard the learned counsel Sri.E.I.Sanmathi for
the appellants/revenue and learned counsel Ms.Tanmayee
Rajkumar for respondent/assessee.
3. The above appeal was admitted for hearing on
17.02.2022 on the following substantial questions of law:
i) "Whether the Tribunal was right in law
to ignore the parameters of analysis
prescribed under Rule 10B, which are
exhaustive and if so, whether it is legally
permissible to bypass the same partially or
by implication"?
ii) Whether on the facts and
circumstances of the case and in law, the
Tribunal is right in law in excluding
M/s.Sasken Communications Technologies
Ltd. on the ground of financial difference
even when the TPO has rightly chosen the
said comparables by applying all the
required tests as prescribed under Rule
10B"?
iii) Whether on the facts and in the
circumstances of the case, the Tribunal's
order can be said as perverse since Tribunal

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
has excluded comparable's without going
into reasons assigned by Transfer Pricing
Officer"?
4. Learned counsel Sri.Sanmathi for
appellants/revenue would submit that, the Tribunal
committed grave error in excluding M/s.Sasken
Communications Technologies Limited from comparables.
It is submitted that both the assessee as well as
M/s.Sasken Communications Technologies Limited carry
on similar activities and functions. However, without going
into the business profile or activities of the assessee as
well as the comparable Company, directed exclusion of
comparable M/s.Sasken Communications Technologies
Limited. Thus, he would submit that the order under
challenge suffers from perversity.
5. On the other hand, learned counsel for
respondent-assessee would submit that M/s.Sasken
Communications Technologies Limited is rightly excluded
from comparables since the respondent/assessee

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
Company is in the field of contract service provider.
Whereas, the comparable Company has significant
intangibles and inventories and it has diverse functions.
Therefore, it is submitted that the Tribunal rightly directed
exclusion of comparable M/s.Sasken Communications
Technologies Limited. Further, learned counsel would
submit that while coming to the above conclusion, the
Tribunal rightly placed reliance on the decision in
Electronics for Imaging India Pvt. Ltd. Vs. DCIT reported in
(2017) 85 taxmann.com 124 . Thus, she would pray for
dismissal of the appeal.
6. At the outset it is to be noted that this Court
vide judgment dated 28.08.2026 in ITA No.10/2011 and
connected appeals in Sap Labs India Private Limited
vs. The Income Tax Officer , on consideration of
decisions of Hon'ble Apex Court on transfer pricing has
arrived at the following conclusion which reads as follows:
(i) The Court concludes that Chapter X of the Income-
tax Act, 1961 constitutes a self-contained code

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
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 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.

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
(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
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.
7. It is held that 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 test. Such determination must strictly
confirm to the requirements of Rule 10B of the Rules. In
the instant case, as stated above, the assessee Company
is a contract service provider, whereas the comparable
company M/s.Sasken Communications Technologies
Limited is a company having diverse functions and it has

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HC-KAR
NC: 2026:KHC:58553-DB
ITA No. 278 of 2021
CNR: KAHC010247142021
significant tangibles and inventories as submitted by
learned counsel for respondent. The Tribunal rightly placed
reliance on Electronics for Imaging India Private Limited
(supra) and directed to exclude comparable M/s.Sasken
Communications Technologies Limited. From the material
on record we do not find any perversity in the order of the
Tribunal.
8. The Tribunal has not considered any irrelevant
material or excluded any relevant material while arriving
at its conclusion. Since the finding of the Tribunal is based
on factual and data-driven, we declined to interfere. The
substantial questions of law are answered against the
revenue and in favour of the respondent/assessee.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(DR.CHILLAKUR SUMALATHA)
JUDGE
AP
CT:TSM
List No.: 1 Sl. No.: 11