THE COMMISSIONER OF INCOME TAX vs M/S LOGICA PVT LTD

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ITA No. 501 of 2014



TH
RESERVED ON 28 SEPTEMBER 2026


IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 28 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. 501 OF 2014

BETWEEN:

1.
THE COMMISSIONER OF INCOME-TAX
C.R. BUILDING, QUEENS ROAD, BANGALORE.

2.
THE ASST. COMMISSIONER OF INCOME-TAX
CIRCLE-11(5), RASHTROTHANA BHAVAN
NRUPATHUNGA ROAD, BANGALORE.
…APPELLANTS







(BY SRI E.I. SANMATHI, ADVOCATE)

AND:

1. M/S. LOGICA PVT. LTD.
DIVYASHREE TECHNOPOLIS
124-125 YEMLUR P.O., OFF AIRPORT ROAD
BANGALORE - 560 037
NOW MERGED WITH CGI INFORMATION SYSTEMS AND
MANAGEMENT CONSULTANTS PVT. LTD. #95/1 & 95/2,
ELECTRONIC CITY, TOWER-2, ELECTRONIC CITY
PHASE-1, WEST BANGALORE-560100, AS PER MEMO
DATED 26.09.2026 FILED BY ADVOCATE FOR
RESPONDENT, VIDE ORDER DATED 28.09.2026
…RESPONDENT


Digitally signed
by VEERENDRA
KUMAR K M
Location: High
Court of
Karnataka

(BY MS. TANMAYEE RAJKUMAR, ADVOCATE)

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ITA No. 501 of 2014



THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A
OF INCOME TAX ACT 1961, PRAYING TO ALLOW THE APPEAL AND
SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX
APPELLATE TRIBUNAL, BANGALORE IN ITA NO.1192/Bang/2012
DATED 18.07.2014 AND CONFIRM THE ORDER OF THE APPELLATE
COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASST.
COMMISSIONER OF INCOME TAX, CIRCLE-11(5), BANGALORE &
ETC.
THIS INCOME TAX APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:

CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MRS. JUSTICE K.S. HEMALEKHA

C.A.V. JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)

1. The Revenue has filed the present appeal under Section
260A of the Income Tax Act, 1961 [ the Act ], impugning an order
dated 18.07.2014 [ impugned order ] passed by the learned Income-
Tax Appellate Tribunal, Bengaluru [ ITAT ] in ITA
No.1192/Bang/2011, in respect of Assessment Year [ AY ] 2008-09.

2. The said appeal was preferred by the respondent [ Assessee ]
against the Assessment Order dated 13.7.2012 passed by the

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ITA No. 501 of 2014



Assessing Officer [ AO ] under Section 143(3) read with Section
144C of the Act.

3. The Assessee had filed its income tax returns for the AY
2008-09 on 13.09.2008 declaring a total income of ₹39,42,40,650/-.
The said return was initially processed under Section 143(1) of the
Act, but was later picked up for scrutiny. The AO issued a notice
dated 17.08.2009, under Section 143(2) of the Act, which was duly
served. The Assessee had declared international transactions with
Associated Enterprises (AE). Therefore, the AO made a reference
under Section 92CA of the Act to the Transfer Pricing Officer [ TPO ].
The Assessee had furnished the Transfer Pricing Analysis [ TPA ] to
establish that the international transactions were on an Arm’s
Length basis. It had selected the Transactional Net Margin Method
[ TNMM ] as the most appropriate method.

4. The learned TPO held that the Assessee’s TPA was defective
on several grounds and rejected it. First, it found that the Assessee
had eliminated a large number of companies by applying qualitative
filters, which, according to the TPO, raised doubts about the
objectivity of the analysis.

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ITA No. 501 of 2014



5. Additionally, the TPO noted that the Assessee had not used
the current year's data in all cases. It also observed that the
Assessee had not applied the Related Party Transactions [ RPT ]
filter properly.

6. The TPO also noted that the Assessee had selected
companies which were predominantly generating income from
rendering services on site. However, the Assessee was rendering
its services through centres located in India. The Assessee
objected to the rejection of its TPA.

7. The learned TPO adopted a separate set of filters to select
comparable entities from the available database. Additionally, the
TPO also issued notices under Section 133(6) of the Act to certain
companies and finally selected a list of twenty companies as
comparable. A tabular statement showing the final set of
comparables considered by the TPO is set out below:
Sl.No. Name of the Company OP/TC %
1. Avani Cincom Technologies 25.62
2. Bodhtree Consulting Ltd. 18.72
3. Celestial Biolabs 87.94
4. e-zest Solutions Ltd 29.81
5. Flextronics (Aricent) 7.86
6. iGate Global Solution ltd 13.99
7. Infosys 40.37

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ITA No. 501 of 2014



8. KALS Information Systems ltd(seg) 41.94
9. LGS Global Ltd 27.52
10. Mindtree Ltd (Seg) 16.41
11. Persistent Systemps Ltd 20.31
12. Quintegra Solution Ltd 21.74
13. R systems International (seg) 15.30
14. R S Software (India) Ltd 7.41
Sasken Communication
15. 7.58
Technologies ltd (seg)
16. Tata Elxsi (Seg) 18.97
17. Thirdware Solution Ltd 19.35
18. Wipro Ltd (seg) 28.45
19. Softsol India Ltd 17.89
20. Lucid Software Ltd 16.50
AVERAGE 23.65

8. After making the necessary adjustments, the TPO determined
the arithmetic mean PLI at 22.61% of operating costs. Accordingly,
the learned TPO determined the Arm’s Length Price at
₹300,92,32,011/- and directed an adjustment of ₹16,29,24,390/-
under Section 92C of the Act in respect of international transactions
providing technical services.

9. The TPO conducted a similar exercise for IT-enabled services
[ITES] and selected the following companies as comparables. The
tabular statement showing the final set of comparables considered
by the TPO is set out below:

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ITA No. 501 of 2014





Sl.No. Name of the Company OP/TC %
1. Accentia Technologies Ltd (Seg) 41.77
2. Acropetal Technologies Ltd (seg) 35.30
Aditya Birla Minacs Worldwide
Limited (Earlier known as
Transworks Information Services
Ltd.)
3.
-4.00
Asit C Mehta Financial Services Lid
4. 9.42
(Seg.)
5. Caliber Point Business Solutions Ltd 10.97
Coral Hubs Ltd (Earlier known as
6. 50.68
Vishal Information Technologies Ltd
7. Cosmic Global Ltd 23.30
8. Crossdomain Solutions Ltd 27.03
Datamatics Financial Services Ltd
9. 29.11
(Seg)
e4e Healthcare Solutions Ltd
(Formerly known as Nittany
Outsourcing Services Pvt Itd
10.
18.54
11. Eclerx Services Ltd 58.80
Genesys International Corporation
12. 47.40
Ltd
13. Infosys BPO Ltd 19.66
14. IServices India Pvt. Ltd 10.77
15. Jindal Intellicom Pvt. Ltd -10.29
16. Mold-Tek Technologies Ltd 96.66
17. R Systems International Ltd (Seg) 4.30
Spanco Ltd (Seg.) (Earlier known as
18. 8.81
Spanco Telesystems & Solutions Ltd
19. Sipro Ltd (Seg) 30.05
20. Allsec Technologies Limited -13.29
AVERAGE 24.75

10. After making the adjustments, the TPO determined the
arithmetic mean of the PLI at 23.08% of the operating costs and

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ITA No. 501 of 2014



determined the shortfall of ₹1,95,05,997/- from the Arm’s Length
Price. Accordingly, the learned TPO directed an upward adjustment
to the said extent – a total adjustment of ₹18,24,30,387/-
(₹16,29,24,390/- + ₹1,95,05,997/-).

11. Based on the directions issued by the learned TPO, the AO
passed a Draft Assessment Order. The Assessee filed its
objections before the Dispute Resolution Panel [ DRP ], which were
rejected by an order dated 13.07.2012.

12. Based on the DRP’s directions, the AO passed the final
assessment order on 13.07.2012. The Assessee, being aggrieved
by the transfer pricing adjustment, appealed the final assessment
order before the learned ITAT.

13. The Assessee’s grievance in respect of the transfer pricing
adjustment on account of software development charges was
essentially to the inclusion of seven companies selected by the
learned TPO as comparables. The Assessee contended that the
said seven companies were functionally dissimilar.

14. Regarding the determination of ALP of data processing
charges (IT-enabled services), the Assessee objected to the

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ITA No. 501 of 2014



inclusion of three companies. According to the Assessee, two of the
companies (Coral Hubs Ltd and Eclerx Services Ltd) were
functionally dissimilar, and one company (Mold-Tek Technologies
Ltd) had earned abnormal profits.

15. The learned ITAT accepted the challenge laid by the
Assessee to the inclusion of comparables and allowed the
Assessee’s appeal.

16. Aggrieved by the ITAT's order, the Revenue filed the present
appeal, raising several questions of law.

17. The present appeal was admitted by an order dated
07.04.2015 to consider the following questions of law which were
reframed by the learned counsel appearing for the Revenue.
"1. Whether, the tribunal was correct in holding that
telecommunication charges and expenditure
incurred in foreign currency excluded from export
turnover has to be excluded from total turnover
also, without appreciating that there is no provision
in section 10A that such expenses should be
reduced from the total turnover, as clause (iv) of the
Explanation to section 10A provides that such
expenses are to be reduced only from the export
turnover?

2. Whether, the Tribunal was correct in holding that
the functions of the assessee is not comparable to
the functions of Avani Cimcon Technologies Ltd.,
Celestial Labs Ltd., Infosys Technologies Ltd.,
KALS Information Systems Ltd., Tata Elxsi Ltd.,

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ITA No. 501 of 2014



and Wipro Ltd., under software segment, without
making a FAR analysis of the assessee and also
without appreciating that the comparables satisfy all
the qualitative and quantitative filters applied by the
TPO and recorded perverse finding?

3. Whether, the Hon'ble Tribunal, on the facts and
in the circumstances of the case, was right in
excluding Infosys Technologies Limited and Wipro
Limited from the list of comparables due to
premium branding, without taking into consideration
that brand is only one of the variables to determine
the profit margin when brand is only one of the
factors which affects profitability and not the sole
factor which affects profitability?

4. Whether, the Tribunal, on the facts and in the
circumstances of the case, was right in rejecting
M/s. Coral Hubs Ltd., M/s.Mold-Tek Technologies
Ltd., and M/s.Eclerx Services Ltd., from the final list
of comparables in ITES Segment, by relying on
other decisions without appreciating the fact that
selection of comparables in TP analysis depends
on assessee specific FAR analysis?

5. Whether, on the facts and circumstances of the
case, the Tribunal was correct in not appreciating
the facts that if any filter or criteria applied by the
assessee for search of comparables is accepted or
any filter or criteria applied by the TPO is relaxed,
the entire accept /reject matrix change resulting in
comparable set including those companies which
are neither taken by the assessee nor by the ТРО
in his final comparable set and which may not be
finding place in the TP order under section 92CA of
the Act and recorded perverse finding?"

18. This Court considered the aforesaid questions and, by
judgment dated 13.07.2018, dismissed the appeal. This Court, inter
alia , relied on the earlier decision dated 25.06.2018 in ITA

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ITA No. 501 of 2014



No.536/2015 c/w ITA No.537/2015, captioned Prl. Commissioner
of Income Tax and another v. M/s. Softbrands India Pvt. Ltd .

19. The Revenue preferred a Special Leave Petition before the
Supreme Court against the order dated 13.07.2018. The said
petition was tagged with a batch of matters including the appeal
arising out of this Court’s decision in Prl. Commissioner of Income
Tax and another v. M/s. Softbrands India Pvt. Ltd . ( supra ). The
Supreme Court, inter alia , held that the question whether the ALP
had been determined by following the provisions of the Act and the
Rules made thereunder may give rise to questions of law; therefore,
all the appeals relating to transfer pricing adjustments could not be
rejected on the ground that they did not entail any substantial
question of law.

20. The Supreme Court disposed of the batch of matters by its
decision in SAP Labs India (P) Ltd. v. Income Tax Officer (and
1
other appeals) . The present appeal was remanded to consider
the questions of transfer pricing bearing in mind the observations
made by the Supreme Court in SAP Labs India (P) Ltd. v. Income
Tax Officer ( supra ).

1
(2023) 454 ITR 121 (SC); (2023) 149 taxmann.com 327 (SC)

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ITA No. 501 of 2014



21. The learned counsel appearing for the Revenue rightly
pointed out that question No. 1 stands concluded against the
Revenue by the Judgment dated 13.07.2018, because the Supreme
Court's remand is confined to the other questions relating to the
transfer pricing adjustment.

Re: Questions No.2 and 3:
22. The second question relates to the learned ITAT’s findings
that the following companies were required to be excluded as
comparables for determining the ALP on the ground that their
functional profile was not similar to that of the Assessee:

i. Avani Cincom Tecnologies Ltd.
ii. Celestial Labs Ltd.
iii. Infosys Technologies Ltd.
iv. KALS Information Systems Ltd.,
v. Tata Elxsi Ltd.
vi. Wipro Ltd.
23. This Court has considered whether the aforesaid
comparables were rightly excluded in its decision in ITA

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ITA No. 501 of 2014



No.338/2013 in respect of AY 2007-08. This court found no fault in
the learned ITAT’s decision to exclude those entities as comparable
to the Assessee. Questions No.2 and 3 are thus squarely covered
by the said decision in favour of the assessee.

Re: Question No.4
24. Question No.4 relates to exclusion of three companies. The
learned ITAT found merit in the Assessee’s contention that M/s.
Coral Hubs Limited (which is earlier known as Vishal Information
Technologies Ltd.) was not comparable to the Assessee on the
ground of functional dissimilarity. The learned ITAT found that Coral
Hubs Limited had a different business model because it
subcontracted most of the ITeS work to third-party vendors.
Additionally, the ITAT also referred to its earlier decision in the case
2
of Capital IQ Information Systems India Private Limited . In that
decision, the learned ITAT noted that Coral Hub Ltd. had
commenced a new line of business in print-on-demand. In Maersk
3
Global Centres (India) Pvt. Ltd. , the learned ITAT found Coral
Hub Limited to be functionally dissimilar to the assessee (in that
case) on the ground that it had outsourced a considerable portion of

2
ITA No.1961/Hyd/2011
3
(2014) 31 ITR (Trib) 1 (Mum)

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ITA No. 501 of 2014



its business, while the assessee carried on the entire operations by
itself.

25. We may note that there is no challenge to these findings,
which are essentially findings of fact. The learned counsel for the
Revenue does not contest that Coral Hub Limited's business model
was based on outsourcing and that it did not carry out all activities
in-house.

26. In Rampgreen Solutions (P) Ltd. v. Commissioner of
4
Income Tax the Delhi High Court had found merit in the exclusion
of Coral Hubs Limited (then known as Vishal Information
Technologies Ltd.) as comparable to the assessee in that case on
the ground that it was rendering KPO services, which were higher
end services as compared to the routine ITeS (BPO services). The
Court distinguished KPO from BPO and found that they were not
comparable for the purposes of determining the ALP on the basis of
their PLI.

27. A similar view is also accepted by the Delhi High Court in
Principal Commissioner of Income Tax v. Omniglobe

4
[2015] 60 taxmann.com 355 (Delhi)

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ITA No. 501 of 2014



5
Information Technologies (India) (P) Ltd. and CIT v. PTC
6
Software (I)(P) Ltd . For similar reasons, the learned ITAT also
excluded Eclerx Services Ltd. from the list of comparables. The
question of whether these companies ought to be excluded is based
on factual findings regarding their functional profile.

28. The learned ITAT excluded Mold-Tek Technologies Ltd
[ Mold-Tek ] because it had extraordinary profits in the relevant
assessment year. The learned ITAT noted that Mold-Tek
Technologies Ltd. reported a margin of 96.66% and found it
abnormally high and attributable to extraordinary circumstances.
The learned ITAT also referred to the decision of the Special Bench
in Maersk Global Centres (India) Private Limited ( supra ). In that
decision, it was found that another company had merged with Mold-
Tek. with effect from 01.10.2006, and therefore the consolidated
results resulted in super-nominal profits.

29. Revenue cannot dispute that Mold-Tek reported extraordinary
super profits. Thus, including this company as a comparable would
skew the mean PLI and subvert the process of determining the ALP.


5
[2023] 156 taxmann.com 340 (Delhi)
6
[2016] 75 taxmann.com 31 (Bombay)

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ITA No. 501 of 2014



30. It is relevant to bear in mind that the object of the pricing
analysis is to ascertain the Arm's Length Price. This ensures that
taxable profits are not shifted through international transactions with
Associated Enterprises. Since the objective of the TP analysis is to
determine whether the transactions are on an arm’s length basis, it
would be necessary to exclude comparables which have reported
abnormal results on account of extraordinary circumstances.

31. The exclusion of the companies as referred to above cannot
be stated to be contrary to the provisions of the Act or Rules. Thus,
no substantial question of law arises from the learned ITAT's
decision to exclude the aforementioned companies as comparables
for determining the ALP.

Re: Question No.5
32. This question is framed on the assumption that if any
company found as a comparable by adopting any filter or criteria, is
excluded, the entire matrix would change. Thus, the exercise of
finding comparable entities would be required to be conducted
afresh.

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ITA No. 501 of 2014



33. The learned counsel for the Revenue fairly stated that this
question did not arise in the given facts. The learned ITAT had not
directed the use of any filter. The learned ITAT merely accepted
that certain companies, selected using filters, were required to be
excluded for the reasons set out in the order. In view of the above,
no substantial question of law arises for consideration of this Court.

34. The appeal is, accordingly, dismissed.

Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE


Sd/-
(K.S. HEMALEKHA)
JUDGE



KMV