Karnataka HC Upholds Sasken’s Exclusion From Infineon’s Transfer-Pricing Comparables, Citing Different Functions and Infineon’s Contract-Service Role

The Revenue appealed under Section 260-A of the Income-tax Act, 1961, against the Tribunal’s order dated 19 October 2020, which excluded Sasken Communications Technologies Ltd. as a comparable for Assessment Year 2011–12.

The Revenue argued that the Tribunal had excluded Sasken without properly considering its business profile and activities.

The assessee maintained that it was a contract service provider, whereas Sasken had diverse functions, significant intangibles and inventories.

The Tribunal had relied on Electronics for Imaging India Pvt. Ltd. v. DCIT (2017) 85 taxmann.com 124.

Section 260-A of the Income-tax Act provides for appeals to the High Court on substantial questions of law. Chapter X of the Act and Rule 10B of the Income-tax Rules govern the determination of the arm’s-length price and the comparability analysis.

As the Court stated, selection or exclusion of comparables is a factual, data-driven exercise that must satisfy Rule 10B; the Transfer Pricing Officer must justify substituted comparables, and the Tribunal’s factual findings ordinarily warrant no interference absent perversity or legal error.

The Court also relied on its decision in SAP Labs India Private Limited v. Income Tax Officer (ITA No. 10/2011 and connected appeals, judgment dated 28 August 2026) and referred to Electronics for Imaging India Pvt. Ltd. v. DCIT.

The Court applied the Rule 10B comparability principle to the companies’ differences in functions and business characteristics.

It accepted that the assessee was a contract service provider, while Sasken had diverse functions and significant tangibles and inventories.

In those circumstances, the Tribunal’s reliance on Electronics for Imaging and its decision to exclude Sasken were supported by the record.

The High Court found no indication that the Tribunal had relied on irrelevant material, omitted relevant material, or reached a perverse conclusion.

It declined to interfere with the Tribunal’s exclusion of Sasken as a comparable.