IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.539/MUM/2025 Assessment Year: 2011-12 &

ITA No. 540/MUM/2025 Assessment Year 2012-13 ACIT, Circle 3(3)(1) Xoriant Solutions Private Room No. 522, 5^th Floor, Limited Aayakar Bhavan, M.K. Road, 7th Floor, 7A & 7B, C wing, Time Mumbai 400020. Vs. Square Building, Mittal Estate, Marol Naka, Andheri Kurla Road, Andheri East, Mumbai 500059 PAN: AAACX0146P (Appellant) ( R e s p ondent)

Present for:

Assessee : Shri Pankaj Toprani, Advocate Revenue : Shri Asif Karmali, Sr. DR Date of Hearing : 01.05.2025 Date of Pronouncement : 26.06.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

These two appeals filed by the Department are against the orders of Commissioner of Income Tax (Appeal)-58, Mumbai, vide order Nos. ITBA/APL/S/250/2024-25/1070691086(1) and ITBA/APL/S/250/2024-25/1070691614(1), both dated 27.11.2024 passed against the assessment orders by Income Tax Officer - 11(3)(4) Mumbai, dated 11.03.2015 for Assessment Year 2011-12 and by Deputy Commissioner of Income Tax - 11(3)(2), Mumbai, dated 26.05.2016 for Assessment Year 2012-13 respectively, u/s. 143(3)

r.w.s. 144C(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

2. Grounds of appeal raised by the revenue in both the appeals are in respect of exclusion by ld. CIT(A) of comparable from the list of comparable adopted by ld. Transfer Pricing Officer (TPO) on account of turnover filter and difference in functions, assets and risks. The comparable which are excluded and contested by the revenue are common in the two appeals and therefore both are taken up for adjudication by passing this consolidated order. We take up Assessment Year 2011-12 as the lead case. Our observations and findings in appeal for this year shall apply mutatis mutandis in appeal for Assessment Year 2012-13. Grounds raised by the revenue in appeal for Assessment Year 2011-12 are reproduced as under:

i. “Whether on the facts and circumstances of the case and in law, the Ld.

CIT(A) is correct in directing to exclude Infosys Ltd., Larsen & Toubro Infotech Ltd., Mindtree Ltd., Persistent Systems & Solutions Ltd., Persistent Systems Ltd., Sasken Communication Technologies Ltd., Tata Elxsi Ltd., Wipro Technologies Ltd. and Zylog Systems Ltd. from the list of comparables without analyzing the impact of turnover on the profitability and ignoring the fact that the assessee is a captive service provider to its AE, therefore, the quantum of turnover will not affect the profit margin being earned by the assessee from its AE?

ii. Whether on the facts and circumstances of the case and in law, the Ld.

CIT(A) failed to appreciate that higher turnover of comparables in service industry may not have significant impact on the profitability of captive entities?

iii. Whether on the facts and circumstances of the case and in law, the Ld.

CIT(A) is correct in directing to exclude the above-mentioned companies from the list of comparables without appreciating the fact that the assessee has not demonstrated through documentary evidences the impact of higher turnover of the comparables to their profitability?

iv. Whether on the facts and circumstances of the case and in law, the Ld.

CIT(A) is correct in removing Tata Elxsi Ltd. from the final list of comparables even though the assessee did not contest the inclusion of the company Tata Elxsi Ltd. from the final list of comparables on the ground of high turnover?

v. Whether on the facts and circumstances of the case and in law, the Ld.

CIT(A) is correct in directing to exclude the Acropetal Technologies Ltd. from the list of comparables without appreciating the fact that the majority of income of the assessee company is being derived from development of software products?

vi. Whether on the facts and circumstances of the case and in law, the Ld.

CIT(A) is correct in directing to exclude the Acropetal Technologies Ltd. from the list