ITAT Bangalore Judgment: Altisource Transfer Pricing Victory

IT(TP)A No. 2406/Bang/2024  |  AY 2013-14  |  ITAT Bangalore ‘C’ Bench  |  16th March 2026

CASE AT A GLANCE

The Company and the Transaction

Altisource Business Solutions Pvt. Ltd. sits at Vaishnavi Tech Park, Bellandur, Bengaluru. Its work is straightforward on paper - contract software development, support services and ITeS - delivered entirely to its overseas Associated Enterprises. It filed its return for AY 2013-14 on 30th November 2013. Since international transactions with AEs were involved, the AO referred the matter to the TPO under Section 92CA of the Income Tax Act to determine the Arm’s Length Price.

The TPO reviewed the TP report, disagreed with parts of the comparable selection, made his own inclusions and exclusions, and arrived at a transfer pricing adjustment. The AO adopted it in the final assessment under Section 143(3). Altisource appealed to the CIT(A) and won - the CIT(A) excluded three comparables the TPO had added and included three others the TPO had rejected. The Revenue then came to the ITAT Bangalore, and that appeal is what this case study is about.

The Fight Over Comparables

In transfer pricing, picking the right comparable companies is everything. A wrong comparable set can inflate an adjustment massively or wipe out a genuine one. In this case, both sides were fighting on two fronts simultaneously.

Companies the Revenue Wanted Kept In

The TPO had originally included CG-VAK Software & Exports Limited, Larsen & Toubro Infotech Limited and Persistent Systems Limited. The CIT(A) excluded all three. The Revenue appealed, arguing these were fundamentally software development companies and the CIT(A) was applying unreasonably strict comparability filters. On L&T Infotech specifically, the Revenue pressed hard on the brand value point - it said there was no proven direct link between brand recognition and operating margins, so brand value was not a valid ground for exclusion.

Companies the Revenue Wanted Thrown Out

The CIT(A) had also directed the inclusion of Akshay Software Technologies Limited (ERP implementation), Cigniti Technologies Limited (software testing) and CAT Technologies Ltd. (74% software revenues but no segmental data). The Revenue challenged all three as functionally dissimilar to Altisource.

The Revenue’s Case: 18 Grounds, One Core Theme

Eighteen grounds of appeal sounds like a lot. In practice, the DR himself conceded at the hearing that ten of them - grounds 1, 4, 5, 6, 8, 9, 10, 11, 12 and 17 were general in nature and needed no separate adjudication. The real substance sat in grounds 2, 3, and 7 (on exclusions) and grounds 13, 14, 15, and 16 (on inclusions).

The Revenue’s argument, at its core, was that the CIT(A) had set an impossibly high comparability bar. Transfer pricing case law, especially under TNMM, does not demand an exact replica of the tested party. It demands reasonable functional similarity. Companies like L&T Infotech and Persistent Systems, which have large software development divisions, clear that bar. Rejecting them because they also do other things or because they have a known brand, was  the Revenue said  going beyond what the law actually requires.

The Assessee’s Answer: The Battle Was Already Over

Shri Ketan Ved, appearing for Altisource, did not need to build a complicated legal argument. He had something far more effective: a Coordinate Bench order of the same ITAT Bangalore that had already decided every one of these comparability questions.

That order — IT(TP)A No. 2861/Bang/2017, NXP India Pvt. Ltd. vs. DCIT, pronounced 27th April 2020 — was for the same Assessment Year 2013-14. The Coordinate Bench had examined CG-VAK, L&T Infotech, Persistent Systems, Akshay Software, Cigniti and CAT Technologies. It had given detailed, reasoned findings on all six, drawing on earlier orders from the Hyderabad and Delhi Tribunals. Its verdict: exclude the first three, include the last three. That order had attained finality. No High Court or Supreme Court had disturbed it.

The assessee also placed an Order Giving Effect dated 12th December 2024 on record - in which the AO himself had accepted the CIT(A)’s directions and computed the demand at nil. When the Revenue’s own AO has already accepted the outcome and closed the assessment at nil, the appeal before the Tribunal was always going to be a hard sell.

What the ITAT Bangalore Decided

The Tribunal’s reasoning was tight and direct. It did not re-examine each company from scratch there was no reason to. The Coordinate Bench had already gone through that exercise for the same AY with detailed reasons, relying on a consistent line of Tribunal authority. All this Bench needed to decide was whether any new material or superior court decision existed to justify departing from that settled position. There was none.

On the exclusion of CG-VAK, L&T Infotech, and Persistent Systems, the Tribunal dismissed grounds 2, 3 and 7. The Revenue brought nothing to the table that a higher forum had endorsed as a contrary view. The CIT(A)’s reliance on the Coordinate Bench order was correct and needed no interference.

On the inclusion of Akshay Software, Cigniti and CAT Technologies - the Tribunal dismissed grounds 13, 14, 15 and 16 for the same reason. The Coordinate Bench had directed their inclusion for AY 2013-14. That order was final. The CIT(A) followed it. No error was found.

The Revenue’s appeal was dismissed in full. Order pronounced in open court on 16th March 2026.

What Practitioners Should Take From This ITAT Judgment

First: a finalised Coordinate Bench order is not a suggestion. If the same Tribunal has decided a comparability issue for the same AY and that order has gone unchallenged at the High Court or Supreme Court level, bringing it back before a fresh Bench without a superior forum’s contrary ruling is not going to succeed. This ITAT Bangalore judgment makes that point unmistakably.

Second: multi-segment companies without usable segmental data do not belong in a pure-play comparable set. L&T Infotech and Persistent Systems are large, diversified IT firms. A captive software development unit serving one overseas parent is a fundamentally different animal. When there is no segmental data to isolate the relevant division, including such firms distorts the entire benchmarking exercise — a point that has now been confirmed across Bangalore, Hyderabad and Delhi Tribunal rulings.

Third: brand value and owned intangibles are legitimate comparability filters under TNMM, not arbitrary obstacles. A tested party with no intangibles and no brand equity cannot fairly be benchmarked against a company whose revenue is partly driven by brand pull or IP ownership. The margins are just not comparable on a like-for-like basis.

Fourth: keep an eye on the Order Giving Effect. Once an OGE with a nil demand is on record, the Revenue’s appeal faces a credibility gap that the Tribunal notices, even if it does not say so explicitly.

Conclusion

This latest ITAT case law from Bangalore does not break new legal ground. Its value lies in confirming, again, that the judicial consensus on certain oft-litigated comparables in the IT sector is now well entrenched. CG-VAK, L&T Infotech and Persistent Systems have been excluded in case after case, AY after AY. At some point, TPOs and the Revenue machinery need to accept that including these companies in a pure-play software development comparable set is going to be reversed on appeal - consistently.

For IT companies navigating transfer pricing scrutiny in India, the Altisource judgment is a useful reference point. It reinforces that a well-documented TP report backed by settled Tribunal authority on comparable selection gives a taxpayer strong ground at the assessment stage, at the CIT(A) and before the ITAT Bangalore.