Utimaco Technologies Private Limited (“the assessee”), engaged in the distribution of livescreen and other software solutions, was subject to transfer pricing proceedings for AY 2022-23. The assessee relied on an APA entered into with the CBDT for earlier years and submitted that its FAR profile and benchmarking methodology remained unchanged. The TPO, however, applied a turnover filter, rejected certain comparables and made a TP adjustment of ₹3,21,47,310 by determining an arm's length margin of 18.08% against the assessee's margin of 10.23%.
Assessee’s Contentions | Revenue’s Contentions | Court’s Judgement |
The assessee contended that its APA with CBDT for AYs 2015-16 to 2019-20 should be considered since the same methodology, FAR profile and margin framework continued in AY 2022-23, with no material change in functions, assets or risks. | The Revenue rejected reliance on the APA, stating that it was specifically applicable only to AYs 2015-16 to 2019-20 and had neither been extended nor rolled back to AY 2022-23. Therefore, APA could not be treated as binding for the year under consideration. | The Tribunal held that the APA was not mechanically binding for AY 2022-23, but the methodology and FAR analysis accepted under the APA were relevant and persuasive where continuity in the FAR profile was demonstrated. |
The assessee further contended that seven comparables accepted in AY 2021-22 were wrongly excluded solely on the basis of turnover, despite no material change in the FAR profile. | The Revenue supported the TPO’s application of the turnover filter and comparable selection. It also supported the 18.08% arm’s length margin determined by the TPO against the assessee’s 10.23% margin. Accordingly, the Revenue defended the resulting ₹3.21 crore TP adjustment. | The Tribunal directed exclusion of Rishabh Software due to aggregate RPT of 28.48%, and after considering the appropriate comparable set, held that the assessee's 10.23% margin fell within the 4.29%–22.63% arm's length range; hence, the TP adjustment was deleted. |
ITAT held that an earlier APA, though not binding for an uncovered assessment year, remains relevant and persuasive where the assessee demonstrates continuity in its FAR profile and methodology. ITAT held that the assessee’s 10.23% margin fell within the arm’s length range of 4.29%–22.63% after the appropriate comparable analysis; accordingly, the ₹3.21 crore TP adjustment was deleted
