Infosys, Infosys BPO Not Comparable To Goldman Sachs: Karnataka HC Upholds ITAT Order

The Karnataka High Court has upheld the exclusion of Infosys Ltd and Infosys BPO Ltd as comparable companies for Goldman Sachs Services Pvt Ltd in a transfer pricing dispute, finding no reason to interfere with the tribunal's factual assessment of the companies.

A Division Bench of Justice S.G. Pandit and Justice Chillakur Sumalatha dismissed the Income Tax Department's appeal against the tribunal's order concerning Goldman Sachs for assessment year 2014-15.

The department had challenged, among other things, the exclusion of Infosys and Infosys BPO from the comparables and the direction to allow a working capital adjustment.

The court noted that the tribunal had given reasons for excluding both companies and that the department had failed to show any perversity in those findings.

“When the Tribunal has arrived at factual finding, the appellants-revenue have failed to point out as to how the said factual finding is contrary to the settled position of law.”, it noted.

On Infosys Ltd, the tribunal had examined its annual report and found that the company was not comparable to Goldman Sachs' profile. It also noted that Infosys was a “giant risk taking company” engaged in developing and selling software products and owned intangible assets.

Infosys BPO was excluded after the tribunal considered the annual reports of the two companies and concluded that their activities were not comparable.

The court also upheld the direction to the Transfer Pricing Officer (TPO) to compute the working capital adjustment on actuals after taking into account the inclusion and exclusion of comparable companies.

Referring to its August 28, 2026 decision in SAP Labs India Private Limited, the court observed that there is no fixed or scientific formula for granting a working capital adjustment. The exercise depends on the facts and circumstances of each case, is data-driven, and its manner and extent are not specifically prescribed under the Income Tax Act or Rules.

The court also reiterated that selection or exclusion of comparables is essentially a factual and data-driven exercise. A TPO cannot reject a taxpayer's comparables merely to substitute them with a standard departmental set, and the determination must conform to Rule 10B of the Income Tax Rules.

In this case, the department had not shown that the tribunal relied on irrelevant material or ignored relevant facts while excluding the comparables. The court therefore answered the substantial questions of law in favour of the respondent-assessee and against the Revenue, and dismissed the appeal.

For Revenue: Advocate Y.V. Raviraj,