The Karnataka High Court upheld the exclusion of Infosys Ltd. and Infosys BPO Ltd. from the comparable-company set in Goldman Sachs Services Pvt. Ltd.’s transfer-pricing dispute for assessment year 2014–15. It also upheld a direction to calculate the working capital adjustment using actuals after revising the set. The ruling rests on the facts and evidence in this case; it does not make either Infosys entity automatically unsuitable as a comparable in every assessment.
What the Karnataka High Court decided
The Revenue appealed under section 260A of the Income-tax Act, 1961, against the Bengaluru Income Tax Appellate Tribunal’s order dated 29 January 2020 in IT(TP)A No. 3244/Bang/2018. The dispute concerned Goldman Sachs Services Pvt. Ltd. and assessment year 2014–15. The High Court upheld the Tribunal’s exclusion of the two Infosys entities and its direction that the Transfer Pricing Officer (TPO) calculate the working capital adjustment on actuals after considering the revised comparable set. The Revenue’s appeal was dismissed. TaxGuru’s report of 6 October 2026 reproduces the judgment text.
The appeal was admitted on 2 June 2021 on five substantial questions of law relating to comparability under the Transactional Net Margin Method (TNMM), Rule 10B, the exclusion of Infosys Ltd. and Infosys BPO Ltd., and the actual working capital adjustment. The report text does not clearly identify the High Court appeal number or the date of its judgment, so those details cannot be stated here.
Why Infosys Ltd. was excluded
The Tribunal examined Infosys Ltd.’s annual report and found that its business profile did not match Goldman Sachs Services’ profile for the comparison. The High Court’s reproduced discussion describes Infosys as a large, risk-taking company that developed and sold software products and owned intangible assets. It accepted that the Tribunal had given reasons for excluding the company. The reported judgment
The point is not simply that Infosys and Goldman Sachs operated in different industries, or that Infosys was larger. Transfer-pricing comparability requires examining the tested party’s functions, assets and risks against those of a proposed comparable. Product development, ownership of intangibles and a different risk profile can matter when they distinguish the companies’ economic activities in the relevant year.
Why Infosys BPO Ltd. was excluded
The Tribunal reviewed the annual reports of Infosys BPO Ltd. and the other company under consideration and concluded that their activities were not comparable. The High Court treated that conclusion as a reasoned factual finding. The judgment’s account says the Tribunal found “the activities are not at all comparable”; that phrase describes the Tribunal’s conclusion as recounted by the High Court, not a general rule for all transfer-pricing cases. The reported judgment
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For another taxpayer or assessment year, a sound comparison would need to consider the actual services and functions performed, risk profile, intangibles, relevant segment information and financial data. A company’s name or broad label as an IT or BPO business does not settle the question.
What the court said about working capital adjustment
After the comparable set changed, the Tribunal directed the TPO to calculate the working capital adjustment using actuals and taking the remaining comparables into account. The High Court upheld that direction. It relied on its 28 August 2026 decision in SAP Labs for the principle that working capital adjustment is data-driven and depends on the facts and circumstances of the case. As the reproduced judgment puts it: “there can be no fixed or scientific formula for granting Working Capital Adjustment, as the exercise necessarily depends upon the facts and circumstances of each case.” The reported judgment
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The court also treated working capital adjustment as a comparability adjustment, not a filter for selecting companies in the first place. The direction therefore does not establish a fixed percentage or automatic adjustment that applies to every taxpayer. The inputs and calculation must be assessed on the particular record.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why the ruling does not make Infosys an automatic exclusion
The High Court found that the Tribunal had explained why it excluded the two companies and that the Revenue had not shown those factual findings to be contrary to settled law or otherwise perverse. It treated comparable selection as a factual, data-driven exercise governed by Rule 10B. The reproduced discussion also says a TPO cannot replace a taxpayer’s comparable set with a standard departmental set without applying the governing requirements. These are principles stated in the court’s discussion, not a substitute for reviewing the full order and applicable law in a live dispute.
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The outcome is tied to Goldman Sachs Services’ profile, the relevant assessment year, the available evidence and the Tribunal’s findings. It supports a case-specific analysis of functions, risk, intangibles, services and reliable financial information; it does not decide that Infosys Ltd. or Infosys BPO Ltd. can never be a valid comparable.
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