My company runs voice-based call centres, but the Transfer Pricing Officer has benchmarked me against high-margin analytics companies because we are all called ITeS — can he do that?
No. The Delhi High Court held on 10 August 2015 that where the tested party is not a knowledge process outsourcing provider, a KPO cannot be used as a comparable. The broad label of information technology enabled services covers services of completely different content and value, and Rule 10B(2)(a) requires comparability to be judged by reference to service characteristics. eClerx and Vishal Information Technologies were both excluded — eClerx as a KPO doing data analytics and financial services work, Vishal because it outsourced most of its work and so had a wholly different cost structure. The Tribunal's order and the final assessment order were set aside.
Decided by the High Court (High Court of Delhi at New Delhi; Dr S. Muralidhar and Vibhu Bakhru JJ; judgment delivered by Vibhu Bakhru J) on 2015-08-10, reported as ITA 102/2015, High Court of Delhi at New Delhi. It bears on section 92C, section 92CA, section 260A of the Income Tax Act 1961, in Assessment & Scrutiny and Appeals matters.
This is the judgment that stopped the department treating "ITeS" as a single comparable set. It disagrees, in terms, with the Special Bench of the Tribunal in Maersk Global Centers, which had held that the line between business process outsourcing and knowledge process outsourcing is too thin to be used at the selection stage. The Court's answer is that a KPO employs advanced skills and knowledge and uses resources of a different quality, so it is functionally different, and the object is to price the service actually rendered rather than one higher up the value chain. Two further holdings are widely used: the transactional net margin method does not license looser selection of comparables, because a method that is less sensitive to dissimilarity is not a reason to dilute the standard; and supernormal profits are not a ground of exclusion in themselves but are a signal that something material may differ and must be investigated.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee is a wholly owned subsidiary of vCustomer, USA, and provides voice-based customer care to its holding company's clients from two Software Technology Park units at New Delhi and Pune. The holding company does the marketing, contracts with the customers and bears the business risks; the assessee is an offshore service provider remunerated at cost plus fifteen per cent. For assessment year 2008-09 it received Rs.91,73,94,525 for call centre services. Its transfer pricing study used the transactional net margin method with operating profit over total cost as the profit level indicator, returned a margin of 14.83 per cent against an average of 15.74 per cent for eight chosen comparables, and claimed adjustments for working capital and for risks borne by the holding company. The Transfer Pricing Officer accepted the method but rejected the study and the adjustments, selected eleven comparables of his own with an average margin of 28.96 per cent, and computed an adjustment of Rs.11,00,35,400. The Dispute Resolution Panel excluded some companies but kept eClerx Services Ltd. and Vishal Information Technologies Ltd. (later Coral Hub Ltd.), reducing the adjustment to Rs.5,92,07,428. The Tribunal upheld that on 22 March 2013.
The questions of law were answered in the affirmative and against the Revenue; the Tribunal's order of 22 March 2013 and the final assessment order of 9 October 2012 were set aside and the appeal allowed. Where the tested party is not a KPO service provider, an entity rendering KPO services cannot be taken as a comparable. eClerx, which does data analytics, pricing analytics, content operations, product data management and financial services including capital markets and back-office support, is not comparable with a voice-based call centre, and the Tribunal erred in holding the functions broadly similar. Vishal could not be a comparable either: its employment cost was a small fraction of the assessee's proportionate cost because most of its work was outsourced, and the Dispute Resolution Panel and the Tribunal were wrong to brush that difference aside. High profits are not by themselves a ground for exclusion, there being no such provision in Chapter X or the Rules.
The Court's starting point is Rule 10B(2)(a), which requires the comparability of controlled and uncontrolled transactions to be judged with reference to the characteristics of the service or product. That factor cannot be undermined by a broad classification such as ITeS, which takes in services of completely different content and value. BPO and KPO are understood plainly: the first does not necessarily involve advanced skills and knowledge, the second does, and a KPO differs in the responsibilities undertaken, the activities performed and the quality of resources employed. The Special Bench in Maersk Global Centers had held the line too thin to draw at the selection stage; the Court disagreed, because the object is to price the service rendered, not a more valuable one that might be rendered later. It accepted that no straitjacket applies — where an entity offers a mix and the categorisation is uncertain, a broad functionality test followed by exclusion of materially dissimilar entities is right — but where the controlled transaction is plainly lower-end ITeS such as a call centre doing data processing without domain knowledge, a KPO must be kept out at the threshold. On method, the Court rejected the Panel's view that the transactional net margin method tolerates functional dissimilarity because it is subsumed at net margin level: the identification of comparables does not change with the method chosen, and greater functional similarity strengthens the reliability of the result. On supernormal profits — 50.68 per cent for Vishal and 65.88 per cent for eClerx against 2.2 to 24 per cent for the rest — the Court held there is no statutory quartile exclusion, but a wide deviation in profit level indicators signals either material dissimilarity or unreliable data and must trigger further analysis; the factors in Rule 10B are not exhaustive.
Where the tested party is not a KPO service provider, an entity rendering KPO services cannot be considered as a comparable for the purposes of Transfer Pricing analysis.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court held on 10 August 2015 that where the tested party is not a knowledge process outsourcing provider, a KPO cannot be used as a comparable. The broad label of information technology enabled services covers services of completely different content and value, and Rule 10B(2)(a) requires comparability to be judged by reference to service characteristics. eClerx and Vishal Information Technologies were both excluded — eClerx as a KPO doing data analytics and financial services work, Vishal because it outsourced most of its work and so had a wholly different cost structure. The Tribunal's order and the final assessment order were set aside. This was decided by the High Court (High Court of Delhi at New Delhi; Dr S. Muralidhar and Vibhu Bakhru JJ; judgment delivered by Vibhu Bakhru J) and bears on section 92C, section 92CA, section 260A of the Income Tax Act 1961. It is reported as ITA 102/2015, High Court of Delhi at New Delhi. This is the judgment that stopped the department treating "ITeS" as a single comparable set. It disagrees, in terms, with the Special Bench of the Tribunal in Maersk Global Centers, which had held that the line between business process outsourcing and knowledge process outsourcing is too thin to be used at the selection stage. The Court's answer is that a KPO employs advanced skills and knowledge and uses resources of a different quality, so it is functionally different, and the object is to price the service actually rendered rather than one higher up the value chain. Two further holdings are widely used: the transactional net margin method does not license looser selection of comparables, because a method that is less sensitive to dissimilarity is not a reason to dilute the standard; and supernormal profits are not a ground of exclusion in themselves but are a signal that something material may differ and must be investigated. If it applies to you, the first step is this: Describe the content of your service precisely — what the operators actually do, what domain knowledge is required — because service characteristics under Rule 10B(2)(a) are the first filter, not the ITeS label.
The assessee is a wholly owned subsidiary of vCustomer, USA, and provides voice-based customer care to its holding company's clients from two Software Technology Park units at New Delhi and Pune. The holding company does the marketing, contracts with the customers and bears the business risks; the assessee is an offshore service provider remunerated at cost plus fifteen per cent. For assessment year 2008-09 it received Rs.91,73,94,525 for call centre services. Its transfer pricing study used the transactional net margin method with operating profit over total cost as the profit level indicator, returned a margin of 14.83 per cent against an average of 15.74 per cent for eight chosen comparables, and claimed adjustments for working capital and for risks borne by the holding company. The Transfer Pricing Officer accepted the method but rejected the study and the adjustments, selected eleven comparables of his own with an average margin of 28.96 per cent, and computed an adjustment of Rs.11,00,35,400. The Dispute Resolution Panel excluded some companies but kept eClerx Services Ltd. and Vishal Information Technologies Ltd. (later Coral Hub Ltd.), reducing the adjustment to Rs.5,92,07,428. The Tribunal upheld that on 22 March 2013. The matter was decided on 2015-08-10 by the High Court (High Court of Delhi at New Delhi; Dr S. Muralidhar and Vibhu Bakhru JJ; judgment delivered by Vibhu Bakhru J). On those facts the High Court held as follows. The questions of law were answered in the affirmative and against the Revenue; the Tribunal's order of 22 March 2013 and the final assessment order of 9 October 2012 were set aside and the appeal allowed. Where the tested party is not a KPO service provider, an entity rendering KPO services cannot be taken as a comparable. eClerx, which does data analytics, pricing analytics, content operations, product data management and financial services including capital markets and back-office support, is not comparable with a voice-based call centre, and the Tribunal erred in holding the functions broadly similar. Vishal could not be a comparable either: its employment cost was a small fraction of the assessee's proportionate cost because most of its work was outsourced, and the Dispute Resolution Panel and the Tribunal were wrong to brush that difference aside. High profits are not by themselves a ground for exclusion, there being no such provision in Chapter X or the Rules.
The Court's starting point is Rule 10B(2)(a), which requires the comparability of controlled and uncontrolled transactions to be judged with reference to the characteristics of the service or product. That factor cannot be undermined by a broad classification such as ITeS, which takes in services of completely different content and value. BPO and KPO are understood plainly: the first does not necessarily involve advanced skills and knowledge, the second does, and a KPO differs in the responsibilities undertaken, the activities performed and the quality of resources employed. The Special Bench in Maersk Global Centers had held the line too thin to draw at the selection stage; the Court disagreed, because the object is to price the service rendered, not a more valuable one that might be rendered later. It accepted that no straitjacket applies — where an entity offers a mix and the categorisation is uncertain, a broad functionality test followed by exclusion of materially dissimilar entities is right — but where the controlled transaction is plainly lower-end ITeS such as a call centre doing data processing without domain knowledge, a KPO must be kept out at the threshold. On method, the Court rejected the Panel's view that the transactional net margin method tolerates functional dissimilarity because it is subsumed at net margin level: the identification of comparables does not change with the method chosen, and greater functional similarity strengthens the reliability of the result. On supernormal profits — 50.68 per cent for Vishal and 65.88 per cent for eClerx against 2.2 to 24 per cent for the rest — the Court held there is no statutory quartile exclusion, but a wide deviation in profit level indicators signals either material dissimilarity or unreliable data and must trigger further analysis; the factors in Rule 10B are not exhaustive. In the words reproduced by the source cited on this page: "Where the tested party is not a KPO service provider, an entity rendering KPO services cannot be considered as a comparable for the purposes of Transfer Pricing analysis."
It was decided by the High Court on 2015-08-10 and is reported as ITA 102/2015, High Court of Delhi at New Delhi. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 92C, section 92CA, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The questions of law were answered in the affirmative and against the Revenue; the Tribunal's order of 22 March 2013 and the final assessment order of 9 October 2012 were set aside and the appeal allowed. Where the tested party is not a KPO service provider, an entity rendering KPO services cannot be taken as a comparable. eClerx, which does data analytics, pricing analytics, content operations, product data management and financial services including capital markets and back-office support, is not comparable with a voice-based call centre, and the Tribunal erred in holding the functions broadly similar. Vishal could not be a comparable either: its employment cost was a small fraction of the assessee's proportionate cost because most of its work was outsourced, and the Dispute Resolution Panel and the Tribunal were wrong to brush that difference aside. High profits are not by themselves a ground for exclusion, there being no such provision in Chapter X or the Rules. It arises in Assessment & Scrutiny and Appeals matters, on section 92C, section 92CA, section 260A of the Income Tax Act 1961, and was decided by High Court of Delhi at New Delhi; Dr S. Muralidhar and Vibhu Bakhru JJ; judgment delivered by Vibhu Bakhru J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Attack a proposed comparable on its cost structure as well as its functions: an entity that outsources most of its work has a different cost base, and the Court rejected the view that outsourcing is so common in the industry that it does not affect profitability. Do not rest an objection on high margins alone; use the wide deviation in profit level indicators as the trigger for a functional analysis showing why the entity is dissimilar. Resist the argument that the transactional net margin method subsumes functional dissimilarity at the net margin level — the Court held that the choice of method does not change how comparables are selected.
Still good law. A citator search returns 190 later decisions, 15 of them from High Courts. The Delhi High Court applied it in Pr CIT-1 v Future First Info. Services Pvt Ltd (12 December 2023): the Revenue argued at para 3.1 that because Rampgreen 'has been challenged before the Supreme Court ... the same cannot be relied upon', and the Bench rejected that course, quoting Rampgreen at para 8 for the proposition that 'A KPO service provider would also be functionally different from other BPO service providers, inasmuch as the responsibilities undertaken, the activities performed, the quality of resources employed would be materially different', and on that reasoning upholding the exclusion of eClerx. The same Court continues to treat it as governing: in Pr CIT-1 v American Express (India) Pvt Ltd (18 May 2026) the questions on comparables are disposed of at para 35 as 'Covered by the decision of this Court in Rampgreen Solutions Pvt. Ltd. CIT (2015) 377 ITR 533 against the Revenue', with further reliance at paras 31.3 and 31.4. IMPORTANT: both judgments record that the Revenue filed a Special Leave Petition against Rampgreen, and neither states its outcome; no Supreme Court decision citing the judgment exists. The judgment is plainly unstayed and is being followed, but a practitioner relying on it should verify the current status of that SLP. Nothing overruling, doubting or confining it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested text is clipped: about 24,209 characters from the middle are missing, covering the assessee's and the Revenue's arguments and the Court's survey of the Tribunal decisions on BPO and KPO comparability. The facts, the questions framed and the whole of the Court's analysis from paragraph 33 to the operative order are present. Two loose ends. The Court set aside the final assessment order as a whole, although that order also carried additions on excess deduction under section 10A and a disallowance under section 14A which are mentioned only in passing and were not argued; what becomes of them is not stated. And the assessee's claims for adjustment on account of working capital and risk, rejected by the Transfer Pricing Officer, are not dealt with in the part of the judgment read. No reporter citations were harvested; the appeal number comes from the judgment's own heading. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The questions of law were answered in the affirmative and against the Revenue; the Tribunal's order of 22 March 2013 and the final assessment order of 9 October 2012 were set aside and the appeal allowed. Where the tested party is not a KPO service provider, an entity rendering KPO services cannot be taken as a comparable. eClerx, which does data analytics, pricing analytics, content operations, product data management and financial services including capital markets and back-office support, is not comparable with a voice-based call centre, and the Tribunal erred in holding the functions broadly similar. Vishal could not be a comparable either: its employment cost was a small fraction of the assessee's proportionate cost because most of its work was outsourced, and the Dispute Resolution Panel and the Tribunal were wrong to brush that difference aside. High profits are not by themselves a ground for exclusion, there being no such provision in Chapter X or the Rules.
TaxSphere, “Rampgreen Solutions P Ltd v CIT”, https://taxnotice.vittsphere.com/caselaw/case/rampgreen-solutions-p-ltd-v-cit/ (validity last checked 2026-08-29)
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