High Court Highlights Distinction Between ITeS And Software Services – ITeSproviders Not Comparable Software Developers

In Transfer Pricing documentation/ audits, it has often been observed that taxpayers/ Tax Authorities alike have mistakenly benchmarked IT/ ITES with the wrong set of comparables perhaps largely due to the similar sounding nomenclature for the two categories of services. In a recent decision, Bombay High Court has highlighted that ITES providers cannot be used as comparables for benchmarking software services keeping in view the functional differences between ITES and software services.

ITES – back office services

ITeS or IT enabled services are back office services such as BPO, Call Centre, accounting, payroll processing, book keeping, record keeping etc which deploy online or IT medium for rendering of services. Usually highly skilled workforce is not required for rendering such kind of services and the workforce comprises of graduates/ post graduates who acquire skills on the job.