Services Pvt. Ltd., Circle18(1), 7th Floor, Tower A, CR Building, Unitech Cyber Park, Sector39, New Delhi. Gurgaon. PAN: AADCA6769Q (Appellant) (Respondent) Assessee By : Shri Nageshwar Rao, Advocate Department By : Shri Kumar Pranav, Sr. DR Date of Hearing : 10.01.2018 Date of Pronouncement : 11.01.2018 ORDER PER R.S. SYAL, VP: These two appeals filed by the assessee one against the quantum and the other against the penalty imposed u/s 271(1)(c) of the Incometax ITA No.5200/Del/2011 & ITA No.1141/Del/2017 Act, 1961 (hereinafter also called 'the Act') are in relation to the assessment year 200708. Quantum Appeal (ITA No.5200/Del/2011) 2. The only issue raised in the quantum appeal is against the transfer pricing addition of Rs.53,27,302/ made in respect of 'Software development segment.' 3. Briefly stated, the facts of the case are that the assessee was incorporated in January, 2007 and is engaged in the business of providing software development services, healthcare claim adjudication and bio pharmaceutical services. Five international transactions, including provision of I.T. services with the reported value of such transaction at Rs.10,24,95,795/, were reported. The assessee applied the Transactional Net Margin Method (TNMM) for showing that Software development services segment, designated in Transfer Pricing documentation as IT services, was at arm's length price (ALP). Similar method was adopted for benchmarking the international transaction of Claim processing service transaction (ITES). The Assessing Officer (AO) made reference to the 2 ITA No.5200/Del/2011 & ITA No.1141/Del/2017 Transfer Pricing Officer (TPO) for determining the ALP of the international transactions reported by the assessee. The TPO vide his order dated 11.10.2010, proposed transfer pricing adjustments in the Software development service and ITES segment amounting to Rs.2.68 crore in total. Pursuant to the directions given by the Dispute Resolution Panel (DRP) and certain rectification orders passed, the TPO, vide his order dated 25.10.2011, recalculated the transfer pricing adjustment in Software development segment at Rs.53,27,302/. No transfer pricing adjustment was proposed in ITES segment in such rectification order. As such, we are concerned in the instant appeal only with the transfer pricing addition of Rs.53,27,302/ made in the Software development segment. 4. Before proceeding further, we want to make it clear that albeit the assessee raised an additional ground during the course of earlier hearing, but the same was not pressed before us. Similarly, the assessee had sought inclusion of a company in the list of comparables, which was also given up by the ld. AR during the course of hearing. 3 ITA No.5200/Del/2011 & ITA No.1141/Del/2017 5. The assessee is, thus, aggrieved only against the inclusion of three companies in the final tally of comparables, namely, Kals Information Systems Ltd., Sasken Communications Technologies Ltd. and Tata Elxsi Ltd. There is no dispute on any other aspect of the determination of the ALP of the Software development segment. In order to properly evaluate the contention of the assessee qua the exclusion of the above referred three companies, it is paramount to understand the functional profile of the assessee under 'Software development segment.' 6. The Transfer Pricing study report discloses that the assessee has certain selfdeveloped data processing and data analytics software which are used for several internal purposes, including benefit design, benchmarking, claim processing, cost trading, marketing, managing relations and increasing efficiency and profitability. When we peruse the terms of the Service agre