Income Tax Appellate Tribunal Bangalore Dcit, Bangalore vs M/S Lam Research (India) Pvt. Ltd.,, ... on 17 September, 2021 IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER IT(TP)A Nos. & Assessment Appellant Respondent Years 405/Bang/2016 M/s. Lam Research India Pvt. Ltd., DCIT, 201112 ABlock11/1 and 12/1, Amrajyothi Circle 4(1)(1), Layout Intermediate Ring Road, Bengaluru. Bengaluru 560 071. PAN : AABCN 2063 Q 468/Bang/2016 DCIT, M/s. Lam Research India 201112 Circle 4(1)(1), Pvt. Ltd., Bengaluru. Bengaluru 560 071. PAN : AABCN 2063 Q Appellant by : Shri. Darpan Kirpalani, Advocate Respondent by : Ms. Neera Malhotra, CIT(DR)(ITAT), Bengaluru. Date of hearing : 16.09.2021 Date of Pronouncement : 17.09.2021 ORDER Per N.V. Vasudevan, Vice President IT(TP)A No.468/Bang/2016 is an appeal by the Revenue, while IT(TP)A No.405/Bang/2016 is an appeal by the assessee. Both these appeals are directed against IT(TP)A Nos.405, 468/Bang/2016 Page 2 of 16 the order dated 31.12.2016 of the DCIT, Circle4(1)(1), Bangalore passed u/s. 143(3) r.w.s. 144C(13) of the Incometax Act, 1961 [the Act] in relation to AY 201112. 2. The grounds of appeal raised by the Revenue in its appeal reads as follows: 1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. The Hon'ble DRP erred in directing the AO to reduce the expenses both from the Export Turnover as well as Total Turnover when there is no provision in section 10A which requires the said expenses to be reduced from the Total turnover? 3. The Hon'ble DRP erred in holding that foreign exchange loss or gain is a part of operating expense or operating income, as the case may be, when the TPO has excluded this data from that of the comparables. 4. Whether the DRP is correct in foreign exchange fluctuation as operating in nature, while treating foreign exchange fluctuation nonoperating in nature as applied by the TPO. 5. Whether the DRP is correct in holding that the foreign exchange transaction are to be considered as operating in nature, when the Rule 10B(2)(d) stipulates that the net profit margin realized by the taxpayer in the international transactions shall alone be computed for comparability analysis under TNMM. 6. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. 3. The assessee in its appeal has raised several grounds, but at the time of hearing, the ld. counsel for the assessee prayed that ground No.1(e)(i) and 1(i) (i) of the revised grounds of appeal alone be adjudicated and other grounds were not pressed. The relevant grounds read as follows: IT(TP)A Nos.405, 468/Bang/2016 Page 3 of 16 e) The learned AO/ TPO and the learned DRP have erred, in law and in facts, by accepting / rejecting the companies based on unreasonable comparability criteria The learned AO/DRP/TPO has failed to appreciate the fact that the following companies are not functionally comparable to the software development segment of Appellant, therefore has erred in law and in facts in considering them as comparable companies: a. Acropetal Technologies Limited b. EInfochips Limited c. ICRA Techno Analytics Limited d. Persistent Systems and Solutions Limited i) The learned AO/ TPO and the learned DRP have erred, in law and in facts, by accepting / rejecting companies based on unreasonable comparability criteria; i. The learned AO/DRP/TPO has failed to appreciate the fact that the following companies are not functionally comparable to the IT enabled service segment of Appellant, therefore has erred in law and in facts in considering them as comparable companies: a. Accentia Technologies Limited b. Acropetal Technologies Limited(seg) c. ICRA Online Limited d. Jeevan Scientific Technologies Limited 4. We shall first identify the issues to be deci