Dy. Commissioner of Income Tax, Circle 6(1)(2), Bengaluru560 001 ..... Respondent. I.T. (T.P) A. No.435/Bang/2015 (Assessment Year : 201011) (By Revenue) Assessee By : Shri Tata Krishna, Advocate. Respondent By : Shri G.R. Reddy, CIT1 (DR) Date of Hearing : 03.07.2017. Date of Pronouncement : 31.08.2017. O R D E R Per Shri Vijay Pal Rao, J.M. : These cross appeals are directed against the assessment order dt.27.01.2015 passed under Section 143(3) r.w.s. 144C(13) of the 2 IT(TP)A Nos.396 & 435/Bang/2015 Income Tax Act, 1961 (in short 'the Act') in pursuant to the directions of the Dispute Resolution Panel (in short 'DRP') dt.4.9.2014 for the Assessment Year 201011. 2. The assessee stated to be engaged in the business of software development services providing to its parent company outside India. The assessee has reported the international transactions with its Associated Enterprises (AEs) as under : International Transactions Amount (Rs.) Software development services 17,68,09,824 Reimbursement of expenses 8,60,212 Total value of International 17,76,70,036 Transactions Segment in dispute Software development services Methodology adopted to TNMM determine ALP Turnover from software 17,68,09,824 development services Margins : Appellant's Margin in software 12.00% segment ALP Margin in software segment as 22.71% per TPO Adjustment under Section 92CA 1,65,04,805 3 IT(TP)A Nos.396 & 435/Bang/2015 To benchmark its international transactions the assessee selected 14 companies in Transfer Pricing Study Analysis however, the TPO rejected 12 companies selected by the assessee and carried out a fresh search. The TPO finally selected a set of 11 companies as under : Accordingly, the TPO proposed an adjustment under Section 92CA of Rs.1,65,04,805. The assessee challenged the action of the TPO and draft order framed by the Assessing Officer before the DRP and filed its objections. The DRP rejected 8 companies out of set of 11 companies 4 IT(TP)A Nos.396 & 435/Bang/2015 selected by the TPO. The DRP rejected 5 companies on the ground of turnover filter of Rs.1 to Rs.200 Crores and further 2 companies on the ground by applying 0% Related Party Transaction (RPT) consequently the DRP retained only 3 companies. Hence both revenue as well as assessee are aggrieved by the directions of DRP and consequent final order passed by the Assessing Officer and filed the cross appeals by raising the following grounds : Assessee's Grounds I. The Order of the Learned Assessing Officer in so far as it is prejudicial to the interest of the Appellant is not justified in law and on facts and circumstances of the case. II. The Directions of the Honourable DRP in so far as the same are prejudicial to the interest of the Appellant are not justified in law and on facts and circumstances of the case. III. As regards transfer pricing adjustment of Rs.1,16,68,539/ made under Section 92CA of the IT Act: 1. The Honourable DRP is not justified in upholding the action of the Learned TPO in making adjustment of Rs.1,16,68,539/ under Section 92CA of the IT Act. 2. The Learned TPO is not justified in considering incorrect operating revenue of Rs.17,30,98,447/ and operating expenses of Rs.15,45,13,286/ as against the correct operating revenue of Rs.17,68,09,824/ and operating expenses of Rs.15,78,27,015/ as accepted by the Honourable DRP although the per