Income Tax Appellate Tribunal Delhi Utstarcom Inc. (India Branch), Gurgaon vs Ddit, New Delhi on 23 December, 2016 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH 'I2' : NEW DELHI) BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER and SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.5848/Del./2011 (ASSESSMENT YEAR : 200708) Ut Starcom Inc. (India Branch), vs. DDIT, Circle 2 (2), 805, Signature Towers II, New Delhi. South city I, Gurgaon (Haryana). (PAN : AAACU5017A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Rajesh Sachdev, CA REVENUE BY : Shri T.M. Shiva Kumar, CIT DR Date of Hearing : 07.12.2016 Date of Order : 23.12.2016 ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The Appellant, UT Starcom Inc. (India Branch) (hereinafter referred to as 'the assessee company') by filing the present appeal sought to set aside the impugned order dated 29.09.2011, passed by the AO under section 144C (1) read with section 143 (3) of the Incometax Act, 1961 (for short 'the Act') qua the assessment year 200708 in consonance with the orders passed by the ld. DRP/TPO on the concise grounds inter alia that : 2 ITA Nos.5848/Del./2011 "On the facts and in the circumstances of the case and in law, the learned Additional Director of Income Tax, Transfer Pricing Officer 11(4), New Delhi ("Ld. TPO") and the learned Deputy Director of Incometax, Circle 2(2), International Tax, New Delhi ("Ld. AO") under directions issued by the Hon'ble Dispute Resolution Panel II, New Delhi ("DRP"), erred in making an addition to the Appellant's total income of INR 5,45,17,350 (i.e. INR 2,07,82,181 based on the provisions of Chapter X of the Incometax Act, 1961 ('the Act') and INR 3,37,35,169 based on the other provisions of the Act.) 1. Transfer Pricing adjustment 1.1 On the facts and in the circumstances of the case, the Ld. TPO/ AO has erred in misconstruing the directions of Hon'ble DRP issued under section 144C( 5) of the Act while issuing final assessment order under section 143(3) read with section 144C(13) of the Act resulting in incorrect transfer pricing adjustment of INR 2,07,82,181 instead of INR 23,98,098. 1.2 On the facts and in the circumstances of the case and in law, the Ld. TPO has erred and the Hon'ble DRP has further erred in upholding / confirming the action of the Ld. TPO of disregarding, without material defects, the benchmarking analysis and comparable companies selected by the Appellant based on the contemporaneous data in the transfer pricing study report maintained as per section 92D of the Act read with Rule 10D of the Incometax Rules, 1962 ('the Rules') and the various submissions made by the Appellant. 1.3 On the facts and in the circumstances of the case and in law, the Ld. TPO and Hon'ble DRP has erred, in adopting an arbitrary search strategy for selection of alleged comparable companies. Specifically, the Ld. TPO and Hon'ble DRP has grossly erred 1.3.1 By adopting a flawed process of using notices under section (6) of the Act and relying on the same without providing complete information to the Appellant or an opportunity to cross examine the parties. 1.3.2 By disregarding the multiple year data approach and considering the data which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements. 1.3.3 By adopting inappropriate filters in the process of selecting comparable companies; 3 ITA Nos.5848/Del./2011 1.3.4 By adopting companies as comparables having complete disregard to their functional comparability; 1.3.5 By inappropriately computing the operating margins of the alleged comparable companies. 1.4 On the facts and in the circumstances of the case and in law, the Ld. TPO has erred and the Hon'ble DRP has further erred in upholding / confirming the action of the Ld. TPO in not allowing appropriate adjustment(s) in accordance with the provisions of rule 1 OB of the Rules. 1.5 On the facts and in the circumstances of the case and in law, the Ld. TPO has erred and the Hon'ble DRP has further erred in upholding / confirming the action of the Ld. TPO in making in adjustment to the arm's length price of international transactions without giving benefit of the proviso to section 92C(2) of the Act. 1.6 On the facts and in the circumstances of the case and in law, the Ld. TPO has erred and