C/o. IBM India Pvt. Ltd., Tax, III Floor, Subramanya Arcade, Circle 12(4), Bangalore. No.12, Bannerghatta Main Road, Bangalore. PAN AABCT 3272D Appellant Respondent. Appellant By : Shri Padamchand Khincha, C.A. Respondent By : Smt. Neera Malhotra, Addl. CIT (D.R) Date of Hearing : 16.02.2016. Date of Pronouncement : 9.3.2016. O R D E R Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the assessment order dt.30.11.2011 passed under Section 143(3) rws 144C in pursuant to the directions of the Dispute Resolution Panel (in short 'DRP') dt.16.8.2012 passed 2 IT(TP)A No.1599/Bang/2012 under Section 144C(5) of the Income Tax Act, 1961 (in short 'the Act') for the Assessment Year 200809. 2. The assessee has raised the following grounds : 1 Assessment and reference to Transfer Pricing Officer are bad in law a) The learned Deputy Commissioner of Incometax, Circle 12(4) ['DCIT' or 'AO'] / Deputy Commissioner of Income Tax Transfer Pricing V ['TPO'] erred in law and on facts in making a addition of INR 33,452,024 to the total income of the Appellant on account of adjustment to the arm's length price with respect to software development service transaction entered into by the Appellant with its associated enterprises. b) The AO/TPO erred in law and on facts as he failed to establish that the Appellant shifted profits outside India. 2 Comparability analysis adopted by the TPO for determination of arm's length price a) The AO/ TPO grossly erred on facts and in law in rejecting the filters and search process adopted by the Appellant in the Transfer Pricing Study. Further, the AO/TPO also erred on facts and in law by conducting a fresh benchmarking analysis in respect of captive software services provided by the Appellant and wrongly comparing the Appellant's activities with companies operating as fullfledged entrepreneurs without considering the differences in functions performed, assets employed and risks assumed by the Appellant visàvis comparable companies. b) The AO/TPO erred in law in applying arbitrary filters as criterion for rejection of companies identified by the Appellant in the Transfer Pricing Study such as (i) companies whose data for financial year ('FY') 200708 was not available, (ii) companies with software development service revenue less than 75% of total operating revenue, (iii) companies with software development service revenue less than INR 1 crore, (iv) companies with export sales less that 25% of total revenue, (v) companies with related party transactions greater than 25% of operating revenue, (vi) companies with employee cost is less than 25% of total revenues, (vii) companies with different financial year ending (i.e. other than 31 March 2008), (viii) companies having diminishing revenues / persistent losses during financial year 200708 and (ix) companies whose onsite income is greater than 75% of export revenues. c) The AO/TPO also erred on facts and in law in excluding the foreign exchange gain or loss while calculating the net margins of the comparable companies. d) The AO/TPO also erred on facts in arbitrarily accepting companies without considering the turnover and size of the Appellant and comparables and also erred on facts in arbitrarily rejecting companies based on their financial results without considering the functional comparability. 3 IT(TP)A No.1599/Bang/2012 e) The AO/TPO erred in considering a set of 'secret data', i.e. data which was not available in public domain and not allowing the Appellant an opportunity to cross examine the data furnished by companies to whom notice under Section 133(6) of the Act were issued. 3 Erroneous data used by the AO/TPO a) The AO/TPO has erred in law in using data, which was not conte