M12, Balrama House, Circle1(1), Karampura Commercial Complex, New Delhi. New Delhi. PAN: AADCA0915A (Appellant) (Respondent) Assessee By : Shri Nageshwar Rao, Advocate Department By : Shri Amrendra Kumar, CIT, DR Date of Hearing : 31.07.2017 Date of Pronouncement : 02.08.2017 ORDER PER R.S. SYAL, VP: This appeal filed by the assessee is directed against the final assessment order passed by the Assessing Officer (AO) u/s 143(3) read ITA No.6402/Del/2012 with section 144C of the Incometax Act, 1961 (hereinafter also called 'the Act') in relation to the assessment year 200809. 2. The first issue assailed before us is the addition of Rs.37,28,9290/ made by the Assessing Officer in relation to the international transaction of 'Software development services.' 3. Briefly stated, the facts of the case are that the assessee is a 100% subsidiary of Aircom International Ltd., UK., which is engaged in the business of 'Software solutions' and 'Consultancy services' in the area of telecommunication industry. The assessee, an Indian company, reported certain international transactions in Form No.3CEB. For the purposes of transfer pricing analysis, the assessee divided its business into three broader categories, viz., (i) Software Development; (ii) Software Deployment, Training, Consultancy and Equipment Rental; and (iii) Support Services which include licence fee paid and support and maintenance fees paid. In respect of 'Software Development Services', the assessee used Transactional Net Margin Method (TNMM) as the most appropriate method with Profit Level Indicator 2 ITA No.6402/Del/2012 (PLI) of Operating Profit to Total Cost (OP/TC). The assessee computed its own PLI at 9.81% as against that of comparables at 12.06% and claimed that the international transaction of 'Provision of software development services', transacted at Rs.5,45,05,847/, was at arm's length price (ALP). The Assessing Officer (AO) made reference to the Transfer Pricing Officer (TPO) for determining the arm's length price of the international transactions. The TPO did not dispute the categorywise accounts drawn up by the assessee in the above referred three segments and went on to analyze the same. As regards the international transactions relating to 'Software Development Services', the TPO observed that the assessee developed some software to be used as input for the product 'ENTERPRISE suite' sold/licensed by the Aircom Group worldwide. The assessee was being remunerated on cost plus 10% markup. As against the assessee's selection of 25 companies as comparable, the TPO, applying certain filters, restricted the number of comparable companies to 19. Their average OP/TC was computed at 26.21% which, after carrying out working capital adjustment, was revised to 27.98%. By applying this as arm's length margin, the TPO 3 ITA No.6402/Del/2012 worked out the ALP of the `Software development services' rendered by the assessee at Rs.6.00 crore and odd. Since the assessee declared the value of international transaction of 'Provision of software services' at Rs.4.69 crore, the TPO worked out the shortfall, being, the amount of transfer pricing adjustment at Rs.55,25,459/. The assessee assailed the TPO's determination of the ALP before the Dispute Resolution Panel (DRP). One company was excluded by the DRP. The TPO, in his order giving effect to the direction of the DRP, computed average adjusted OP/TC of the remaining 18 companies at 24.15%. Treating the same as a benchmark, he worked out transfer pricing adjustment amounting to Rs.37,28,929/ in the segment of 'Software development services.' The Assessing Officer, in his final assessment order, made an addition for this sum, against which the assessee has come up in appeal before us. 4. We have heard the rival submissions and perused the relevant material on record. There is no dispute as regards the application of TNMM as the most appropri