Income Tax Appellate Tribunal Hyderabad Electronic Arts Games (India) ... vs Dcit, Circle 17(1), Hyderabad, ... on 29 December, 2017 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES "B", HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. No. 325/HYD/2016 Assessment Year: 201112 Electronic Arts Games Deputy Commissioner (India) Private Limited, Vs of Income Tax, HYDERABAD Circle17(1), [PAN: AABCJ4279Q] HYDERABAD (Appellant) (Respondent) For Assessee : Ms. Karishma R. Phatarphekar & Mr. Harsh R. Shah, ARs For Revenue : Smt. T.H. Vijaya Lakshmi, CITDR Date of Hearing : 21122017 Date of Pronouncement : 29122017 ORDER PER B. RAMAKOTAIAH, A.M. : This is an appeal by Assessee for the AY. 201112. Assessee is contesting transfer pricing adjustments made in the assessment order by the Transfer Pricing Officer [TPO]. 2. Brief facts of the case are that assesseecompany is a group company of Delaware Corporation and is wholly owned subsidiary of Electronic Arts Games (India) Private Limited, Inc. assessee is engaged in providing contract software services, back office support services, corporate IT support services and marketing support services to its Associated Enterprises [AE]. : 2 : I.T.A. No. 325/Hyd/2016 Assessee has furnished transfer pricing report along with return and submitted that assessee's PLI i.e., OP/TC is of 10.40% and justified on the basis of the comparables selected by assessee. However, the TPO on a reference from the AO conducted fresh search and bench marked the net operating profit margin at 17.03% after giving 3.78% relief on account of working capital adjustment. The 18 comparable companies selected by the TPO are as under: Sr. Name of the Company NCP after No. WCA% 1. Acropetal Technologies Limited (Seg) 30.09 2. Akshay Software Technologies Limited 0.52 3. C T I L Limited 0.5 4. Evoke Technologies Private Limited 6.22 5. EZest Solutions Limited 34.71 6. ICRA Techno Analytics Limited 21.87 7. Igate Global Solutions Limited 21.39 8. Infosys Limited 40.06 9. Kals Information Systems Limited (Seg) 5.29 10. Larsen and Toubro Infotech Limited 16.04 11. Mindtree Limited 8.76 12. Persistent Systems and Solutions Limited 18.77 13. Persistent Systems Limited 23.73 14. R S Software (India) Limited 13.85 15. Sankhya Infotech Limited 9.74 16. Sasken Communication Technologies Limited 24.88 17. Tata Elxsi Limited 10.2 18. Zylog Systems Limited 21.01 Arithmetic Mean 17.03 3. Consequent to the TPO order, AO issued a draft assessment order dt. 25032015 proposing the adjustment of Rs. 4,09,38,368/. Aggrieved by the draft assessment order, assessee filed an application before the Dispute Resolution Panel [DRP] u/s. 144C of the Act, objecting to the additions proposed in the draft assessment order. The DRP in its order, rejected 15 comparable : 3 : I.T.A. No. 325/Hyd/2016 companies,out of the 18 comparable companies selected by the Ld.TPO. On giving effect to this direction, the mean margin of the retained comparable companies i.e., Persistent Systems and Solutions Limited, Persistent Systems Limited and Sasken Communication Technologies Limited [at item Nos. 12, 13 and 16] worked out to be more than the margin computed by the TPO at 22.46%. Thereafter, the DRP concluded that more number of comparables take care of the differences due to the mean margin computation and accordingly, upheld the Arm's Length Price [ALP] determined by the TPO. Consequent to the order of the DRP, AO retained same addition and finalized the assessment order. Hence, assessee aggrieved. 4. Assessee has raised various grounds contesting the issue but mainly focused on inclusion and exclusion