Income Tax, India Pvt. Ltd., Circle 7(1)(2), Umiya Business Bay, Bangalore. Tower 1, 6th Floor, Cessna Business Park, Sarjapur Outer Ring Road, Bangalore 560 037. PAN: AAACY 2823L APPELLANT RESPONDENT IT(TP)A No.606/Bang/2016 Assessment year : 201112 M/s. Yokogawa IA Technologies Vs. The Assistant Commissioner of India Pvt. Ltd., Income Tax, Bangalore 560 037. Circle 7(1)(2), PAN: AAACY 2823L Bangalore. Revenue by : Ms. Neera Malhotra, CIT(DR)(ITAT), Bengaluru. Respondent by : Shri P.C. Khincha, CA Date of hearing : 27.06.2018 Date of Pronouncement : 08.08.2018 ITA Nos. IT(TP)A Nos.466 & 606/Bang/2016 Page 2 of 16 ORDER Per N.V. Vasudevan, Judicial Member IT(TP)A No. 466/Bang/2016 is an appeal by the revenue while IT(TP)A No.606/Bang/2016 is an appeal by the assessee. Both these appeals are directed against the final order of assessment dated 29.11.2016 passed by the ACIT, Circle 7(1)(2), Bangalore u/s. 143(3) r.w.s. 144C(13) of the IncomeTax Act, 1961 ["the Act"]. 2. First we shall take up for consideration the appeal by the assessee. In grounds No.1 to 4 raised by the assessee, the assessee has challenged the determination of Arms Length Price (ALP) and consequent addition made to the total income in respect of international transaction entered into by the assessee with its Associated Enterprise (AE). At the time of hearing, the ld. counsel for the assessee submitted that ground No.3 raised by the assessee in its appeal, if adjudicated, would be sufficient and other grounds are not pressed for adjudication. Ground No.3 raised by the assessee in its appeal reads as follows: "4. Without prejudice, the lower authorities have erred in: a. Rejecting the comparables selected and transfer pricing analysis undertaken by the Assessee on unjustifiable grounds. b. Conducting a fresh transfer pricing analysis despite absence of any defects in the transfer pricing analysis submitted by the Assessee; c. Adopting inappropriate filters like 25% RPT filter etc. in the process of selecting comparables; d. Adopting companies as comparables even though they are not comparable in terms of functions performed, risks assumed, assets utilized, despite unusual business circumstances or high margins etc. ITA Nos. IT(TP)A Nos.466 & 606/Bang/2016 Page 3 of 16 e. Ignoring additional comparables proposed during the assessment proceedings. f. Considering provision for doubtful debts as nonoperating in nature while computing operating margins; g. Not making proper adjustment for enterprise level and transactional level differences between the Assessee and comparable companies; h. Not recognizing that the Assessee was insulated from risks, as against comparables, who assume these risks and therefore have to be credited with a risk premium on this account; and i. Not appropriately computing the working capital adjustment while computing the ALP." 3. As far as appeal by the revenue is concerned, ground Nos.2 &3 raised by the revenue in its appeal can be conveniently adjudicated along with ground No.3 raised by the assessee, as these grounds relate to determination of ALP in respect of international transaction entered into by the assessee with its AE. Gr.No.2 & 3 raised by the Revenue reads thus: "2. Whether the DRP has erred to include forex gain/loss as operating in nature without ascertaining the nexus with the business activity of the tax payer. 3. Whether the DRP has erred in granting 1% risk adjustment arbitrarily without appreciating the facts of the case and its comparables." 4. The facts with regard to determination of ALP in respect of international transaction between the assessee and its AE are