Income Tax Appellate Tribunal Delhi St Ericsson India Pvt. Ltd., New Delhi vs Dcit, New Delhi on 3 July, 2018 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH 'I1' : NEW DELHI) BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.609/Del./2015 (ASSESSMENT YEAR : 201011) STEricsson India Pvt. Ltd., vs. DCIT, Circle 24 (2), S 327, Lower Ground Floor, New Delhi. Greater Kailash II, New Delhi 110 048. (PAN : AAMCS1022K) ITA No.168/Del./2015 (ASSESSMENT YEAR : 201011) DCIT, Circle 24 (2), vs. STEricsson India Pvt. Ltd., New Delhi. S 327, Lower Ground Floor, Greater Kailash II, New Delhi 110 048. (PAN : AAMCS1022K) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri S.D. Kapila, Advocate REVENUE BY : Shri Sanjay Kumar Yadav, Senior DR Date of Hearing : 09.05.2018 Date of Order : 03.07.2018 ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Present cross appeals filed by the assessee as well as by the revenue are being disposed of by way of consolidated order to avoid repetition of discussion. 2 ITA No.609/Del./2015 ITA No.168/Del./2015 Appellant, STEricsson India Pvt. Ltd. (STE India) (for short 'the taxpayer'), by filing the present appeal sought to set aside the impugned order dated 28.11.2014, passed by the AO under section 144C read with section 143 (3) of the Incometax Act, 1961 (for short 'the Act') qua the assessment year 201011 in consonance with the orders passed by the ld. DRP/TPO on the grounds inter alia that : "1. The order passed by the learned Joint Director of Income Tax, Transfer PricingIII (1),New Delhi (erstwhile Transfer PricingII (2) ("the TPO"), draft and final assessment order passed by Deputy Commissioner of Income Tax, Circle 24(2) (erstwhile Circle 9(1 )), New Delhi ("the AO") pursuant to the directions of the Hon'ble Dispute Resolution Panel III ("the DRP"), are bad in law and void adinitio. 2. The AO has erred in law and on the facts of the case in determining the total income of the Appellant at Rs.479,668,511 as against returned income of RS.197,866,765 and thereby made an upward adjustment of RS.281 ,801 ,746. Part I Transfer Pricing Grounds 3. That on facts of the case and in law, the DRPI TPO/AO have erred in not demonstrating that the motive of the Appellant was to shift profits outside of India by manipulating the prices charged in its international transactions as envisaged under provisions of Chapter X of the Act. 4. That on facts of the case and in law, the DRPI TPO/AO have erred in rejecting certain companies and adding certain companies to the final set of alleged comparable companies on an adhoc basis, thereby resorting to cherry picking of comparable companies for benchmarking the international transaction pertaining to IC design and software development services ("impugned transaction") 5. That on facts of the case and in law, the DRP/TPO/AO have erred in law and in facts by selecting certain companies which are functionally noncomparable to the Appellant. 3 ITA No.609/Del./2015 ITA No.168/Del./2015 6. That on facts of the case and in law, the DRP/TPO/AO have failed to consider the foreign exchange gain and provisions/liabilities no longer required written back as operating in nature and consequently treated it as nonoperating item and erroneously treated nonoperating costs as operating while calculating the operating margin of the Appellant as well of the alleged comparable companies. 7. That on facts of the case and in law, the TPO has erroneously treated amortization of goodwill as an operating expense while calculating the operating margin of the Appellant. 8. That on facts of the case and in law, the TPO has erred in computation of the operating margin and working capital adjusted margin of alleged comparable companies 9. That on fact of the case and in law, the DRP/TPO/AO have erred in conducting a fresh economic analysis by using arbitrary filters for identifying companies comparable to the Appellant. The arbitrary filters applied by the TPO and confirmed by the DRP/AO are based on turnover, different accounting year, export revenue, employee c