Income Tax Appellate Tribunal Delhi M/S. Cadence Design Systems (India) ... vs Dcit, New Delhi on 4 September, 2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "I", NEW DELHI BEFORE N. K. SAINI, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. No.2074/DEL/2014 Assessment Year:200910 Cadence Design Systems v. Dy. Commissioner of (India) Pvt. Ltd. Income Tax Ofloor, Hotel The Suryaa, Circle 3(1) New Friends Colony, New Delhi New Delhi TAN/PAN:AAACC1138Q (Appellant) (Respondent) Appellant by: Shri Nageshwar Rao, Advocate Respondent by: Shri Neeraj Kumar, D.R. Date of hearing: 05 06 2017 Date of 04 09 2017 pronouncement: ORDER PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the assessee against the final assessment order dated 25.2.2014, for quantum of assessment passed under section 143(3)/144C of the Income Tax Act, 1961, which is in pursuance of directions given by the Dispute Resolution Panel1, New Delhi (DRP), vide order dated 24/12/2013. For the sake of ready reference, the grounds of appeal raised by the assessee are reproduced hereunder: 1. The final assessment order dated February 25, 2014 passed by the Deputy Commissioner of Income Tax, Circle 3(1) New Delhi ('Learned AO') pursuant to the directions of the Hon'ble Dispute Resolution Panel (,DRP'), draft assessment order passed I.T.A. No.2074/DEL/2014 2 by Learned AO and the orders dated January 08, 2013 and February 02, 2014 passed by Additional Commissioner of Income Tax, Transfer Pricing1 (1), New Delhi ('Learned TPO'), is bad in law and void abinitio. 2. That on facts and in law, the Learned AO has erred in computing the total income of the Appellant at INR 66,75,13,660 as against the returned income of INR 37,65,99,859 by making an upward adjustment of Rs 28,92,41,993 and INR 16,71,808 with respect to transfer pricing (UTP") and corporate tax matters, respectively. Part I Transfer Pricing Grounds 3. That on facts of the case and in law, the DRPI TPO/AO have erred in rejecting the economic analysis undertaken by the Appellant by conducting a fresh economic analysis for international transactions pertaining to provision of software development services, provision of Information Technology ("IT') back office support service and presales marketing and post sales technical support service (impugned transactions") 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 impugned transactions. 5. That on facts of the case and in law, the DRP ITPO/AO have erred by identifying companies which are engaged in providing Knowledge Process Outsourcing services as compared to the Appellant for the benchmarking of the international transaction pertaining to IT back office support services. 6. That on facts of the case and in law, the DRP/ TPO/AO have erred in selecting companies in the final set of alleged comparables which have different business/operating models as compared to the Appellant for the impugned transactions. 7. That on facts of the case and in law, the DRP ignored the principle of natural justice by not a giving a finding on the I.T.A. No.2074/DEL/2014 3 additional evidence filed by the Appellant with respect to comparable companies namely Fortune Infotech Limited, Microland Limited and Microgenetics Systems Limited considered for the benchmarking of international transaction pertaining to IT back office support services and ICRA Techno Analytics Limited and Indus Networks Limited for the benchmarking of international transaction pertaining to presales marketing and postsales technical support service. 8. That on facts of the case and in law, the DRP/TPO/AO erred and vitiated the principle of natural justice by not giving due cognizance to the detailed analysis and technical arguments submitted by the Appellant in respect of certain companies considered/rejected for benchmarking of impugned transactions. 9. That on facts of the case and in law, the DRP has grossly erred in giving a direction to rectify the arithmetical errors in the computation of the operating margins of alleged comparable companies in compliance with the Income Tax Act (lithe Act") without appreciating that Indian regulations do not enumerate the methodology for computing operating margins which may apply to the Appellant DRP has erred in directing the TPO to recompute margins