Software Operation Pvt. Ltd., Tax, Survey No.192, Whitefield Road, Circle 11(4), Bangalore. Mahadevpura, Bangalore560 048 PAN AAACH 7164H Appellant Respondent. Appellant By : Shri Ajith Jain, C.A. Respondent By : Mrs. Neera Malhotra, CIT (D.R) Date of Hearing : 11.02.2016. Date of Pronouncement : 09.3.2016. O R D E R Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the Assessment Order passed under Section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (in short 'the Act') in pursuant to the directions of Dispute Resolution Panel ('DRP') dt.28.9.2010 under Section 144C(5) of the Act for the Assessment Year 200607. 2 IT(TP)A No.1456/Bang/2010 2. The assessee has raised the following concise grounds : Transfer Pricing 1. The order passed by the Honorable Dispute Resolution Panel ("DRP") and the learned Assessing Officer ("AO") / Transfer Pricing Officer ("TPO") is not in accordance with the law and is contrary to the facts and circumstances of the present case and in any case in violation of the principle of equity and natural justice. 2. The Honorable DRP and the learned AO/TPO erred in fact and in law in determining the Arm's Length Price ("ALP") by adopting the financial data for a single year [i.e. the financial year 200506] of the comparables as against multiple year data considered by the Appellant. 3. The learned TPO has erred in selecting companies as comparable to the Appellant despite such companies failing the test of comparability and reliability on some or all of the factors such as functional dissimilarity and product led revenues. 4. The leaned TPO has erred in adopting a faulty process of selection of comparable companies without taking into account aspects such as the influence of extraordinary events, abnormality in the financial results of the concerned year, reliability of the financial data and the failure of his own filters. 5. The Honorable DRP and the learned AO/TPO erred in fact and in law in using selective information, which was not available in public domain, obtained under section 133(6) of the Incometax Act, 1961 ("the Act") without any independent validation of the data provided and by ignoring the inconsistencies therein with the information available in public domain, including the audited financial statements, of the comparable companies. 6. The learned TPO erred in computing the operating margins of the comparable companies at higher levels and determining the operating margin of the Appellant to be lower than the margin actually earned by the Appellant. The Honorable DRP and the learned AO have erred in upholding the same. The exercise of computation of margins ignores certain items which ought to have been considered as operating or nonoperating items, as the case may be, and also ignores risk adjustments to the margins of the comparable companies 3 IT(TP)A No.1456/Bang/2010 7. The Honorable DRP and the learned AO/TPO erred in law and on facts in upholding the arm's length margin arrived at by the learned TPO by not considering the lower range of 5 percent from the mean margin as allowed under the Act and the Incometax Rules, 1962 ("Rules"). 8. Without prejudice to all of the above, the Honorable DRP and the learned AO / TPO have erred in facts and in law in applying the provisions of transfer pricing to the Appellant without appreciating the fact that the Appellant was entitled to tax holiday under section 10A of the Act during the relevant year and therefore there would be not be any motive to shift profits to the other country. Adjustments under the Section 10A of the Act 9. The Honourable DRP and the learned AO has erred in law and on facts in concluding that expenditure incurred in foreign currency are to be excluded from the export turnover for the purpose of computation of relief under the section 10A of the Act. 10. The Honourable DRP and the learned AO has erred in law and on facts in upholding that the said expenditure incurred in foreign currency should not be reduced from the total turnover for the purpose of computation of relief under section 10A of the Act