Kariyammana Agrahara Village Commissioner of Varthur Hobli Incometax Bangalore103 Circle4(1)(2) Bangalore PAN NO : AACCM9437E APPELLANT RESPONDENT Appellant by : Shri Padam Chand Khincha, A.R. Respondent by : Shri Rajesh Kumar Jha, D.R. Date of Hearing : 30.12.2020 Date of Pronouncement : 05.01.2021 ORDER PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the assessment order dated 31.12.2015 passed by the A.O. u/s 143(3) r.w.s 144C of the Act for assessment year 201112 in pursuance of directions given by Ld. Dispute Resolution Panel (DRP). 2. The grounds and additional grounds urged by the assessee give rise to the following issues: a) Addition relating to transfer pricing adjustment b) Disallowance of interest paid on ECB loans. IT(TP)A No.411/Bang/2016 Maxim India Integrated Circuit Design Pvt. Ltd., Bangalore Page 2 of 20 c) Additional depreciation claimed on computers d) Deduction u/s 10A of the Incometax Act,1961 ['the Act' for short] in respect of disallowance of interest on ECB loans and additional depreciation. 3. The assessee has filed a letter dated 9.11.2020, wherein it is stated that the ground No.7 relating to claim of additional depreciation is being withdrawn. Accordingly, the ground relating to the above said issue are dismissed as withdrawn. 4. The facts relating to the case are stated in brief. The assessee herein is a subsidiary of M/s. Maxim International Holdings Inc., USA. The assessee is registered as 100% exportoriented unit in India. Hence it was claiming deduction u/s 10A of the Act. It has got 3 distinct operating divisions, viz., Software development services, ITES services & Marketing services. Since the assessee had entered into international transactions with its Associated Enterprises (AEs), the AO referred the matter of determination of Arms Length Price (ALP) of the international transactions to the Transfer Pricing Officer (TPO). 5. The first issue is relating to the addition made on account of transfer pricing adjustment made by the A.O. The transfer pricing adjustment relates to the Software development segment of the assessee. The turnover of the assessee from this segment for assessment year under consideration is Rs.25.66 crores. The assessee followed TNM method as most appropriate method and profit level indicator (PLI) was taken as Operating profit/Operating revenue. The assessee declared margin of 10.83%. According to the Transfer pricing study conducted by the assessee, its international transactions in respect of Software development segment were at arms length. IT(TP)A No.411/Bang/2016 Maxim India Integrated Circuit Design Pvt. Ltd., Bangalore Page 3 of 20 6. The TPO rejected transfer pricing study conducted by the assessee and selected following 13 companies: Sl. Name Sales Cost PLI No. 1 Acropetal Technologies Ltd. 81,40,16,893 61,67,54,876 31.98% (seg) 2 ezest solutions (from Capitaline) 11,28,66,098 9,32,55,341 21.03% 3 EInfochips Ltd. 26,03,84,251 167,64,47,527 56.44% 4 Evoke (from Capitaline) 14,48,69,912 13,39,96,568 8.11% 5 ICRA Techno Analytics Ltd. (in 15,84,01,000 12,68,94,000 24.83% 000) 6 Infosys Ltd 253850000000 177,030,000,000 43.39% 7 Larsen & Toubro Infotech Ltd. 23318122096 19,764, 861,289 19.83% 8 Mindtree Ltd.