6th Floor, Building No. 8C, DLF 313, 3rd Floor, C.R. Building, I.P. Cyber City, DLF City PhaseII, Estate, New Delhi Gurgaon PAN : AAACF0927G (Appellant) (Respondent) Appellant by Sh. Himanshu Shekhar Sinha, Advocate Respondent by Sh. T.M. Shiva Kumar, CIT(DR) Date of hearing 01.11.2016 Date of pronouncement 06.01.2017 ORDER PER O.P. KANT, A.M.: This appeal filed by the assessee arises out of the order dated 30/09/2010 passed by the learned Assessing Officer ('AO') under section 143(3) read with section 144C of the Income tax Act, 1961 (for short 'the Act') for assessment year 200607 . This order was passed by the Assessing Officer in compliance to the directions issued by the Dispute Resolution Panel (DRP) dated 21/09/2010. The grounds of appeal raised by the assessee are as under: "1.That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ("AO") is bad in law and void abinitio. 2 ITA No. 5493/Del/2010 AY: 200607 2. That on facts and circumstances of the case and in law, the reference made by the Ld. AO" suffers from jurisdictional error as the Ld. AO did not record any reasons in the draft assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. Transfer Pricing Officer ("TPO") for computation of the arm's length price, as is required under section 92CA(1) of the Income Tax Act, 1961 ("Act"). 3. That on facts and circumstances of the case and in law, Ld. A.O/Ld. TPO/Ld. DRP failed to appreciate that there was no intention of shifting of profits outside India by the Appellant. 4.That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/ Ld. DRP erred in determining the ALP of the Appellant's international transaction at Rs. 73,14,59,416 as ™ against Rs. 63,96,88,383 determined by the Appellant and recommending an addition of Rs. 9,17,71,033 on that account to the Appellant's income. 5.That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/ Ld. DRP erred while making an aforesaid addition of Rs. 9,17,71,033 to the value of international transactions by: (i) failing to consider and appreciate that the business of the Appellant and the group companies is affected by business cycles and therefore multiple year data should be used for computing the arm's length margin under Rule 10B(4) of the Income Tax Rules, 1962 ("Rules"); (ii) rejecting one of the comparables (having low profit margin) selected by the Appellant without any reasonable basis. Further the Ld. AO/ Ld. TPO/Ld. DRP contradicted its own stand by retaining another comparable (having abnormally high profit margin and also having significant related party transactions) which ought to have been excluded based on the rationale used to exclude the aforesaid low margin comparable. (iii) Selecting the Profit Level Indicator (PLF) as Operating Profit/Total Cost ('OP/OC') as against the PLI chosen by the Appellant as Operating Profit/ Operating Income ('OP/OI'); and (iv) rejecting the characterization of the Appellant as 'IT enabled engineering service. 3 ITA No. 5493/Del/2010 AY: 200607 6. That on facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Ld. DRP failed primarily due to idle capacity and accordingly an adjustment to arm's length margin was necessitated under Rule 10B(3)(ii) of the Rules. 7. That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/ Ld. DRP failed to consider and appreciate the fact that an adjustment to the arm's length margin for differential working capital held by the Appellant as compared to external service providers used for arm's length analysis was warranted under Rule 10B(3)(ii) of the Rules. 8. That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/Ld. DRP erred in