Income Tax Appellate Tribunal Bangalore Cypress Semiconductor Technology ... vs Dcit, Bangalore on 31 July, 2018 IT(TP)A.356 & 313/Bang/2016 Page 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T(TP).A No.356/Bang/2016 (Assessment Year : 201112) Cypress Semiconductor Technology India P. Ltd, No.65/2, Bagmane Tech Park, Block C, "Bagmane Laurel", C. B. Raman Nagar, Bengaluru 560 093 .. Appellant PAN : AABCC2470Q v. Deputy Commissioner of Incometax, Circle 2(1)(1), Bengaluru .. Respondent I.T(TP).A No.356/Bang/2016 (Assessment Year : 201112) (By the Revenue) Assessee by : Shri. T. Suryanarayana, Advocate Revenue by : Shri. C. H. Sundar Rao, CITDRI Heard on : 19.07.2018 Pronounced on : 31.07.2018 ORDER PER LALIET KUMAR, JUDICIAL MEMBER : These are cross appeals by the assessee and the Revenue against the order of the ACIT, Circle 2(1)(1), Bengaluru, dt.28.12.2015, passed u/s.143(3) r.w.s.144C of the Act, in pursuance to the directions of the DRP, for the assessment year 201112. IT(TP)A.356 & 313/Bang/2016 Page 2 02. The grounds raised by the assessee are as under : IT(TP)A.356 & 313/Bang/2016 Page 3 03. The grounds raised by the Revenue are as under : The assessee before us urged only ground nos.8, 9, 10 and 14. The remaining grounds have not been pressed by the AR of the assessee. 04. Brief facts are that the assessee is engaged in the provision of software development services in the designing of Cypress range of products. The Assessee provides services to its parent company in the designing and development of integrated circuits, software and computer aided design tools. During the previous year IT(TP)A.356 & 313/Bang/2016 Page 4 relevant to the Assessment Year (`AY' for short) 201112, the Assessee provided SWD services to its AEs at a price of Rs.1,49,91,75,237/ towards which the TPO made an adjustment of Rs.20,08,18,017/. Initially, a draft assessment order dated 27.03.2015 came to be passed by the Assessing Officer (`AO' for short) in which, inter alia, the aforesaid TP adjustment was proposed to be incorporated. The net margin on cost earned by the assessee is as under : Operating Income Rs.149,91,75,237/ Operating Cost Rs.136,89,75,080/ Operating Profit (Op. Income Op. Rs. 13,02,00,157/ Cost) Operating/Net margin (OP/TC) 9.51% The assessee had selected sixteen comparables in its TP study, as under : SI. Name of the company Average NPI No. 1 Akshay Software Technologies Ltd. 4 2 Bells Softech Ltd. 5 3 FCS Software Solutions Ltd. 30 4 Helios & Matheson Information Technology Ltd. 16 5 LGS Global Ltd. 15 6 Mindtree Ltd 21 7 Omni Ax'S Software Ltd. 2 8 Persistent Systems & Solutions Ltd 20 9 Quinnox Consultancy Services Ltd. 14 10 Reliance Infosolutions Pvt. Ltd. 9 11 Spry Resources India Pvt. Ltd. 28 12 CCE Software Pvt. Ltd. 15 13 Allied Digital Services Ltd. 13 14 Octant Industries Ltd. 1 15 Techprocess Solutions Ltd. 10 16 Maximaa Systems Ltd. 5 ,, Arithmetical Mean 13% However the TPO had rejected 14 comparables and retained only two comparables, namely, Mindtree Ltd and Persistent Systems & IT(TP)A.356 & 313/Bang/2016 Page 5 Solutions Ltd., and had also brought in another eleven comparables. Thus the final list of comparables, as per the TPO were as under : SI. No. Name of the Company 1 Acropetal Technologies Ltd. (seg) 2 eZest Solutions Ltd. 3 EInfochips Ltd. 4 Evoke Technologies Pvt. Ltd.