HUAWEI TECHNOLOGIES INDIA PRIVATE LIMITED,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, AO AS SPECIAL RANGE-3, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A No. 328/Bang/2023 Assessment Year : 2016-17 M/s. Huawei Technologies India Pvt. Ltd., The Assistant SY No. 37, 46, 45/3, Commissioner 45/4 ETC., of Income Tax, KNO 1540, Divyasree AO AS Special Technopark, Range – 3, Vs. Kundalahalli Village, Bengaluru. Bengaluru – 560 037. PAN: AAACH8599L APPELLANT RESPONDENT & ITA No. 355/Bang/2023 Assessment Year : 2016-17 (By Revenue)

Assessee by : Shri Padam Chand Khincha, CA : Shri Sunil Kumar Singh, CIT- Revenue by DR Date of Hearing : 08-08-2023 Date of Pronouncement : 01-11-2023 ORDER

Page 2 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 PER BEENA PILLAI, JUDICIAL MEMBER Present cross appeals by assessee and revenue are against the order passed by the Ld.CIT(A)-12, Bengaluru dated 24.02.2023 u/s. 250 of the act for A.Y. 2016-17 on following grounds of appeal. Grounds of appeal by Assessee: “Based on the facts and circumstances of the case and in law, Huawei Technologies India Private Limited (hereinafter referred to as "HTIPL" or "the Appellant"). respectfully craves leave to prefer an appeal against the order passed by the Learned Commissioner of Income-tax (Appeals) — 12, Bengaluru ("hereinafter referred to as "Ld. CIT(A)") dated 24 February 2023 under Section 250 of the Income-tax Act, 1961 ("the Act") on the following grounds: That on the facts and circumstances of the case and in law. General grounds 1. Impugned order passed by the Ld. CIT(A) and the Learned Assessing Officer ('Ld. AO") pursuant to the order of the Transfer Pricing Officer — 3(1)(1), Bengaluru ("Transfer Pricing Officer" or "Ld. TPO") are based on incorrect appreciation of facts and incorrect interpretation of law, and therefore, bad in law. 2. The Ld. AO/ TPO, erred in assessing the total income of the Appellant at INR 2,01,56,28.070, as against returned income of INR 72,23,42,710. Grounds relating to transfer pricing matters: 3. The Ld. AO/ TPO. erred in making an addition of INR 1,29,32,85,364 to the total income of the Appellant on account of adjustment in the Arm's Length Price ("ALP") for the international transaction of software development services undertaken by the Appellant with its Associated Enterprises (`AEs"). The Ld. CIT(A) has erred in law and in facts by upholding the action of the Ld. AO/ TPO in: 4. Not accepting the economic analysis undertaken by the Appellant in accordance with the Act read with the Income- tax Rules, 1962 ("the Rules"), conducting a fresh economic

Page 3 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 analysis by applying new filters for the determination of ALP and holding that the Appellant's impugned international transactions are not at arm's length. 5. Considering the functions performed under the IT services segment to be similar to that of software development services segment and computing the margins of the Appellant for the entity as a whole for undertaking TP analysis. 6. Invoking provisions of clause (c) of sub-section 3 of Section 92C read with Section 92CA of the Act contending that information/ data used in computation of ALP is not reliable or correct and rejecting the TP documentation maintained by the Appellant thereby arriving at a different ALP. 7. Incorrectly applying the following quantitative and qualitative filters: a) Rejecting the filter applied by the Appellant for eliminating companies having research and development (R&D) expenses more than 3 percent of sales. b) Rejecting the filter applied by the Appellant for eliminating companies having more than 200 percent of net fixed assets of turnover. c) Applying the current year data filter while undertaking search for comparable companies. thereby accepting only those companies whose data is available for FY 2015-16 d) Applying different accounting year filter as a comparability criterion (i.e., rejecting companies having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months) e) Rejecting certain comparable companies using employee cost greater than 25 percent of the total operating revenue as a comparability criterion. f) Rejecting certain comparable companies using export sales less than 75 percent of total sales as a comparability criterion.

Page 4 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 g) Applying only the lower turnover filter of less than INR 1 crore as a comparability criterion and not applying a higher threshold limit for turnover filter. h) Applying modified related party transaction ("RPT") filter to reject companies, which included application of the filter in two separate legs as provided below.  An RPT filter for the revenue transactions only (RPT revenue greater than 25 percent of total sales)  An RPT filter for the expense transactions only (RPT expenses greater than 25 percent of total expenses) i) Applying a filter of 75 percent of operating revenue from software development services. for rejecting comparable companies. j) Applying persistent loss filter for rejecting companies that have incurred loss for any 2 out of preceding 3 years. 8. Rejecting companies while carrying out the comparability analysis without evaluating comparability based on the financial data for the year preceding the current year in accordance with Rule 10B(5) of the Rules. 9. Collecting selective information of the companies by exercising power granted under Section 133(6) of the Act that was not available to the Appellant in the public domain and relying on the same for comparability purposes in denial of natural justice. 10. Rejecting certain functionally comparable companies based on unreasonable comparability criteria for the software development service segment. i. Melstar Information Technologies Limited ii. Tera Software Limited iii. Sasken Communication Technologies Limited (seg) iv. Akshay Software Technologies Limited v. Yudiz Solutions Private Limited vi. Smartcloud Infoservices Private Limited vii. Benchmark IT Solutions India Private Limited 11. Rejecting certain functionally comparable companies based on unreasonable comparability criteria for the IT service segment - i. Kellton Tech Solutions Limited ii. Net Access India Limited iii. Locuz Enterprise Solutions Limited

Page 5 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 iv. P C S Technology Limited v. Accel Frontline Limited vi. Allied Digital Services Limited vii. D C M Limited viii. Take Solutions Limited 12. Not considering the following companies engaged in similar activity as comparable to the Appellant while undertaking search for software development service segment. i. Maveric Systems Limited ii. Celstream Technologies Private Limited iii. Batchmaster Software Private Limited iv. Isummation Technologies Private Limited v. Sagarsoft (India) Limited vi. Extentia Information Technology Private Limited vii. InfoMile Technologies Limited 13. Accepting certain functionally non-comparable companies based on unreasonable comparability criteria for the software development service segment: i. Inteq Software Private Limited ii. R S Software (India) Limited iii. Larsen & Toubro Infotech Limited iv. Nihilent Technologies Private Limited v. Infobeans Technologies Limited vi. Thirdware Solution Limited vii. Cybage Software Private Limited 14. Erroneously computing the operating margins of the comparable companies and the Appellant by not considering certain expenses/ income on the premise that these are not routine operating costs/ income, without providing any cogent reason to substantiate the findings 15. Not making suitable adjustments to account for differences in the risk profile of the Appellant vis-a-vis the comparable companies. Consequential grounds: The Ld. AO/ TPO have erred, in law and in facts in. 16. Initiating penalty proceedings under Section 271(1)(c) of the Act. 17. Consequential Interest: 17.1 Levying an interest of INR 21,67,23,388 in the assessment order under Section 234B of the Act.

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17.2 Levying an interest of INR 42,42,922 in the assessment order under Section 234C of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law.”

Grounds of appeal by Revenue: “1. Whether the CIT(A) was right in fact and in law in rejecting Persistent Systems Limited on the ground of functional dissimilarity by seeking exact comparability, while searching for comparable companies of the assessee under TNMM whereas the requirements of law and international jurisprudence require seeking similar comparables companies? 2. Whether the CIT(A) was right in fact and in law in rejecting, Infosys limited as comparables on the ground of functional dissimilarity and high turnover by seeking exact comparability, while searching for comparable companies of the assessee under TNMM whereas the requirements of law and international jurisprudence require seeking similar comparables companies? 3. Whether the CIT(A) was right in fact and in law in rejecting Aspire Systems India Put Ltd. as a comparable on the basis of extraordinary event viz; amalgamation without considering the turnover of the comparable and the value of the net assets taken over by it while holding that amalgamation would impact its profits. 4. Whether while seeking the comparability as mentioned above the CIT(A) was right in fact and in law in imposing conditions beyond law whereas the requirement of law is to acknowledge only those differences that are likely to materially affect the margin. 5. Whether the Hon'ble CIT(A) was right in fact and in law is not acknowledging that determination of ALP by carrying out comparability analysis of the comparable

Page 7 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 companies is an art and not exact science as no two companies are exactly same. 6. Whether the CIT(A) was right in fact and in law in demanding comparability standards that may itself defeat the purpose of law relating to determination of ALP under the Income Tax Act. 7. Whether on the facts and the circumstances of the case the CIT(A) was right in not considering that under TNMM the comparability of an international transaction with an uncontrolled transaction has to be seen with reference to the functions performed, assets employed, and the risks assumed by the respective parties to the transactions as per Rule 1 OB(2)(b). 8. Whether on the facts and the circumstances of the case the CIT(A) was right in not considering that Rule 108(3) mandates that a given or select uncontrolled transaction selected in terms of Rule 1 OB(2) Shall be comparable to an international transaction" if none of the differences, if any, between the compared transactions are likely to materially affect the price or cost charged or paid or the profit arising from such transactions in the open market and that the mere circumstance of a company presenting a peculiar feature such as a huge turnover, ipso facto will not lead to its exclusion. 9. Whether on the facts and circumstances of the case, the CIT(A) was right in holding that the taxpayer is entitled to working capital adjustment despite the fact that the taxpayer did not demonstrate with data as to how such difference impacted its profits. 10. Whether on the facts and circumstances of the case, the CIT(A) erred in not relying on the decision of ITAT Chennai in the case of Mobis India Vs DCIT (TS-235-ITAT- 2013(CHNY)-TP) where the claim of the assessee for working capital adjustment was rejected on the ground that the assessee was unable to justify the adjustment to be made on account of negative working capital as the assessee could not show the impact of the negative working capital on its margin. 11. Whether on the facts and circumstances of the case, the CIT(A) erred in not recognizing that reasonable accurate working capital adjustment is not possible as the

Page 8 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 differences in working capital requirement is itself based on various assumptions.”

Brief facts of the case are as under: 2. HTIPL, the assessee before us having its registered office at Bangalore was incorporated in India with limited liability on 04.09.2000 and is a subsidiary of Huawei Tech Investment Company Ltd., Hong Kong (“Huawei Hong Kong”), which is in- turn a subsidiary of Huawei Technologies Company Ltd. (“Huawei China”). The assessee is registered under the Software Technology Parks of India Scheme at Bangalore with effect from 27.03.2001. During the year under consideration, assessee rendered software development (“SWD”) services and IT services in the field of telecommunications to its AE’s.

2.1 It is submitted that under the SWD services segment, the assessee develops and supplies computer software and tests the existing programs. And under the technical support services (ITeS), the assessee provides the following services.  Network Operation Support Service ("NOS"): Under NOS, HTIPL provides services such as real-time network monitoring, fault management, proactive management, network change management, service fulfilment support with quality assurance in order to comply with key performance indicator targets.

Page 9 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023  Technical Support Services ("TSS"): Under TSS, HTIPL ensures that the existing programs are functioning effectively and there is no problem in its infrastructure. If any issue arises, at the request of Huawei China, HTIPL provides technical support services to Huawei group entities. It was submitted that the services under the technical support services were rendered for the first time by the assessee during the FY 2015-16. Such services were rendered from October 2015. These services had not been rendered in any of the earlier previous years. The Ld.TPO noted that the assessee was remunerated at cost plus mark-up of 13% both for provision for SWD services and provision for IT (support) services being ("ITeS").

2.2 The assessee filed its original return of income on 30.11.2016, declaring a total income of INR 72,23,42,710. The case was selected for scrutiny and reference was made to the Ld.TPO to determine the arm's length price ("ALP") of the international transactions the assessee had with its associated enterprises ("AEs").

2.3 On receipt of the reference, the Ld.TPO noted that assessee had following international transactions with its AEs.  Provision of Software development services ("SWD") – INR 7,95,04,85,139  Provision of IT services ("ITeS") - INR 45,43,24,895  Drawdown of External Commercial Borrowing –

Page 10 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 INR 56,10,65,000  Interest Paid on External Commercial Borrowing – INR 17,94,95,695  Purchase of Fixed Assets - INR 32,39,87,798 2.4 The Ld.TPO noted that assessee had undertaken the analysis by adopting TNMM as the most appropriate method with PLI to be OP/OC. The assessee had identified following 8 comparables under the SWD segment as well as the ITeS segment as under: SWD Weighted average unadjusted Sl.No. Name of comparable company margin (OP/OC)(%) Melstar Information Technologies 1. -3.43% Limited 2. Akshay Software Technologies Limited 0.04% 3. C G-V A K Software & Exports Limited 10.53% 4. Tera Software Limited 11.74% 5. Cigniti Technologies Limited 19.39% 6. Tata Elxsi Limited 21.90% 7. R Systems International Limited (seg) 24.40% Sasken Communication Technologies 8. 32.73% Limited (seg) 35th Percentile 10.53% Median 15.57% 65th Percentile 21.90%

ITeS OP/OC as per Sl.No. Name of the company Appellant 1 Locuz Enterprise Solutions Ltd. 1.12% Allied Digital Services Ltd. - 2 1.62% Infrastructure Management Services Take Solutions Ltd. - Sale Of IT 3 3.64% Infrastructure Et Support services

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4 D C M Ltd. - I T Business 6.12% 5 Net Access India Ltd. 9.97% 6 P C S Technology Ltd. 10.65% 7 Accel Frontline Ltd. - IMS 17.55% 8 Kellton Tech Solutions Ltd. 24.31% No of comparables 8 35th Percentile 3.64% Median 8.05% 65th Percentile 10.65% 2.5 The Ld.TPO noted that assessee computed its margin at 13.03% for SWD segment and 13% for ITeS segment and the comparables under SWD segment, the average margin was computed at 15.57% and 8.04% for ITeS segments. The assessee had thus treated its transaction to be at arms length.

2.6 The Ld.TPO dissatisfied with the approach adopted by assessee aggregated the ITeS and SWD segment into one single segment being SWD services. The Ld.TPO considered the functions performed by the assessee under ITeS service segment to be similar to that of SWD service segment and computed the margins of the assessee for the entity as a whole and recomputed the operating margin of assessee at 7.2%.

2.7 The Ld.TPO then undertook the selection of fresh comparables consisting of 14 companies that had an average median of 27.28%, the details of the comparables so selected by the Ld.TPO are as under:

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Weighted average Sl. No. Name of comparable company unadjusted margin (OP/OC)(%) Kals Information Systems Private 1 8.60% Limited 2 E-Zest Solutions Limited 10.87% 3 Rheal Software Private Limited 14.50% 4 C G-V A K Software & Exports Limited 18.50% 5 R S Software (India) Limited 20.87% 6 Larsen & Toubro lnfotech Ltd 24.83% 7 Nihilent Limited 26.36% 8 Inteq Software Private Limited 28.20% 9 Persistent Limited 30.89% 10 Infobeans Technologies Limited 32.42% 11 Thirdware Solution Limited 36.90% 12 Infosys Limited 38.61% 13 Aspire Systems (India) Pvt. Ltd. 39.28% 14 Cybage Software Pvt. Ltd. 66.45% 35th Percentile 20.87% Median 27.28% 65th Percentile 32.42%

2.8 The Ld.TPO while recomputing the assessee’s margin, considered the gain / loss arising out of foreign exchange fluctuation to be operating in nature. The Ld.TPO thus computed an adjustment of Rs.1,56,62,49,989/- u/s. 92CA of the act. On receipt of the transfer pricing order, the Ld,AO passed the draft assessment order on 09.12.2019 by incorporating the transfer pricing adjustment proposed by the Ld.TPO. Subsequently, assessee informed the Ld.AO that, it is proposing to approach this Ld.CIT(A) and it would not be filing objections against the draft assessment order with the DRP.

Page 13 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 Accordingly, an assessment order was passed on 30.01.2020 making the addition in the hands of the assessee at Rs.1,29,32,85,364/-. Aggrieved by the order of the Ld.AO, assessee filed appeal before the Ld.CIT(A).

2.9 Before the Ld.CIT(A), assessee raised the grounds challenging aggregation of ITeS and SWD segment of the assessee, recomputation of operating margin of the assessee and inappropriate selection of certain comparables under SWD segment.

2.10 The Ld.CIT(A) after considering various submissions of the assessee confirmed the action of the Ld.AO regarding aggregation of ITeS and SWD segments. The Ld.CIT(A) relied on the order of this Tribunal in assessee’s own case for A.Ys. 2012-13 to 2014- 15, and held that as no distinction has been made in respect of the services rendered by the assessee and the entire service segment was benchmarked under SWD services, during 2012-13 to 2014-15, upheld the action of the Ld.AO. The Ld.CIT(A) also agreed with the recomputation of operating margin of the assessee and that of the comparables.

2.11 Regarding the inappropriate selection of certain comparables challenged by the assessee, the Ld.CIT(A) accepted the exclusion of 3 companies being Infosys Ltd., Aspire Systems India Pvt. Ltd. and Persistent Systems Ltd. In respect of

Page 14 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 remaining comparables, the Ld.CIT(A) upheld the action of the Ld.AO. The Ld.CIT(A) also dismissed the grounds wherein assessee sought inclusion of certain comparables engaged in similar activities as that of assessee. Aggrieved by the order of the Ld.CIT(A), assessee and revenue are in appeal before this Tribunal.

Assessee’s appeal: 3. At the outset, the Ld.AR has submitted that assessee do not wish to press Ground nos. 6-9. Accordingly, these grounds are dismissed as not pressed. It is submitted that Ground nos. 1 & 2 are general in nature and therefore do not require adjudication. The Ld.AR has submitted that Ground nos. 3-5 are effective grounds in respect of the transfer pricing adjustment made. It is also submitted that Ground nos. 16 and 17 are consequential in nature that does not require any adjudication.

Ground nos. 3-5: 3.1 The Ld.AR submitted that assessee carries out SWD services for its AE and develops, supplies computer software and tests existing programs and also provides technical support services to its AE in China at its request. It is submitted by the Ld.AR that the functions performed by the assessee under ITeS segment are in the nature of technical support services of the network infrastructure provided to the AE and assessee provides NOS services in terms of remote support services to its AE. The Ld.AR

Page 15 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 submitted that in performing these services, the assessee may be required to conduct onsite visits for projects on case to case basis. He thus submitted that the functions of the assessee under ITeS segment are in no way connected to the SWD services provided by the assessee to its AE.

3.2 Referring to page 359 of the paper book, the Ld.AR submitted that assessee has undertaken to benchmark SWD and ITeS segments separately by adopting TNMM as the most appropriate method and the net margin earned from each segment was compared with the weighted average margin earned by the comparable companies engaged in similar services.

3.3 It was thus submitted by the Ld.AR that, the ITeS service segment was a new segment that was introduced by the assessee during the financial year relevant to Assessment Year under consideration. He thus submitted that it is not appropriate to characterise the assessee by aggregating both the segments under the SWD service segment.

3.4 Referring to the observations of the Ld.CIT(A), in assessee’s own case for A.Ys. 2012-13, 2013-14 and 2014-15, the Ld.AR submitted that in those years, ITeS segment was not there and the year under consideration before this Tribunal is the first year when assessee has provided ITeS services to its AE.

Page 16 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 3.5 The Ld.DR on the contrary, relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in the light of records placed before us.

3.6 In order to understand the functions performed by the assessee under SWD and ITeS segment, it is necessary to go through the transfer pricing study report filed by the assessee and identifying the services that has been rendered by it under the relevant segments. The Ld.TPO in the transfer pricing order has observed that assessee operates under two business segments; The Ld.TPO has noted as under: “1. The IT services rendered by the taxpayer is in the nature of providing Network Operating Services (NOS) covering real-time network monitoring, fault management, proactive maintenance etc. According to Rule 10TA(m) "software development services" means,— (i) Business application software and information system development using known methods and existing software tools; (ii) Support for existing systems; (iii) Converting or translating computer languages; (iv) Adding user functionality to application programmes; (v) Debugging of systems; (vi) Adaptation of existing software; or (vii) Preparation of user documentation,

Page 17 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 but does not include any research and development services whether or not in the nature of contract research and development services.] The taxpayer's NOS (Network Operating Service) falls within the categorization of (ii) Support for existing systems; (v) Debugging of systems; (vi) Adaptation of existing software. 1. It is also evident from Form 3CEB that the company is engaged in Software Development Services. 2. Further the taxpayer himself has submitted in the TP study as well as in the response to show cause notices that the categorizations of above mentioned services would be IT services and not IT enabled services.” 3.7 To understand the functions performed by the assessee under the software development services segment and ITeS segment, we also need to go through the TP study report placed at pages 395 of paper book.

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ITeS segment Huawei India, in addition to providing software development services, renders IT services to Huawei China for its facility in Bangalore based on the inter-company agreement dated August 01, 201523 with Huawei China defining the scope24 and nature of the assignments. Huawei India primarily undertakes following services under IT services:  Network Operation Support Service ("NOS"): Under NOS, Huawei India provides services such as real-time network monitoring, fault management, proactive management, network change management, service fulfilment support with quality assurance in order to comply with key performance indicator targets.  Technical Support Services ("TSS"): Under TSS, Huawei India ensures that the existing programs are functioning

Page 22 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 effectively and there is no problem in its infrastructure. If any issue arises, at the request of Huawei China, Huawei India provides technical support services to Huawei group entities.

General Management Functions The functions addressed below are common functions that are carried out by any business irrespective of their size and type. These functions are drivers of every business and are indispensable in the economic environment.  Corporate Strategy Determination: Generally, all policies within Huawei India are determined by its own management who continuously monitor the economic environment surrounding the Indian entity, assess their strategic position within the industry and target to achieve its corporate objective with guidance from Huawei Group.  Finance, Accounting, Treasury and Legal Function: The management in Huawei India is responsible for managing the finance, treasury, legal and accounting functions. In certain areas, wherever necessary, Huawei India is guided by the Huawei Group. Huawei India is also responsible for all local statutory compliance.  Human Resource Management Function: The human resource function at Huawei India is coordinated by its management, which is responsible for recruitment, development and training of the personnel including the

Page 23 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 emolument structure. In this respect, where appropriate, it is guided by Huawei Group policies.

3.8 On analysis of the functions performed by the assessee under both segments, it is clear that the assessee has provided services to its AE under SWD segment as well as ITeS segment. It is noted that the Ld.TPO also has observed that the services rendered by the assessee are under two segments, but still holds the services of the assessee under SWD segment to be similar to that of the functions performed by the assessee under ITeS segment. We also note that the reasoning by the assessee Ld.TPO to aggregate both these segments are not justifiable and therefore cannot be upheld.

3.9 We under such circumstances inclined to remand both these segments back to the Ld.TPO/Assessing Officer to reverify the services rendered by assessee under both the segments vis-à-vis the specific functions performed by it. The Ld.AO shall not forget that, the assessee has admittedly made a statement in respect of ITeS services being rendered by the assessee for the first time in the financial year relevant to Assessment Year under consideration. Accordingly, grounds 3 to 5 are remanded back to the Ld.TPO/AO for denovo consideration. The Ld.AO/TPO is directed to recompute the ALP margin of the assessee under both the segments independently based on respective functions performed by the assessee under each segment in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee.

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Department’s Appeal: 5. The issues raised in the revenue appeal is regarding certain comparables that were excluded by the Ld.CIT(A). As we have remanded the computation of ALP of both segments for denovo consideration to the Ld.AO/TPO, these grounds becomes infructous. Accordingly, the grounds raised by the revenue are dismissed.

In the result, the appeal filed by the assessee stands partly allowed for statistical purposes and appeal filed by the revenue stands dismissed. Order pronounced in the open court on 01st November, 2023.

Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 01st November, 2023. /MS /

Page 25 IT(TP)A No. 328/Bang/2023 & ITA No. 355/Bang/2023 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file By order

Assistant Registrar, ITAT, Bangalore