DCIT, NEW DELHI vs. M/S. BENTLEY SYSTEMS INDIA LTD., NEW DELHI

Briefly stated relevant facts are that the assessee, namely, Bentley India is engaged in marketing and distributing Bentley group products in the Indian markets, besides providing low end Software Development , testing and quality assurance services to Bentley USA. For the assessment year 2010-11 the assessee filed their return of income on 20/10/2010 Declaring a total income of Rs. 3, 02, 26, 580/-and in view of the international transaction of the assessee, Ld. AO referred the matter to the Ld. TPO for determination of the Arm’s Length Price of the international transaction.

The main international transaction of the assessee with its Associated Enterprises (AEs) was the provision of the Software Development Services and IT enabled services. Assessee adopted Transaction Net Margin Method (TNMM) as the most appropriate method and OP/TC as the PLI to benchmark the international transaction relating to Software Development Services. The assessee has arrived at a set of twenty one companies under Software Development Segment with an average margin of 11.43% by using the multiple year data. Margin of the assessee was worked out at 12.67% and the assessee treated the same at Arm’s Length Price.

After considering the comparables submitted by the assessee and also conducting fresh survey, the Transfer Pricing Officer (Ld. TPO) prepared the finalist of comparables

When the assessee filed objections before the Ld. DRP, Ld. DRP considered the objections of the assessee and, inter alia, granted relief to the assessee by directing the Ld. TPO to exclude M/s. E-Zest Solutions and Infinite Data System Private Limited from the final set of comparables. Challenging such a direction, revenue preferred the appeal. The assessee, however, filed cross objections disputing the correctness of the action of Ld. TPO in not accepting the economic analysis undertaken by the assessee, not accepting the use of multiple year data, and the filters adopted by the Ld. TPO and accepted by the Ld. DRP while finalising the set of comparables.

At the outset, Ld. AR brought it to our notice that is an infructuous appeal filed by the Department, because even if the companies, namely, M/s. E-Zest Solutions and Infinite Data System Private Limited are retained in the final set of comparables, still the difference in PLI would be +/-5%, within the limits of the “Safe Harbour Provision” embodied in the rules framed by the board in exercise of its powers under section 92 CA (3), as such delving deeper into the matter is not warranted. He submitted that the arms length margin as per the directions of the Ld. DRP is 14.13% whereas the same after including these two companies would be 17.95%. He filed a working of this calculation. 3

Ld. AR filed a copy of the order dated 19/10/2016 passed by the Hon’ble jurisdictional High Court in PCIT vs. Ameriprise India Private Limited in of 2016 wherein the Hon’ble High Court held that in a situation where even if the figures of comparables were to be included, no adjustment would be permissible due to the fact that the margin of variation would be within the limits of the “Safe Harbour Provision” embodied in the rules framed by the board in exercise of its powers under section 92 CA (3), no questions of law arise.

In this matter, if the submission of Ld. AR turns out to be correct, then the grounds of appeal

With the observations, the appeal of the Revenue is allowed for statistical purposes and the cross objections are dismissed as infructuous.