MERCEDES - BENZ RESEARCH & DEVELOPMENT INDIA PRIVATE LIMITED,BANGALORE vs. ASST. C.I.T., BANGALORE

Per Shri Jason P Boaz, A.M. : These are cross appeals, by the assessee and revenue, directed against the order of assessment dt.20.01.2016 passed under Section 2 IT(TP)A Nos.269 & 381/Bang/2016 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short 'the Act'), pursuant to the directions issued by the Dispute Resolution Panel-2, Bangalore (‘DRP’) under Section 144C(5) of the Act dt.14.12.2015. The Assessment Year involved is 2011-12.

2. The learned AO/TPO erred in rejecting the CPM/ CUP method adopted by the Appellant and using Transactional Net Margin Method (“TNMM”) as the most appropriate method for determining arm’s length price; Grounds of objections relating to TNMM:

3. The learned AO/Transfer Pricing Officer (‘TPO’)erred in making an addition of INR 234,637,983 to the total income of the Appellant on account of adjustment in the arm’s length price of the software research and development services transaction entered by the Appellant with its associated enterprise;

4. The learned AO/TPOerred, in law and in facts, by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules, and conducting a fresh economic analysis for the determination of the ALP in connection with the impugned international transaction and holding that the Appellant’s international transaction is not at arm’s length;

4 IT(TP)A Nos.269 & 381/Bang/2016 5. The learned AO/ TPOerred, in law and in facts, by determining the arm’s length margin/ price using only FY 2010-11 data which was not available to the Appellant at the time of complying with the transfer pricing documentation requirements; 6. The learned AO/TPOerred in rejecting certain comparable companies by applying the following quantitative and qualitative filters: a) The learned AO/TPO erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant for having different accounting year (i.e. companies having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months); b) The learned AO/TPO erred in applying ‘employee cost greater than 25% of the total revenues’ as a comparability criterion in the search strategy to identify comparable companies; c) The learned AO/ TPO erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant where consolidated results had been used for analysis. The Appellant had considered the consolidated results in only those cases where the income of the Indian company constituted more than 75% of the consolidated company-wide/ segmental revenues. d) The learned AO/ TPO erred, in law and in facts, by rejecting certain comparable companies identified by the Appellant using export earnings greater than 75% of the sales as a comparability criterion; and e) The learned AO/ TPO erred, in law and in facts, by applying the turnover filter only on lower limit of INR 1 crore and not applying an upper limit of turnover of INR 200 crores;

7. The learned AO/ TPOerred, in law and in facts, by accepting / rejecting companies based on unreasonable comparability criteria; 8. The learned AO/TPO erred, in law and in facts, by wrongly computing the operating margin for some of the comparable companies; 9. The learned AO/ TPO erred, in law and in facts, by artificially restricting the benefit of working capital adjustment of the Appellant and incorrectly computing the same for certain comparable companies; 10. The learned AO/TPO erred, in law and in facts, by incorrectly considering pass through costs in the nature of technical consultancy and software license costs as operating in nature while computing the operating margin of the Appellant; 11. The learned AO/TPO erred, in law and in facts, by not making suitable adjustments on account of differences in the risk profile of the Appellant vis-à-vis the comparables, while conducting comparability analysis;

5 IT(TP)A Nos.269 & 381/Bang/2016 12. The learned AO/TPO erred, in law and in facts, by computing the arm’s length price without giving benefit of +/- 5 percent under the proviso to section 92C of the Act; 13. The learned AO erred, in law and in facts, by levying interest of INR 43,442,290 and INR 744,887under section 234B and 234Dof the Income Tax Act, 1961, respectively. 14. The learned AO erred, in law and in facts, in initiating penalty proceedings u/s 271(1)(c) of the Act.”

3.1.2 The assessee has also filed additional grounds vide letter dt.21.7.2017 :-

6 IT(TP)A Nos.269 & 381/Bang/2016 3.2 The grounds raised in Revenue’s appeal are as under :- “1. The directions of the DRP are opposed to law and facts of the case.

2. The Hon'ble DRP erred in holding that foreign exchange loss or gain is a part of operating expense or operating income, as the case may be, when the TPO has excluded this data form that of the comparables.

3. Whether the DRP is correct in foreign exchange fluctuation as operating in nature, while treating foreign exchange fluctuation non-operating in nature as applied by the TPO.

4. The Hon'ble DRP erred in granting 1% risk adjustment arbitrarily without appreciating the facts of the case and its comparables.

5. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above.” 4.0 Transfer Pricing. 4.1 Before proceeding to deal with the grounds of appeal raised in the cross appeals, the brief facts related to the TP issues are summarized hereunder :- 4.2 For the year under consideration, the assessee reported the following international transactions :- Sl.No. Type of transaction Amount (Rs.) 1 Software development services (Recd) 1,60,51,01,082 2 Communication and Software License Fees 1,67,16,623 (Paid) 3 Reimbursement of expenses (Paid) 8,88,26,530 4 Training Expenses 2,75,273 5 Repairs & Maintenance (Paid) 22,04,444

7 IT(TP)A Nos.269 & 381/Bang/2016 4.3 The financial results reported by the assessee during the year under consideration are as under :

Particulars Amount (Rs.) Operating income 160,51,01,082 Operating Cost 149,68,18,050 Operating Profit (Op. 10,82,83,032 Income – Op. Expenses) Operating / Net Margin 7.23% (OP/TC)

4.4 The assessee conducted a TP Study for the international transactions in respect of its software development activity and applying CUP Method as the Most Appropriate Method (‘MAM’) selected 23 companies as comparables to it after applying certain filters. Based on the comparability analysis carried out, the assessee concluded that its international transactions with the AE are at arm’s length. 4.4 The TPO examined and assessee’s TP Report and rejected the same for the various reasons given in his TP order. The TPO then, adopting TNMM as the MAM conducted his own comparability analysis and applying certain criteria / filters, finally selected the following 13 companies as the final set of comparables.

8 IT(TP)A Nos.269 & 381/Bang/2016 4.5 The TPO computed the ALP of the international transactions of the software development services segment of the assessee as under :-

9 IT(TP)A Nos.269 & 381/Bang/2016 Based on the above computation, the TPO proposed an adjustment of Rs.24,09,24,619 in respect of the international transactions entered into by the assessee with its AEs in the software development services segment which was incorporated in the draft order of assessment for Assessment Year 2011-12 dt.26.3.2015. 4.6 Aggrieved by the draft order of assessment for Assessment Year 2011-12 dt.26.3.2015, the assessee filed its objections thereto before the DRP, which disposed off the same by issuing directions thereon under Section 144C(5) of the Act on 14.12.2015. Pursuant thereto, the Assessing Officer passed the impugned final order of assessment dt.20.1.2016 for Assessment Year 2011-12, wherein the assessee's income was determined at Rs.36,84,82,023 solely due to the Transfer Pricing Adjustment of Rs.23,46,37,983. 4.7 Aggrieved by the order of assessment for Assessment Year 2011-12 passed under Section 143(3) r.w.s. 144C(13) dt.20.1.2016, both Revenue and the assessee have preferred cross appeals. In the course of appellate proceedings, the assessee had filed paper book, case law compendium and chart of comparables seeking inclusion / exclusion of 10 IT(TP)A Nos.269 & 381/Bang/2016 certain companies into / from the list of comparables. We have heard both parties, perused and carefully considered the orders of the TPO, DRP, order of assessment, submissions of learned Departmental Representative for Revenue and the learned Authorised Representative for the assessee; including judicial pronouncements cited and placed reliance upon. We now proceed to dispose off the cross appeals in seriatum hereunder. Revenue’s appeal in IT(TP)A No.381/Bang/2016 5. Ground Nos.1 & 5 are general in nature and therefore no adjudication is called for thereon.

12 IT(TP)A Nos.269 & 381/Bang/2016 of this, reliance was placed on the decision of the co-ordinate bench of this Tribunal in the case of Syniverse Teledata Systems Ltd. (2017) 80 taxmann.com 196 (Bang). 7.2 Per contra, the learned Authorised Representative of the assessee submitted that the working of assessee's claim for risk adjustment was filed before the DRP. However, in the course of proceedings, the learned Authorised Representative of the assessee submitted that ground No.11 of the assessee's appeal related to risk adjustment is not being pressed. 7.3.1 We have heard both parties, perused and carefully considered the material on record. We find that the DRP, at para 14 of its order, had relied on its decision in the earlier Assessment Year 2010-11 and directed the TPO to allow risk adjustment and decide the percentage of risk adjustment to be allowed. As a matter of guidance, the DRP referred to a decision of the ITAT, Hyderabad in the case of Hello Soft Pvt. Ltd. (supra) wherein 1% risk adjustment was allowed. From the above, it is seen that the DRP has merely referred to a decision in which 1% risk adjustment was granted and it is not correct to say that DRP directed that 1% risk adjustment is to be granted in this case. 7.3.2 The Bangalore Benches of the Tribunal, while allowing risk adjustment to captive service providers, as a matter of principle has held in many cases, ;including the one cited (supra), that risk adjustment cannot be granted unless the assessee has submitted computation of the same before the authorities below. In the case on hand, we find that though the assessee in Form 35A submitted before the DRP, at 13 IT(TP)A Nos.269 & 381/Bang/2016 Annexure/Objection 13 thereof, mentioned risk adjustment at 4.92%, no scientific basis or working in respect of the assessee's claim vis-à-vis the comparable companies had been provided. Even on pages 890 & 891 of paper book (Annexure 9-B), no working has been given in respect of risk adjustment claimed at 6.26% vis-à-vis the comparable companies. Since the assessee has not given the computation of risk adjustment of the assessee vis-à-vis the comparable companies, we hold that the assessee shall not be entitled to any risk adjustment and accordingly reverse the DRP’s decision granting the assessee risk adjustment. In coming to this view, we place reliance on the decision of the co-ordinate bench of this Tribunal in the case of Syniverse Teledata Systems (P) Ltd. (2017) 80 taxman.com 196 (Bang-Trib) which covers the issue squarely in favour of the revenue in the light of the factual matrix of the case. Consequently, Ground No.4 of Revenue’s appeal for Assessment Year 2011-12 is allowed.

14 IT(TP)A Nos.269 & 381/Bang/2016 10.2 Under the CUP Method, the assessee had compared the hourly rates charged by the assessee to the AE with the man hour rates adopted by other leading software companies whose information was available in the public domain. In the course of proceedings, it was brought to our notice that a co-ordinate bench of this Tribunal had considered and decided this issue against the assessee in the assessee's own case for the earlier year i.e. Assessment Year 2010-11. In its order in IT(TP)A No. 291/Bang/2015 at para 6 thereof the co-ordinate bench held as under : “ 6. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. At the outset we note that an identical issue has come up before this Tribunal for the Assessment Year 2008-09 and vide order dt.16.3.2016 in IT(TP)A No.1336/Bang/2012 the Tribunal has held in paras 5.5 to 5.8 as under :

“ 5.5 Against the Cost Plus Method, the assessee states that OECD guidelines called for adoption of this method in cases where semi-finished goods are sold between associates or where there are long term buy and supply arrangements or in the case or provision of services, particularly where these are of subsidiary or peripheral nature. It was stated that appropriate method for attracting R&D services is Cost Plus Method which is ideally suited for the case of the assessee. It was submitted that all costs have been considered and arrived at the gross profit and operating profit margin of around 32% is quite reasonable. The net margin of 5% of overall cost is also very significant and reasonable, especially because the company does not resume any significant business risks. Thereafter, the assessee has taken 15% of the profits of companies who have R&D activities as per decision of ITAT in Rolls Royce case and analysed the Cost Plus Method.

5.6 However, as the ld. TPO has stated in the report, there is no data furnished by the assessee with reference to Cost Plus method. Even when we enquired, the ld. counsel fairly admitted that assessee would prefer

15 IT(TP)A Nos.269 & 381/Bang/2016 CUP method over Cost Plus Method. In view of this, in the absence of any data, we are not in a position to appreciate the Cost Plus Method. More over, most of captive service provides work on Cost Plus Method ranging from 5% mark-up to 25% mark-up. All the transactions are related party transactions. Therefore, uncontrolled comparable prices are generally not available in the Cost Plus Method. Even the assessee’s analysis of 32% Gross Profit and 5% Net Profit cannot be accepted as there cannot be any Gross Profit in the case of assessee, who is operating on Cost Plus Method. More over, even though the assessee is stated to have been operating on Cost Plus 5% Method, OP/Cost as computed by the assessee itself is at 3.2% and if foreign exchange gain was added to the operating margin, then only it comes to 5%. Generally in a Cost Plus situation, the entire cost spent by the assessee with a mark-up of 5% would be billed to the AE on a periodical basis. The conversion generally done at the prevailing rate of USD or foreign currency involved. Therefore, the basic concept is the margin would be about 5%. In case of any foreign exchange gain, this could increase the margin to that extent. In case of foreign exchange loss on the USD / foreign currency quoted by the assessee, then the margin would come down to that extent. However, as seen in this case, the margin without foreign exchange gain itself is less than 5%. Therefore, in the absence of correct cost structure and billing procedure, it is very difficult to accept the Cost Plus Method and analyse the issue.

5.7 The next contention of the assessee is with reference to CUP method. The assessee states in the Annexure III to 3CEB report that ‘there are no internal comparables within the group as entire services of assessee are bought back by AE. Offshore software development work by other companies may represent external comparables. However, data in respect of the same which is available in terms of Euros per hour is not comparable without making suitable adjustments to the differences in the nature and terms of contract/transactions’. As necessary information required for these adjustments is not readily available in the public domain, assessee submits that this cannot be done. Thereafter, assessee proceeded to analyse and submit that on a rough and ready basis, this analysis was done with reference to rates charges by major Indian companies although the functions performed or risk assumed by them are significantly higher, as this will provide the connection of upper price charge at which arm’s length transactions takes place. The assessee has given Annexure-IV working out the USD rates and INR rates worked out at rate per hour to submit that this was external CUP and assessee’s margin at Rs.1333.63 is higher than other comparable companies. After

16 IT(TP)A Nos.269 & 381/Bang/2016 examining Annexure-VIII of the report, we have asked the ld. counsel about the working adopted by the assessee in arriving at the rate per hour either in USD terms or INR terms. It was submitted that by taking general accounts and annual repot of the respective companies, assessee has derived offshore consultancy amount and thereafter assumed the persons who have worked offshore and then the rate per day at 20 days per month working and rate per hour at 8 hours per day, thus on various assumptions and presumptions, the rate per hour was arrived from the total profits as reported in the public domain. It was fairly admitted that rate per hour is not available for strict comparison. It was also submitted that the assessee has not taken NASCOM rates as the basis in comparing the rate per hour. This indicates that assessee’s comparability under the CUP method is based on various assumptions of (a) estimating the offshore profits, (b) estimating number of employees, (c) estimating the working hours per employee per day per month, and then dividing the profit by so many assumptions/ numbers. This analysis of the assessee cannot be relied on as an external CUP. As can be seen from the above, there is no internal CUP which can be relied on in order to accept the CUP method. Therefore, in our view, the analysis undertaken by the assessee is not only faulty, but devoid of any data or proper analysis. In view of this, we have no option than to accept the TPO’s contention of TNMM as the most appropriate method.

5.8 Under section 92C of the Act, ALP has to be examined adopting the most appropriate method. Section 92C prescribes five methods – CUP, RPM, CPM, PSM and TNMM. Rule 10C provides the relevant guidelines for analyzing the most appropriate method to be selected. Under the Indian TP regulations, there is no priority or preference to any of the methods. There are also no regulations which prescribe any circumstances under which method is to be adopted, except for PSM. The above 5 methods are categorised generally as 1.Traditional methods i.e., CUP, RPM and CPM, and 2. Transactional profit methods of PSM and TNMM. In the absence of reliable data to undertake the exercise under the traditional methods, the only option is go for the transactional profit methods, when standard methods are not reasonably applied. In view of absence of reliable data either to adopt Cost Plus Method or to analyse the data on the basis of CUP method, either internal CUP or external CUP, we are of the opinion that under given facts and circumstances of the case, TNMM is the only option available to the TPO to analyse the assessee’s transactions in order to arrive at the ALP. Therefore, we reject the assessee’s contentions on 17 IT(TP)A Nos.269 & 381/Bang/2016 CUP/CPM as most appropriate method and approve the approach taken by the TPO for analyzing transactions under TNMM.”

The assessee has not disputed that the facts and circumstances for the year under consideration are identical as for the Assessment Year 2008- 09. Accordingly, following the earlier order of this Tribunal in assessee's own case this issue is decided against the assessee and confirmed the order of the TPO in adopting TNMM as MAM.”

10.3 Following the aforesaid decision of the co-ordinate bench in the assessee's own case for Assessment Year 2010-11 (supra), we decide the issue against the assessee and confirm the order of the TPO in adopting TNMM as the MAM. Consequently, ground No.2 of the assessee's appeal is dismissed.

19 IT(TP)A Nos.269 & 381/Bang/2016 i) Akshay Software Technologies Ltd. ii) Cat Technologies Ltd. iii) LGS Global Limited iv) Silverline Technologies Ltd. v) Caliber Point Business Solutions Ltd. vi) Helios & Matheson Information Technology Ltd. vii) R Systems International Ltd.

20 IT(TP)A Nos.269 & 381/Bang/2016 Representative placed reliance, inter alia, on the following decisions of the co-ordinate benches of this Tribunal in the cases of - i) AMD India P. Ltd. in IT(TP)A No.1487/Bang/2015 dt.6.4.2017 for Assessment Year 2011-12; and ii) Applied Materials India Pvt. Ltd. in IT(TP)A Nos.17 & 39/Bang/2016 dt.21.9.2016 for Assessment Year 2011-12. 12.3 Per contra, the learned Departmental Representative for Revenue supported the orders of the authorities below in including these companies in the final set of comparables. 12.3.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. We have perused the orders of the authorities below and the grounds of objections raised by the assessee before the DRP in respect of the issue of exclusion of the aforesaid 7 companies. It is seen therefrom, that while the assessee has filed its objections in respect of exclusion of the aforesaid comparables before the DRP at Ground of objection 9 at pages 74 to 98 thereof, the DRP in its order has only addressed the issue of inclusion / exclusion of two of the above comparables; (i) Acropetal Technologies Ltd. and (ii) E-Zest Solutions Ltd. at paras 10.6 to 10.7 of its order respectively while disposing off the assessee's grounds of objection No.9. The objections raised by the assessee in respect of the other five companies listed in para 12.1 above i.e. i) E-Infochips Limited ii) ICRA Techno Analytics Ltd. iii) Infosys Technologies Ltd. iv) Tata Elxsi Limited (Seg.) and v) Persistent Systems & Solutions Ltd. have not been addressed by the DRP and we find that 21 IT(TP)A Nos.269 & 381/Bang/2016 there is not even a mention of these companies in the DRP’s order. In this factual matrix of the case, we deem it absolutely necessary and appropriate to remand the issue of comparability of the aforesaid five companies (supra) to the file of the DRP for examination and adjudication on the objections raised by the assessee praying for their exclusion in the light of certain judicial pronouncements and the facts of the case on hand, after affording the assessee adequate opportunity of being heard in the matter. We hold and direct accordingly.

22 IT(TP)A Nos.269 & 381/Bang/2016 13.2 Per contra, the learned Departmental Representative for revenue supported the orders of the authorities below in including this company in the final set of comparables. 13.3.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. We find that the DRP has observed that this company, ‘Acropetal’, operates in three segments and the segmental results are available; while on the contrary the assessee contends that ‘Acropetal’ operates in four segments. Further, it is seen that even though the assessee has raised the other issues before the DRP, as laid out in para 13.1 of this order, the DRP has not rendered any finding thereon. We find that the co-ordinate bench of this Tribunal in the case of AMD India Pvt. Ltd. (supra) relied on by the assessee has excluded ‘Acropetal’ on the ground that it fails the service income filter of 75%; a ground apparently not put forth by the assessee before the authorities below. 13.3.2 Considering the facts and circumstances of the case, as discussed above; that the DRP has not rendered findings on some of the issues raised by the assessee before it and there is a contradiction in the number of segments that this company ‘Acropetal’ operates in, we are of the opinion that it is necessary to remand the issue of comparability of this company back to the file of the DRP for examining and adjudication of the issues raised by the assessee, after affording the assessee adequate opportunity of being heard in the matter and to file details /

23 IT(TP)A Nos.269 & 381/Bang/2016 submissions in this regard, which shall be duly considered. We hold and direct accordingly.

14.3.2 Respectfully following the decision of the co-ordinate bench of this Tribunal in the case of AMD India P. Ltd. for Assessment Year 2011- 12 (supra), we uphold the inclusion of this company, E-Zest Solutions Ltd.

25 IT(TP)A Nos.269 & 381/Bang/2016 in the list of comparables. Consequently, the assessee's ground on this company fails.

Addl. Ground No.16 -Inclusion of companies sought for by the assessee. 15.1 The assessee seeks exclusion of the following seven comparables :- i) Akshay Software Technologies Ltd. ii) Cat Technologies Ltd. iii) LGS Global Limited iv) Silverline Technologies Ltd. v) Caliber Point Business Solutions Ltd. vi) Helios & Matheson Information Technology Ltd. vii) R Systems International Ltd. 15.2 In the course of proceedings before us, the learned Authorised Representative of the assessee submitted that these 7 companies (supra) are all comparable to the assessee in all respects and that the TPO has rejected these companies on incorrect reasons / factors. On being specifically asked at the Bar, the learned Authorised Representative also accepted that the objections were raised by the assessee before the DRP against exclusion of these companies, but the DRP has not dealt with or addressed the issues raised.

15.3 We have heard the rival contentions, perused and carefully considered the orders of the authorities below. It is seen that the TPO

26 IT(TP)A Nos.269 & 381/Bang/2016 has rejected these comparables chosen by the assessee with a single line explanation in the table at para 6.1 of his order under Section 92CA of the Act. As was pointed out to us, many of the companies have been rejected on the ground that data was not available or that data was not available in the Prowess data base. The DRP too has not rendered a proper finding in respect of each of the 7 comparables listed above. In some cases, the DRP has given a cryptic one line – observation, without dealing with the issues raised by the assessee in objections before the DRP. Some of these companies have not been addressed / adjudicated at all as there is no mention of these companies in the DRP order. In this factual matrix of the case, we are of the considered view that it is necessary and appropriate to remand the issue of comparability of the above 7 companies to the file of the DRP for examining the issues and adjudication on each of these companies, on the issues raised by the assessee, after affording the assessee adequate opportunity of being heard and to file details / submissions required, which shall be duly considered and disposed off by way of speaking orders. We hold and direct accordingly.

Addl.Ground No.17-Exclusion of companies sought for by the assessee.

16.1 In this ground (supra), the assessee seeks exclusion of the following 3 companies from the list of comparables :- i) L & T Infotech Limited ii) Persistent Systems Limited

27 IT(TP)A Nos.269 & 381/Bang/2016 iii) Sasken Communication Technologies Limited.

16.2 During proceedings before us, the learned Authorised Representative for the assessee stated that the assessee does not wish to press the ground related to exclusion of Sasken Communication Technologies Limited; therefore this ground is dismissed as not pressed and consequently Sasken Communication Technologies Ltd. is retained in the final list of comparables.

16.3 According to the learned Authorised Representative, ;the other two companies were chosen as comparables by the assessee in its TP Study itself. The learned Authorised Representative however submits that the assessee seeks exclusion of L & T Infotech Limited and Persistent Systems Limited, due to more details being now available in the public domain which render these two companies as not comparable to the assessee and therefore prays that they be excluded from the list of comparable companies.

16.4 Per contra, the learned Departmental Representative for revenue objected to the admission of this additional ground stating that when the assessee itself has selected these two companies, the authorities below had no occasion to consider the objections now raised by the assessee before the Tribunal.

16.5 After having heard both parties and perused and considered the material on record, we find that the functional comparability of these

28 IT(TP)A Nos.269 & 381/Bang/2016 two companies i.e. i) L & T Infotech Limited and ii) Sasken Communication Technologies Limited have been considered by benches of this Tribunal in various cases, including those cited by the ld.AR. By way of this additional ground, the assessee is raising objections to the inclusion of these companies on the issue of functional dissimilarity and other grounds. In our considered view, the assessee cannot be precluded from raising an objection against inclusion of a company even if the said company was selected by the assessee in its TP Study. This view was taken by the Special Bench of ITAT, Chandigarh in the case of Quark Systems Pvt. Ltd. As per the principles laid down in the aforesaid decision of the Special Bench (supra), we admit this additional ground raised by the assessee seeking exclusion of these two companies i) L & T Infotech Limited ii) Sasken Communication Technologies Limited without commenting on the merits of the case and remit the matter of their comparability analysis to the file of the TPO/A.O. for examination of the assessee's claim and to adjudicate thereon after providing the assessee adequate opportunity of being heard, which shall be duly considered. We hold and direct accordingly.

29 IT(TP)A Nos.269 & 381/Bang/2016 therefore uphold the action of the Assessing Officer in charging the said interest under Section 234B and 234D of the Act. The Assessing Officer is, however, directed to recompute the interest chargeable, if any, under Section 234B & 234D of the Act while giving effect to this order.