IN THE ITAT, PUNE BENCH
R.S. SYAL, V.P. & S.S. VISWANETHRA RAVI, J.M.
Netscout Systems India (P) Ltd. v. DCIT
ITA No. 741/Pun/2017
27 November, 2020
Appellant by: Kishor Phadke
Respondents by: Rajarshi Dwivedy, Commissioner
R.S. Syal, V.P.
This appeal by the assessee takes exception to the final assessment Order, dated 27-1-2017 passed by the assessing officer under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') in relation to the assessment year 2012-13.
2. The only dispute raised herein is against transfer pricing addition of Rs. 1,33,75,076 made by the assessing officer in the international transaction of Rendering of software development and support services'.
3. The factual matrix of the case is that the assessee is an Indian Private Limited Company, a 100% subsidiary of Netscout Systems Inc. USA. It is engaged in rendering software development services and support services exclusively for its parent company. Return was filed declaring total income of Rs. 2,51,85,090. The assessee reported three international transactions in Form No. 3CEB. The assessing officer (AO) made a reference to the Transfer Pricing Officer (Transfer Pricing Officer) for determining the Arm's Length Price (hereinafter referred to as ALP') of international transactions. The dispute in the extant appeal is only qua the international transaction of 'Rendering of software development and support services' with transacted value of Rs. 15,29,56,672. The assessee followed the Transactional Net Marginal Method (TNMM) as most appropriate method with its Profit Level Indicator (PLI) of Operating Profit/Total Cost (OP/TC) computed at 16.57%. The assessee selected certain comparables to demonstrate that the international transaction was at ALP. The Transfer Pricing Officer made certain alterations to the comparables selected by the assessee and also to the profit margin of some of the comparables. He shortlisted nine comparables with their mean profit margin at 28.18%, which was taken as benchmark. In this way, the Transfer Pricing Officer proposed transfer pricing adjustment of Rs. 1,53,44,587. The assessing officer notified the draft order on 23-3-2016 proposing transfer pricing addition of this magnitude. The assessee raised objections before the Dispute Resolution Panel (hereinafter referred to as the Dispute Resolution Panel'). On giving effect to the directions given by the Dispute Resolution Panel on 25-11-2016, the assessing officer passed the impugned order making transfer pricing addition of Rs. 1,33,75,076. Aggrieved thereby, the assessee is in appeal before the Tribunal.