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The grievance of the appellant is against the exclusion of four comparables introduced by the Transfer Pricing Officer (‘TPO’) for benchmarking the international transaction of rendition of software services by the Respondent-assessee to its parent company -Open Solutions Inc., USA, the Associated Enterprise (‘AE’).

Shanti Prime Publication Pvt. Ltd.

Sec. 92B & 92C of Income-tax Act, 1961 & Rule 10B(2) & 10B(1)(e) of Income Tax Rules, 1962 - Transfer pricing - The AO picked up the case for scrutiny and a reference was made to the TPO under s. 92CA of the Act to determine the ALP. The TPO rejected the transfer pricing study undertaken by the assessee and further undertook an extensive study by applying fresh filters for benchmarking the international transaction entered into by the respondent-assessee and substituted its own ALP with the ALP determined by the respondent. Assessment order was passed by the AO under s. 143(3) r/w s. 144C(1) of the Act and the total assessed income was computed at Rs. 5,76,91,078, by making two-fold additions to the assessee’s taxable income: (a) Addition on account of transfer pricing adjustment at Rs. 5,49,05,106 ; (b) Disallowance of excess depreciation at Rs. 27,79,910. Assessee filed its objections before the DRP. However, the DRP partially allowed and affirmed the inclusion of the said comparables. TPO revised the ALP adjustment at Rs. 3,59,52,769 to the income of the assessee. The final assessment was completed, assessing the total income of the assessee at Rs. 3,59,58,831 after making a transfer price addition of Rs. 3,59,52,769. High Court dismissed appeal of the revenue holding that ”The filters are applied to narrow down the search to find the comparables that are closest to the assessee. The use of filters has to be necessarily validated from the annual reports. Since the TPO would have to do this exercise on the basis of the actual data in the report of the comparables, he would surely have the freedom to adopt or reject the comparables“. - PR. CIT V/s OPEN SOLUTIONS SOFTWARE SERVICES PVT. LTD. - [2020] 315 CTR 497 (DEL)