Tribunal directs reassessment of Arm's Length Price and interest under Section 234B, excludes and includes comparables.

The tribunal partly allowed the appeal, directing the Assessing Officer/TPO to recompute the Arm's Length Price (ALP) by excluding certain comparables and including others as per tribunal's directions. The interest under Section 234B was upheld but instructed to be recomputed in accordance with the tribunal's order.

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Issues Involved:
1. Reference to Transfer Pricing Officer (TPO) for determining Arm's Length Price (ALP).
2. Motive of tax evasion.
3. Process for issuing notices under Section 133(6).
4. Computation of ALP based on financial data.
5. Inclusion and exclusion of comparables in transfer pricing analysis.
6. Application of filters by the TPO and CIT(A).
7. Levy of interest under Section 234B.

Issue-wise Detailed Analysis:

1. Reference to Transfer Pricing Officer (TPO) for determining Arm's Length Price (ALP):
The appellant challenged the reference made by the Assessing Officer to the TPO without demonstrating the necessity and expediency of such a reference. The tribunal dismissed this ground as general and not specifically urged.

2. Motive of tax evasion:
The appellant contended that the authorities erred in passing the order without demonstrating a motive of tax evasion. This ground was dismissed as general and not specifically urged.

3. Process for issuing notices under Section 133(6):
The appellant argued that the authorities adopted a flawed process for issuing notices under Section 133(6) and relied on the same without providing complete information or an opportunity to cross-examine the companies concerned. This ground was dismissed as general and not specifically urged.

4. Computation of ALP based on financial data:
The appellant objected to the computation of ALP based on the financial year 2007-08 data of comparables, which was not available when the appellant undertook transfer pricing documentation and reporting obligations. This ground was dismissed as general and not specifically urged.

5. Inclusion and exclusion of comparables in transfer pricing analysis:
The appellant raised several objections regarding the inclusion and exclusion of certain comparables by the TPO and CIT(A). The tribunal examined the comparability of individual companies and made the following observations:

- e-Zest Solutions Ltd.: Excluded from the list of comparables as it provides KPO services, which are not comparable to pure software development services.
- Kals Information Systems Ltd. (Seg): Excluded as it is into software products, unlike the appellant, who is a software service provider.
- Bodhtree Consulting Ltd. and Lucid Software Ltd.: Inclusion upheld as the appellant had not objected to their inclusion in earlier proceedings.

6. Application of filters by the TPO and CIT(A):
The tribunal addressed the unilateral modification of certain filters by the CIT(A) and the inclusion/exclusion of certain comparables. It was held that the RPT filter should be applied at 15% of total revenues. The tribunal reversed the CIT(A)'s order that companies with even a single RPT should be excluded. The tribunal directed the inclusion of companies with RPT within 15% of total revenues.

7. Levy of interest under Section 234B:
The appellant contested the levy of interest under Section 234B. The tribunal upheld the Assessing Officer's action, noting that the charging of interest is consequential and mandatory as upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala (252 ITR 1).

Conclusion:
The appeal was partly allowed. The tribunal directed the Assessing Officer/TPO to recompute the ALP after excluding certain comparables and including others as per the tribunal's directions. The interest under Section 234B was upheld but directed to be recomputed in line with the tribunal's order.

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