Appeal dismissed, cross-appeal partly allowed for Assessment Year 2010-11. Tribunal remands issues for further examination.

The Revenue's appeal for Assessment Year 2010-11 was dismissed, while the assessee's cross-appeal was partly allowed for statistical purposes. The Tribunal remanded specific issues back to the Transfer Pricing Officer for further examination and directed adjustments to be allowed if warranted based on the facts of the case.

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Issues Involved:
1. Exclusion of comparables by the DRP.
2. Risk adjustment.
3. Rejection of the T.P. Study by the assessee.
4. Inclusion of comparables sought by the assessee.
5. Computation of margin.
6. Working capital adjustment.
7. Benefit of +/- 5% range.

Detailed Analysis:

1. Exclusion of Comparables by the DRP:
The Revenue contended that the DRP wrongly excluded certain comparables that qualified all qualitative and quantitative filters. The Tribunal found that the Revenue did not provide material evidence to establish why the DRP's decision was erroneous. The DRP had given elaborate reasons for the exclusion, and in the absence of any material evidence to counter these findings, the Tribunal dismissed this ground.

2. Risk Adjustment:
The Revenue argued that risk adjustment was not required as the assessee faced significant risks. The DRP had directed a 1% risk adjustment without specifying the method of computation. The Tribunal noted that the DRP had directed the TPO to examine the assessee's claim for risk adjustment and decide the percentage if warranted. The Tribunal remanded this issue back to the TPO for examination, directing the TPO to allow the adjustment if the facts warranted it.

3. Rejection of the T.P. Study by the Assessee:
The Tribunal noted that the assessee did not press or urge grounds related to the rejection of the T.P. Study, application of multiple-year data, and use of contemporaneous data. These grounds were rendered infructuous and dismissed.

4. Inclusion of Comparables Sought by the Assessee:
- IDL (India) Ltd.: The Tribunal found that this company was functionally comparable and acceptable as per the TPO's initial analysis but was not included in the final set of comparables. The Tribunal remanded this issue back to the TPO for consideration.
- Kores (India) Ltd.: The Tribunal found that this company was not selected from a search process and could be a case of "cherry picking." The DRP had given detailed reasoning for its exclusion, and the Tribunal upheld the DRP's decision.

5. Computation of Margin:
The assessee contended that the margin of Cyber Media Research Ltd. was wrongly computed. The Tribunal directed the TPO to verify the correct margin and adopt it after affording the assessee an opportunity to be heard.

6. Working Capital Adjustment:
The Tribunal noted that the DRP had granted working capital adjustment subject to the upper limit of the average cost of capital of the comparables. The TPO was directed to examine and allow the working capital adjustment if warranted.

7. Benefit of +/- 5% Range:
The Tribunal noted that the amendment to Section 92C(2A) of the Act, effective from 1.4.2002, clarified that the +/- 5% variation is allowed to justify the price charged in international transactions and not for adjustment purposes. Consequently, this ground was not maintainable and was dismissed.

Conclusion:
- The Revenue's appeal for Assessment Year 2010-11 was dismissed.
- The assessee's cross appeal was partly allowed for statistical purposes.
- The Tribunal remanded specific issues back to the TPO for further examination and directed the TPO to allow adjustments if warranted based on the facts of the case.

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