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2016 (10) TMI 1135 - AT - Income TaxValidity of reassessment proceedings - reopening on the basis of TPO's order - Held that:- The reassessment proceedings initiated based on the ld TPO’s order dated 29.1.2013 suggesting an adjustment of ₹ 2,43,53,752/-to ALP was based on illegal reference by the ld AO and is accordingly void ab initio and bad in law. Hence the entire reassessment proceedings initiated based on such illegal reference and illegal order of ld TPO cannot be construed as information which would have live link to the formation of belief to have reason to believe on the part of the ld AO that income had escaped assessment within the meaning of section 147 of the Act. Hence we hold that no addition in the sum of ₹ 2,43,53,752/-towards adjustment to ALP could be made in the reassessment. Once this addition goes, then the very root of the reassessment proceedings also vanishes and no other addition could be made thereon. Accordingly, the entire reassessment proceedings deserve to be quashed in the facts and circumstances of the case. In view of our above conclusion, we allow the ground no. 1 raised by the assessee by declaring that the reassessment order of the ld AO is bad in law and void ab initio. Adjustment to ALP - TPA - comparable selection - Held that:- The assessee vis a vis the group is involved in the execution of the software development and coding of software service (“software services”) outsourced to it by LVS US, thus companies functionally dissimlar with that of assessee need to be deselected from final list of comparable. ALP of Royalty payments - Held that:- TPO had erred in determining the ALP of Royalty payments at Rs Nil and accordingly direct the ld TPO to allow the deduction for payment of Royalty as the same is also duly benchmarked by the assessee which were not disputed by the revenue and we hold that royalty @ 40% paid by the assessee is at ALP. Accordingly, the grounds raised by the assessee in this regard are allowed.
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