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2018 (1) TMI 885 - AT - Income TaxTransfer pricing addition in respect of ‘Software development segment’ - comparability analysis - Held that:- Assessee is engaged in development, testing and maintenance of internal company software in respect of testing infrastructure capability and of specified data to be used by its A.E., thus companies functionally dissimilar with that of assessee need to be deselected from final list. Penalty u/s 271(1)(c) - whether the assessee’s application of the TNMM in the given circumstances, can be considered as done in good faith and with due diligence? - Held that:- Coming back to the Explanation 7 to section 271(1), we find that no doubt the addition of ₹ 53.27 lac has been made on account of transfer pricing adjustment in respect of the international transaction of provision of ‘Software development services’, but, the same cannot be deemed to represent the income in respect of which particulars have been concealed or furnished wrongly by the assessee. The raison d’etre is that the ALP of this transaction was determined by the assessee in accordance with the provisions of section 92C and in the manner prescribed under the TNMM in good faith and with due diligence. The Hon'ble Delhi High Court in Principal CIT vs. Mitsui Prime Advanced Composites India (P) Ltd. (2017 (4) TMI 186 - DELHI HIGH COURT) has confirmed the deletion of penalty u/s 271(1)(c) which was imposed pursuant to the transfer pricing addition in somewhat similar circumstances. - Decided in favour of assessee.
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