The exclusion of comparables based on the absence of segmental information provided by the companies in respect of the software services and the disqualification of a comparable for uncontrolled transaction.

JUDGMENT

Sanjeev Narula, J. - This common order shall dispose of the afore-noted appeals preferred by both the Assessee as well as the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') challenging the orders passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'ITAT') with respect to Assessment Years 2011-12 and 2012-13. For the sake of convenience, the appeals pertaining to each assessment year are being dealt with separately.

ITA 247/2019 & ITA 357/2019

2. The appeals of the Revenue and the Assessee are numbered as ITA No. 357/2019 and ITA No. 247/2019 respectively. These cross-appeals impugn the common order dated 14.09.2018 passed by the learned ITAT, New Delhi in respect of AY 2011-12, in ITA No. 1479/Del/2016, filed by the Assessee and ITA No. 691/Del/2016 filed by the Revenue (hereinafter referred to as the 'Impugned Order'). The aforesaid ITAs assailed the order dated 16.01.2016 of the Ld. Assessing Officer (hereinafter referred to as 'AO').

3. Briefly stated, the factual matrix giving rise to the present appeals is as follows:

3.1. That Microsoft India (R&D) Pvt. Ltd. (hereinafter referred to as the 'Assessee') is a private limited company which was set up in India in May 1998 and is a subsidiary of Microsoft Ireland Research Ltd. (99.99% shareholding); the ultimate parent company being Microsoft Corporation, USA. The Assessee is engaged, inter alia, in rendering software development services and information technology enabled services.

3.2. The Assessee filed its return of income on 29.11.2011, declaring an income of Rs. 2,01,64,26,819/- and same was processed under Section 143(1) of the Act. The case of the Assessee was selected for scrutiny assessment and notice under Section 143(2) was issued.

3.3. The Assessee filed Audit Report in Form No. 3CEB declaring six international transactions. Its case was selected for scrutiny and the AO referred the matter to the Transfer Pricing Officer (hereinafter referred to as the 'TPO') for determination of Arm's Length Price ('ALP') of the international transactions. The TPO proposed transfer pricing adjustment of Rs. 2,40,89,61,667/- (being Rs. 2,01,21,96,582/- towards Software development services and Rs. 39,67,65,085/- towards provision of IT enabled services).

3.4. Pursuant to the aforesaid reference, draft order under Section 144C was framed by the AO. Aggrieved with the same, the Assessee filed its objections before the Dispute Resolution Panel (hereinafter referred to as the 'DRP') which were disposed of vide order dated 08.12.2015 with certain directions. Accordingly, pursuant to the order of the DRP, final assessment order under Section 143(3)/144C was framed by the AO on 16.01.2016, determining the total taxable income at Rs. 4,37,47,44,593/-.

3.5 The Assessee preferred an appeal against the assessment order vide ITA No. 1479/DEL/2016 before the learned ITAT. The Revenue also preferred an appeal against the same order vide ITA No. 691/DEL/2016. The afore-noted appeals were disposed of vide the Impugned order dated 14.09.2018.

4. Both the parties assail the Impugned order, urging substantial questions of law.

5. The main and only plank of submissions advanced by Mr. Ruchir Bhatia, learned Senior Standing Counsel appearing on behalf of the AppellantRevenue in ITA 357/2019 is that the learned ITAT has erred in excluding the three comparables from the list of comparables, which are: (i) Infosys Technologies Ltd., (ii) Persistent Systems Ltd. and (iii) Wipro Technology Services Ltd. He submits that Persistent Systems Ltd. was included by the Assessee itself in its list of comparables. Having considered the said entity as a comparable in its transfer pricing documentation, and then also accepted by the TPO, the Assessee would be precluded from challenging the inclusion in further appellate proceedings. He points out that the Assessee is not questioning the filters applied by the TPO and adds that the filter applied by th