1. The Assessee is a company engaged in the manufacturing and selling of two-wheelers. The assessee maintains regular books of accounts, which are duly audited u/s 44AB. The accounting policies, method of accounting, excepting one instance, are the same as in earlier years. Assessee is assessed to tax since past so many years. There was a joint venture between Hero Group, India and Honda Motor Company, Japan. During the Financial Year ('FY') 2006-07, relevant to Assessment Year ('AY') 2007-08, the assessee had 45.7% share of the motor cycle market and 39.4% share of two wheeler market, in India.

2. For the year under appeal, the assessee filed its return of income on 31.10.2007, declaring an income of Rs. 11,98,61,43,972. The return of income was revised on 05.03.2009, wherein increased amount of TDS was claimed. The return was processed u/s 143(1) of the Income-tax Act, 1961 ('the Act') on 24.03.2010. The case was selected for scrutiny and notice u/s 143(2) was issued. During assessment proceedings the assessing officer referred the case to the Transfer Pricing Officer ('TPO'), as there were certain international transactions with its associate concerns (AEs). The TPO passed a