A.T. Varkey, Judicial Member - This is the first appeal preferred by the assessee against the assessment order dated 19.02.2014 passed by the AO under section 143(3) read with Section 144C of the Income Tax Act,, 1961 (herein after "the Act"),in pursuance to direction issued by after the Dispute Resolution Panel (DRP) for Assessment Year 2009-10.

2. Ground No. 1 is general in nature and it needs no adjudication inasmuch as all other grounds taken in the appeal shall take care of the additions made by the AO in the assessment order.

3. Now, we shall come to the ground No. 2 to 2.12 regarding the issue about Transfer Pricing Adjustment. In these ground, it has been alleged by the assessee that the Assessing Officer has erred in making adjustment of Rs. 34,25,12,827/- to the income of the assessee on account of the difference in the Arms length price of the international transactions undertaken by the assessee during the year under consideration. It has been further alleged that the Assessing Officer has erred on facts and in law in disregarding the internal bench marking undertaken by the assessee for determining the arm's length price of the international transactions applying TNMM. It has further been alleged that the Assessing Officer has erred on facts and law in disregarding the segmental of profitability submitted by the assessee.

4. The relevant facts giving rise to this issue are discussed in ensuing paras.

5. The assessee company is a 100% subsidiary of Birlasoft Enterprises Ltd, India, which in turn is 100% subsidiary of Birlasoft Inc., USA. The assessee company is engaged in the business of software development and related services.

6. During the relevant previous year, the appellant entered into the international transactions of Software development and related services with the associated enterprises, viz. Birlasoft Inc. USA and Birlasoft (UK) Ltd. amounting to Rs. 2,75,96,68,216 as under:-

7. For the purpose of determining the arm's length price in respect of the aforesaid international transactions, the assessee applied TNMM on the basis of internal comparison, whereby operating profit margin earning from rendering software development and related services to associated enterprise were compared with the operating profit margin earned from rendering software development and related services to unrelated parties. The operating results of the assessee in respect of the international transactions with associated enterprise were computed at 4.92% as against the operating profit margin of -4.34% earned from unrelated parties. The detailed particulars in this respect are as under:-

8. As afore-stated, for the purpose of benchmarking international transaction of provision of software development services, the appellant applied Transactional Net Margin Method (TNMM) as the most appropriate method with OP/OC % as the profit level indicator. While applying TNMM the assessee had compared the entity vide profit margin earned from transactions undertaken with related parties and unrelated parties. The assessee produced the segmental analysis which was duly audited and certified by an independent firm of chartered accountant. And since the operating profit margin (OP/TC%) earned from rend