ORDER

PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER:

This appeal has been preferred by the assessee against the final assessment order dated 29.01.2016 passed u/s 143(3) read with section 144C of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) passed subsequent to the directions of the Dispute Resolution Penal-1, New Delhi (DRP) vide directions dated 23.12.2015. The assessment year under consideration is 2011-12.

2.0 The brief facts of the case are that the assessee is a company incorporated on September 12, 2007, is a wholly owned subsidiary of Dassault Systemes SA (“DSSA”). The Appellant is engaged in distribution of the software products developed by its associated enterprises (“AEs”), viz. DSSA and Dassault Systemes Delmia Corp (“Dassault Delmia”), as per the terms of the Intercompany Distribution and License Agreement (“IDLA”). During AY 2011-12, the Appellant was engaged in distribution of software products, provision of marketing services, and provision of software related professional services to its AEs.

2.1 For the Financial Year (“FY”) 2010-11, relevant to AY 2011-12, the Appellant filed its return of income on November 29, 2011 declaring taxable income of INR 16,43,22,980 Assessment proceedings were initiated under section 143(2) of Income Tax Act, 1961 (“Act”). Reference was made to the Transfer Pricing Officer (“TPO”) under section 92CA(1) of the Act, for the determination of the arm’s length price of the international transactions of the Appellant under section 92CA(3) of the Act. Based on the information and explanations filed during the assessment proceedings before the Assessing Officer (“AO”) and the TPO, the AO issued a draft assessment order dated March 27, 2015 as per the provisions of section 144C read with section 143(3) of the Act, wherein the total income of the Appellant was proposed to be assessed at INR 22,09,47,700 under the normal provisions of the Act, after making following additions to the returned income:

The said adjustment was made in relation to the international transaction pertaining to - “Payment of royalty” as under:

In Form 3CEB & TP Study, amount of INR 43,38,56,048 was disclosed as payment of royalty. This was on account of certain reversals during the year. Further the Appellant had also received credit of INR 82,74,484 from its AE which was also disclosed in Form 3CEB.

2.2 The Assessee filed objections before the Hon’ble Dispute Resolution Panel (“DRP”) against the said draft assessment order of the Assessing Officer. The DRP upheld the order of the Assessing Officer/TPO with certain directions to revise the computation of margins in line with the safe harbor rules.

2.3 Now the assessee is in appeal before this Tribunal and has raised the following grounds of appeal.

1. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in assessing the total income of the Appellant for the relevant AY at INR 22,09,47,700 as against the returned income of INR 16,43,22,980.

Transfer Pricing Grounds

2. That on the facts and circumstances of the case and in law, the AO/DRP/TPO erred in making an adjustment of INR 5,66,24,721 to the arm’s length price (“ALP”) of the international transaction pertaining to payment of royalty made by the Appellant to its Associated Enterprise (“AE”).

3. That on the facts and circumstances of the case and in law the Assessing Officer/DRP/TPO erred in disregarding the functional, asset and risk (“FAR”) profile of the Appellant and rejecting the TP documentation maintained by the Appellant in an arbitrary manner, disregarding that the Appellant is a software distributor an