ORDER

PER R.K. PANDA, AM:

This appeal filed by the assessee is directed against the order dated 21.11.2014 passed by the DRP-14, New Delhi, relating to assessment year 2010-11.

2. Ground Nos.1,4 and 5 being general in nature are dismissed.

3. Ground of appeal No.3 by the assessee reads as under:-

“3. That the Ld.A.O/DRP has erred on facts and in law in making the addition of Rs.10,470 by invoking the provisions of section 14A of the Income Tax Act, 1961.”

4. The ld. counsel for the assessee, at the time of hearing, did not press this ground due to smallness of the amount for which the ld. DR has no objection. Accordingly, ground of appeal No.3 is dismissed as not pressed.

5. Ground of appeal Nos.2.1 to 2.5 by the assessee read as under:-

“2.1 That the Hon'ble Members of the DRP have erred on facts and in law in holding that the TPO was correct in the selection of comparables and in upholding the adjustments of Rs.88,04,775 u/s 92CA of the Income Tax Act, 1961.

2.2 That the Hon'ble Members of the DRP have erred on facts and in law in holding that the comparables used by the TPO are correct.

2.3 That the Ld. Assessing Officer has erred on facts and in law in making an addition of Rs.88,04,775/- on the basis of the order passed by TPO.

2.4. That the Ld. Assessing Officer/TPO/DRP has erred on facts and in law in not appreciating that the appellant is “non-risk bearing entity which does the facilitating functions” and in categorizing the appellant as software developer.

2.5 That the Ld. TPO has erred on facts and in law in observing that the appellant has used comparable data for more than previous two years and has arrived at the ALP on the basis of irrelevant considerations.”

6. Facts of the case, in brief, are that the assessee is a company engaged in providing customized e-learning modules and IT enabled services to its parent company at Singapore. The assessee filed its return of income on 24^th September, 2010 declaring income of Rs.30,86,800/-. Since the assessee had undertaken international transactions with its AE, a reference u/s 92CA(1) was made by the Assessing Officer to the TPO for determination of the ALP of the international transaction. The TPO, during the course of TP assessment proceedings noted that the assessee is a wholly owned subsidiary of Pacific Knowledge Platform Pte Ltd. providing e-module learning software services to Knowledge Platform Singapore. He observed that the assessee during the impugned assessment year has undertaken the following international transactions:-

1. Developing E-Learning modules and related work 6,69,27,856

7. He observed that the main international transaction of the assessee is the provision of software development services. The assessee has applied TNMM as the most appropriate method and the OP/TC ratio is taken as the profit level indicator in the TNMM analysis. The PLI of the company is arrived at 10.1% on cost whereas the average PLI of the six comparables as per fresh search executed by the assessee was at 8.5%. It was accordingly stated that the price charged in its international transaction being more than the arithmetical mean of the comparables, the price charged is at arm’s length.

8. However, the TPO did not accept the contention of the assessee. The TPO made fresh search of the comparables by applying new filters such as (1) companies whose data is not available for the financial year 2009-10 (2) companies whose software development income is less than Rs.5 crores; (3) companies whose revenue from services is less than 75% of the total operating revenues; (4) companies who have export sales less than 75% of the sales from software development services; (5) companies having more than 25% RPT; (6) companies who have persistent loss for the last three years upto and including financial year 2009-10; (7) companies whose employee cost is less than 25% of the Operating cost; (8) companies having different financial years i.e., not March 31, 2010; (9) companies that are functionally differe