In transfer pricing, comparability analysis must strictly adhere to adopted quantitative and qualitative filters. Entities failing established criteria such as export thresholds or related party transaction filters must be excluded, and benchmarking must consistently apply these standards to ensure a reliable determination of the arm’s length price.

ORDER

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

1. The assessee has filed appeal against assessment order dated 31.12.2015 passed by the Assessment Unit, Income Tax Department under section 143(3) read with section 144C(13)r.w.s. 144B of the Income-tax Act, 1961 (for short ‘the Act”) for Assessment Year 2021-22 pursuant to the directions of the Dispute Resolution Panel u/s 144C(5) of the Act.

2. M/s. Assimilate Solutions India Private Limited, the assessee was incorporated on 19.04,2012 and is engaged in the business of providing information technology (IT) enabled services. There has been no change in business during the year under consideration when compared with earlier years. The assessee has filed its return of income for the Assessment Year 2021-22 on 26.02.20222 vide acknowledgement no.262650710260222 in ITR-6 declaring return income of Rs.8,46,22,740/-. The case was selected for scrutiny under CASS and notice under section 143(2) of the Income-tax Act, 1961 (for short ‘the Act’) was issued on 28.06.2022 and duly served upon the assessee. The case was selected for scrutiny under CASS on the following grounds:

(a) International transaction(s) arising out/being part of business restructuring or reorganization (T.P. risk parameter.

3. During the year, the assessee has undertaken the following international transactions/specified domestic transaction :-

4. At the time of hearing, ld. AR of the assessee brought to our notice the relevant facts which are reproduced below:

1.1 During FY 2020-21, Assimilate Solutions India Private Limited (“Assessee” or “Appellant” or “Company”) continued, as in the past, to be engaged in the business of providing back office/other information technology enabled services (“ITES”) to Assimilate Solutions LLC of USA (“AE”).

1.2 Legal agreements executed by the Assessee with its AE namely Assimilate Solutions LLC for providing/exporting 100% of its ITES services to such AE as filed before the TPO/AO/DRP are enclosed as under:

 Master Service Agreement (“MSA”) for Gurgaon unit of the Company with AE (effective from January 1, 2014) at pages 3-16 of Paper Book (“PB”)read with First Amendment to MSA (effective from May 1, 2015) at pages 17-19 of PB and Second Amendment to MSA (effective from December 1, 2016) at pages 20-22 of PB.Nature of services as provided are defined in Annexure A attached to MSA (refer to page 15 of PB).

 MSAfor Chandigarh unit of the Company with AE (effective from May 1, 2016) at pages 23-36of PBread with First Amendment to MSA (effective from December 1, 2016) at pages 37-39 of PB.Nature of services as provided are defined in Annexure A attached to MSA (refer to page 35 of PB).

 MSAfor Noida unit of the Company with AE (effective from February 1, 2020) at pages 40-53 of PB. Nature of services as provided are defined in Annexure A attached to MSA (refer to page 52 of PB).

1.3 As per aforesaid MSAs read with First /Second Amendments to MSA (wherever applicable), it was agreed between the parties that the Assessee will charge from its AE profit margin ranging between 5% to 25% on its direct cost and expenses (excluding foreign exchange gain/loss) for invoicing 100% of its services as exported to the AE.

1.4 On this basis, the Assessee during the year under consideration undertook international transaction of exporting 100% of its back office/ITES services to its AE for an arm’s length price (ALP) of Rs.90,30,69,262 which worked out to 12.53% profit level indicator (PLI) of OP/OC.

1.5 Such ALP as declared by the Assessee in th