Bentley Systems India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5730/DEL/2011

• Counselvise Citation: 573020114 RSA 2011
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: VIJAY IYER
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ITA NO.5730/DEL/2011 ASSESSMENT YEAR : 2007-08 BENTLEY SYSTEMS INDIA PVT. LTD., 203, 2 ND FLOOR, OKHLA INDUSTRIAL ESTATE, PHASE III, NEW DELHI. PAN : AABCB5645E VS. ACIT, CIRCLE-2(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY IYER, CA REVENUE BY : MRS. ANUSHA KHURANA, SR. DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEA R 2007-08, TAKING THE FOLLOWING GROUNDS:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, 1. THE ASSESSING OFFICER (A.O.)/DISPUTE RESOLUTION P ANEL (DRP) HAS ERRED IN MAKING AN ADDITION OF RS.34,780 ,481/- TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION PERTA INING TO AVAILING OF INTRA-GROUP SERVICES BY THE APPELLANT FRO M ITS ASSOCIATED ENTERPRISES. 2. THE TPO/A.O. HAS ERRED BY NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME TAX RULES, 1962 (THE RULES) ITA NO.5730/DEL/2011 2 3. THE TRANSFER PRICING OFFICER (TPO)/A.O. HAS ERRED IN REJECTING THE COMBINED TRANSACTION APPROACH UNDERTAKEN B Y THE APPELLANT AND IN THE PROCESS WRONGLY SEGREGATED THE INTERNATIONAL TRANSACTION PERTAINING TO THE AVAILING OF I NTRA-GROUP SERVICES FROM THE INTERNATIONAL TRANSACTION PERTAINING T O DISTRIBUTION OF SOFTWARE PRODUCTS. 4. THE TPO/A.O. HAS ERRED, IN LAW AND IN FACT, IN DETERMI NING THE COMPARABLE UNCONTROLLED PRICE METHOD AS THE MOST APPROPRIATE METHOD TO BENCHMARK THE INTERNATIONAL TRANSAC TION PERTAINING TO AVAILING OF INTRA-GROUP SERVICES. 5. THE TPO/A.O. HAS ERRED BY ASSUMING THAT NO BENEFIT HA S BEEN CONFERRED ON THE APPELLANT FROM AVAILING OF INTRA -GROUP SERVICES FROM ITS ASSOCIATED ENTERPRISES. 2. ADDRESSING GROUND NOS. 4 AND 5 FIRST, THE LD. COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT APROPOS THE ASSESSEES OBJECTION AGAINST THE ACTION OF THE TPO IN DETERMINING THE COMPARABLE UNCONTROLLED PRICE OR CUP METHOD AS THE MOST APPROPRIATE METHOD TO BENCHMARK THE INTERNATIONAL TRANSACTION PERTAINING TO AVAILING OF INTRA-GROUP SERVICES AND ASSUMING THAT NO BENEFIT HAS BEEN CONFERRE D ON THE ASSESSEE FROM AVAILING OF INTRA-GROUP SERVICES FROM ITS A E, THE LD. DRP HAS GONE WRONG IN OBSERVING THAT IN THE ABSENCE OF ADE QUATE DATA, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE POSITION PUT FORTH BY THE TPO WAS BEING ACCEPTED, DESPITE THE FACT THAT COMPLETE DATA WAS PROVIDED BY THE ASSESSEE, WHICH HAS NOT BEEN TA KEN INTO CONSIDERATION BY THE LD. DRP AND SO, THE MATTER REQUI RED TO BE SENT BACK TO THE LD. DRP TO RE-DECIDE IT AGAIN ON TAKING INTO CONSIDERATION THE DATE SO PROVIDED BY THE ASSESSEE. 3. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG R ELIANCE ON THE DRPS ORDER IN THIS REGARD. 4. IN THIS REGARD, IT IS SEEN THAT AS PER THE TPOS ORDE R, THE ASSESSEE REMAINED UNABLE TO PROVE THE BENEFITS THAT IT HAD DE RIVED FROM THE SERVICES PURPORTEDLY PROVIDED TO IT BY ITS AE; THAT NO INDEPENDENT ITA NO.5730/DEL/2011 3 ENTITY WOULD PAY FOR SUCH SERVICES WITHOUT ANY COST BEN EFIT ANALYSIS; THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE AS TO THE COST BENEFIT ANALYSIS WITH REGARD TO INDEPENDENT SUPPLIERS; THAT NO THIRD PARTY WOULD LIKE TO AVAIL SERVICES WITHOUT ANY COST BENEFIT ANALYSIS WITH REGARD TO AE VERSUS INDEPENDENT SUPPLIER; THAT NO CONT EMPORANEOUS DOCUMENTATION WAS PRODUCED BY THE ASSESSEE TO SUPPORT IT S CLAIM FOR THE RECEIPT OF MANAGEMENT SERVICES; AND THAT SO, THE BENCHMARKING DONE BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE LAW , DUE TO WHICH, THE CUP METHOD WAS REQUIRED TO BE APPLIED. 5. THE ASSESSEE, ON THE OTHER HAND, MAINTAINED BEFORE T HE DRP THAT THE BENEFIT DERIVED BY IT FROM AVAILING OF MANAGEME NT SERVICES OUTWEIGH THE COST INCURRED IN RECEIVING SUCH SERVICES; THAT IF THE SIMILAR SERVICES WERE AVAILED BY THE ASSESSEE FROM A THIRD PARTY, THE COST WOULD HAVE BEEN MUCH HIGHER THAN THAT ACTUALLY INCU RRED BY THE ASSESSEE IN AVAILING SUCH SERVICES FROM ITS AE; THAT THERE IS NO LEGAL REQUIREMENT FOR A PERSON OR COMPANY TO NECESSARILY UND ERTAKE A COST BENEFIT ANALYSIS AND ABSENCE OF SUCH ANALYSIS SHOULD NOT L EAD TO A PRE- CONCEIVED NOTION THAT NO BENEFIT HAS BEEN RECEIVED; THAT DETERMINATION OF ALP WITHOUT USING METHODS PRESCRIBED UNDER THE ACT IS AGAINST THE LAW; THAT THE DETAILS OF BENEFITS DERIVED BY THE ASSESSEE FROM AVAILING OF MANAGEMENT SERVICES FROM ITS AE WERE ALSO DULY PROVI DED BY THE ASSESSEE BEFORE THE TPO; AND THAT THEREFORE, THE ALP OF THE INTERNATIONAL TRANSACTION INVOLVING AVAILING OF MANA GEMENT SERVICES SHOULD NOT BE CONSIDERED AS NIL, BASED SIMPLY ON AN ASS UMPTION THAT AN INDEPENDENT PERSON WOULD NOT BE MAKING SUCH A PAY MENT IN UNCONTROLLED SERVICES. 6. THE DATA PROVIDED BY THE ASSESSEE TO THE TPO, IT IS SEEN, IS AS PER THE ASSESSEES WRITTEN SUBMISSIONS DATED 27.04.2010 [CO PY AT PAGES 241-243 OF THE ASSESSEES PAPER BOOK (APB FOR SHOR T)] AND THE ITA NO.5730/DEL/2011 4 ASSESSEES WRITTEN SUBMISSIONS DATED 13.05.2010 (COPY AT AP B 244- 247), FILED BEFORE THE TPO, IS AS FOLLOWS:- 27 APRIL 2010 OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME TAX TRANSFER PRICING OFFICER I(1) ROOM NO. 315, 3 RD FLOOR DRUM SHAPED BUILDING INDRAPRASTHA ESTATE, NEW DELHI - 110001 FOR THE ATTENTION OF MR. AJIT KUMAR JAIN DEAR SIR, RE: RE: RE: RE: BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY IND IA OR BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA OR BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA OR BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA OR THE ASSESSEE) THE ASSESSEE) THE ASSESSEE) THE ASSESSEE) NOTICE U/S 92CA(2) OF THE INCOME TAX ACT, 1961 (ACT) ASSESSMENT YEAR (AY) 2007-08 WE REFER TO OUR PREVIOUS HEARING AND DISCUSSION HELD ON 16 MARCH 2010 IN CONNECTION WITH THE ONGOING TRANSFER PRICING AS SESSMENT FOR AY 2007-08 OF OUR ABOVE MENTIONED CLIENT, WHEREIN YOU HAD REQUESTED TO FURNISH INFORMATION BEFORE YOUR GOODSELF . IN THIS REGARD, ON BEHALF AND UNDER INSTRUCTION FROM OUR CLIE NT, WE WISH TO SUBMIT FOLLOWING INFORMATION FOR YOUR FAVOURABLE CO NSIDERATION: 1. 1.1. 1. NATURE OF CORPORATE SERVICES AVAILED NATURE OF CORPORATE SERVICES AVAILED NATURE OF CORPORATE SERVICES AVAILED NATURE OF CORPORATE SERVICES AVAILED DURING FINANCIAL YEAR (FY) 2006-07, BENTLEY INDIA RECEIVED SERVICES FROM ITS ASSOCIATED ENTERPRISES (AES). THE SERVICES CAN BE CATEGORIZED UNDER THE FOLLOWING BROAD HEADS: CORPORATE MARKETING; MANAGEMENT; HUMAN RESOURCES (HR); LEGAL; AND ACCOUNTING/ FINANCE. CORPORATE MARKETING CORPORATE MARKETING CORPORATE MARKETING CORPORATE MARKETING BENTLEY INDIA BENEFITS FROM CORPORATE MARKETING SERVI CES PROVIDED BY ITS AES. THESE SERVICES PERTAIN TO ANALYZING MARKET OPPORTUNITIES FOR PRODUCTS AND POSITIONING THEM APPROPR IATELY; ITA NO.5730/DEL/2011 5 ORGANIZING AND CARRYING OUT GLOBAL MARKETING CAMPAIG NS; ASSURING LEADS FROM MARKETING ACTIVITIES FLOW SMOOTHLY TO WORLD WIDE SALES GROUP; PROVIDING CONTENT AND DESIGN FOR COMPANY WEB S ITES; PREPARING AND PUBLISHING CORPORATE BACKGROUND, POWE RPOINT PRESENTATIONS, AND ANNUAL REPORT; DEVELOPING SOLUTION M ESSAGING AND MATERIALS; PUBLISHING COMPANY NEWSLETTER AND MAGA ZINE; PLANNING AND CONDUCTING USER CONFERENCES; DESIGN AND PLACING PRINT AND WEB ADVERTISEMENTS; ISSUING PRESS RELEASES; MAINTAINING CONTACT WITH MEDIA; SETTING VISUAL BRANDING STANDARDS; EN GAGING CONSULTANTS AS NECESSARY TO ASSIST WITH PROVISION OF SUC H MARKETING SERVICES. THESE SERVICES HELP BENTLEY INDI A IN MARKETING ITS PRODUCTS IN A MORE EFFECTIVE MANNER. MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT THE MANAGEMENT SERVICES PROVIDED TO BENTLEY INDIA INCL UDE ADVISE ON OVERALL STRATEGIC MANAGEMENT DIRECTION; ADVIC E, ANALYSIS AND MODELING WITH RESPECT TO STRATEGIC DIRECTIO N; ADVICE ON TRANSFER PRICING DOCUMENTATION; ENGAGING CONSULTANTS, INCLUDING ECONOMISTS, AS NECESSARY, ASSISTING WITH TH E PROVISION OF SUCH OTHER SERVICES; ADVISE ON DEVELOPMENT AND REPOR TING OF ANNUAL BUDGETS AND FORECASTING; GATHERING AND FURNISH ING INFORMATION RELATING TO WORLDWIDE ECONOMIC AND MARKET TRENDS; COORDINATING REGIONAL INTERNAL AUDIT ACTIVITIES AND MO NITOR AUDIT RESULTS; ENGAGING CONSULTANTS AS NECESSARY TO ASSIST WIT H PROVISION OF SUCH MANAGEMENT AND FINANCIAL GUIDANCE. HR HRHR HR THE HR SERVICES PROVIDED TO BENTLEY INDIA INCLUDE RE CRUITMENT (HIRING AND/OR DISMISSAL OF EMPLOYEES THROUGH BENTLE YS PAF SYSTEM); ORIENTATION TRAINING; MAINTENANCE OF TRAINING R ECORDS & CERTIFICATIONS; PERSONNEL FILE MAINTENANCE; ENGAGING OF SUB- CONTRACTORS; COMPENSATION & BENEFITS MANAGEMENT; SERVICE AWARD ADMINISTRATION; RELOCATIONS, ETC. LEGAL LEGAL LEGAL LEGAL THE LEGAL SERVICES PROVIDED TO BENTLEY INDIA INCLUDE ASSISTANCE IN LITIGATION AND DISPUTE RESOLUTION MANAGEMENT INCLUDING DISPUTES WITH CUSTOMERS, RESELLERS, AND EMPLOYEES; NEGOTIATION OF COMMERCIAL SALES AND PROJECT SERVICES CONTRACTS WITH CU STOMERS; ASSISTANCE ON COMPANY SECRETARIAL AND COMPLIANCE MATTER S; NEGOTIATION OF RESELLER AGREEMENTS AND OTHER PARTNER AN D VERTICAL RELATIONSHIP CONTRACTS; CREATION OF STANDARD DEFAULT S ALES AND SERVICES CONTRACTS; WORK ON ANTI-PIRACY MATTERS; ADVICE ON EXPORT CONTROL REGULATIONS AND OTHER REGULATORY AND POLICY ISS UES; AND ASSISTING WITH TRADEMARK OR OTHER INTELLECTUAL PROPERTY REGISTRATIONS OR CHALLENGES. ITA NO.5730/DEL/2011 6 ACCOUNTING/FINANCE ACCOUNTING/FINANCE ACCOUNTING/FINANCE ACCOUNTING/FINANCE BENTLEY INDIA RECEIVES ACCOUNTING SUPPORT ON AN ONGOI NG BASIS IN ALL MATTERS RELATING TO DAY TO DAY PROCEDURES INCLUDIN G, WHEN NECESSARY, THE POSTING OF JOURNAL ENTRIES INTO SAP. FURTHER, SPECIFIC ACCOUNTING ASSISTANCE WAS ALSO RECEI VED BY BENTLEY INDIA IN THE DETERMINATION REQUIREMENTS FOR REPO RTING OF TAXES ON SALES INVOICES IN INDIA IN ORDER TO CORRECTL Y IMPLEMENT IT IN SAP AND ENABLE BENTLEY INDIA MOVE TOWARDS USING SA P AS THE EXCLUSIVE ACCOUNTING SYSTEM IN INDIA IN LINE WITH BEN TLEYS GLOBAL IMPLEMENTATION OF SAP. THE MAIN BENEFIT ARISING FROM THE USE OF SAP WAS TO BR ING COST EFFICIENCIES TO THE ACCOUNTING PROCEDURES BY SIMPLIFY ING PROCEDURES AND TIGHTENING CONTROLS. THE IMPLEMENTATION OF A UNIFORM ACCOUNTING SYSTEM FOR BENTLEY INDIA HAS RESULTED IN REDUCTION OF ANY REWORK COS T. BENTLEY INDIA ALSO RECEIVES REGULAR ASSISTANCE IN REVIEW OF ACCOUN TING CONTROL PROCEDURES AND TIMELY FINANCIAL REPORTING FOR BOTH MA NAGEMENT AND STATUTORY PURPOSES. 2. 2.2. 2. AVAILING OF CORPORATE SERVICES FROM THIRD PARTIES AVAILING OF CORPORATE SERVICES FROM THIRD PARTIES AVAILING OF CORPORATE SERVICES FROM THIRD PARTIES AVAILING OF CORPORATE SERVICES FROM THIRD PARTIES WE WISH TO SUBMIT THAT BENTLEY INDIA HAS NOT AVAILED SAM E OR SIMILAR SERVICES FROM THIRD PARTIES. WE HOPE YOU WOULD FIND THE ABOVE IN ORDER AND TO YOUR SATISFACTION. THE ASSESSEE IS IN THE PROCESS OF PREPA RING A DETAILED RESPONSE TO YOUR REMAINING QUERIES. FURTHER, INCASE YOUR GOODSELF PROPOSES TO DETERMINE THE ARMS LENGTH PRICE FOR THE INTERNATIONAL TRANSACTIONS OF BENTL EY INDIA WHICH IS DIFFERENT FROM THE PRICE DETERMINED BY BENTLE Y INDIA AS THE ARMS LENGTH PRICE, WE REQUEST YOUR GOODSELF TO PRO VIDE US WITH AN OPPORTUNITY TO MAKE FURTHER SUBMISSIONS IN SUPP ORT OF THE DETERMINATION OF THE ARMS LENGTH PRICE BY ASSESSEE. YOURS FAITHFULLY, SD/- AUTHORISED REPRESENTATIVE ITA NO.5730/DEL/2011 7 13 MAY 2010 OFFICE OF THE ADDITIONAL COMMISSIONER OF INCOME TAX TRANSFER PRICING OFFICER I(1) ROOM NO. 315, 3 RD FLOOR DRUM SHAPED BUILDING INDRAPRASTHA ESTATE, NEW DELHI - 110001 FOR THE ATTENTION OF MR. AJIT KUMAR JAIN DEAR SIR, RE: RE: RE: RE: BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY IND IA OR BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA OR BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA OR BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA OR THE ASSESSEE) THE ASSESSEE) THE ASSESSEE) THE ASSESSEE) NOTICE U/S 92CA(2) OF THE INCOME TAX ACT, 1961 (ACT) ASSESSMENT YEAR (AY) 2007-08 WE REFER TO OUR PREVIOUS DISCUSSIONS IN CONNECTION WI TH THE ONGOING TRANSFER PRICING ASSESSMENT FOR AY 2007-08 OF OUR ABOVE MENTIONED CLIENT, WHEREIN YOU HAD REQUESTED TO FU RNISH INFORMATION BEFORE YOUR GOODSELF. IN THIS REGARD, ON BEHALF AND UNDER INSTRUCTION FROM OUR CLIENT, WE WISH TO SUBMIT TH E FOLLOWING INFORMATION FOR YOUR FAVOURABLE CONSIDERAT ION: 3. 3.3. 3. SUPPORTING DOCUMENT FOR CORPORATE SERVICE ALLOCATION SUPPORTING DOCUMENT FOR CORPORATE SERVICE ALLOCATION SUPPORTING DOCUMENT FOR CORPORATE SERVICE ALLOCATION SUPPORTING DOCUMENT FOR CORPORATE SERVICE ALLOCATION DURING FINANCIAL YEAR (FY) 2006-07, BENTLEY INDIA RECEIVED VARIOUS CORPORATE SERVICES FROM ITS ASSOCIATED ENTE RPRISES (AES). THE SERVICES CAN BE CATEGORIZED UNDER THE F OLLOWING BROAD HEADS: CORPORATE MARKETING; MANAGEMENT; HUMAN RESOURCES (HR); LEGAL; AND ACCOUNTING/ FINANCE. THESE SERVICES BENEFIT BENTLEY INDIA AND THE SAME HAS BEEN EXPLAINED IN THE SUBMISSION DATED 27 APRIL 2010 SUBMI TTED WITH YOUR OFFICE. KINDLY NOTE THAT THE TRANSACTION PERTAINING TO AVAILING OF CORPORATE SERVICES IS CLOSELY LINKED AND COMPLEMENTAR Y TO THE DISTRIBUTION OF SOFTWARE PRODUCTS ACTIVITY OF BENTLEY I NDIA. ALL INTERNATIONAL TRANSACTIONS RELATED TO DISTRIBUTION OF SO FTWARE ITA NO.5730/DEL/2011 8 PRODUCTS ARE BENCHMARKED USING THE TRANSACTIONAL NET MA RGIN METHOD (TNMM) AND THE SAME AMPLY DEMONSTRATES THE ARM S LENGTH NATURE OF BENTLEY INDIAS INTERNATIONAL TRANSACTION PERTAINING TO AVAILING OF CORPORATE SERVICES. FURTHER, CORPORATE SERVICE CHARGES HAVE BEEN ALLOCATE D TO BENTLEY INDIA BASED ON REVENUE EARNED BY BENTLEY INDI A AND THE GLOBAL REVENUE OF THE BENTLEY GROUP AND IS DONE BASE D ON THE ARMS LENGTH CRITERIA AND PRINCIPLE. DURING FY 2006-07, BENTLEY INDIA HAS PAID USD 826,29 9.86 AS CORPORATE SERVICE CHARGE TO ITS AE. IN THIS REGARD, PL EASE FIND ATTACHED AS ANNEXURE 1 ANNEXURE 1 ANNEXURE 1 ANNEXURE 1, A LETTER FROM BENTLEY SYSTEMS INC. EVIDENCING COMPUTATION OF THE COST ALLOCATION CHARGE. 4. 4.4. 4. WAIVER OF CORPORATE CHA WAIVER OF CORPORATE CHA WAIVER OF CORPORATE CHA WAIVER OF CORPORATE CHARGES RGES RGES RGES WITH RESPECT TO WAIVER OF CORPORATE CHARGES, PLEASE NOT E THAT THE COST RELATING TO WAVIER OF CORPORATE CHARGES IS BOR NE BY BENTLEY SYSTEMS INC. ALSO REFER ANNEXURE 1, A LETTER FR OM BENTLEY SYSTEMS INC. CLARIFYING THAT THE WAIVER COST IS B ORNE BY BENTLEY SYSTEMS INC. WE HOPE YOU WOULD FIND THE ABOVE IN ORDER AND TO YOUR SATISFACTION. WE REQUEST YOU TO TAKE THE ABOVE ON RECORD . WE SHALL BE PLEASED TO PROVIDE YOU WITH ANY FURTHER INFORMATION/CLARIFICATION THAT YOU MAY REQUIRE IN THIS R EGARD. FURTHER, IN CASE YOUR GOODSELF PROPOSES TO DETERMINE TH E ARMS LENGTH PRICE FOR THE INTERNATIONAL TRANSACTIONS OF BENTLE Y INDIA WHICH IS DIFFERENT FROM THE PRICE DETERMINED BY BENTLE Y INDIA AS THE ARMS LENGTH PRICE, WE REQUEST YOUR GOODSELF TO PRO VIDE US WITH AN OPPORTUNITY TO MAKE FURTHER SUBMISSIONS IN SUPP ORT OF THE DETERMINATION OF THE ARMS LENGTH PRICE BY ASSESSEE . YOURS FAITHFULLY, SD/- AUTHORISED REPRESENTATIVE ENCL: A/A 5 TH MAY, 2010 TO WHOMSOEVER IT MAY CONCERN WE HEREBY CONFIRM THE FOLLOWING IN RESPECT OF THE CO RPORATE CHARGES SLEVIED BY BENTLEY SYSTEMS INC. TO BENTLEY SYS TEMS INDIA PRIVATE LIMITED (BENTLEY INDIA) PURSUANT TO AG REEMENT IN ACCORDANCE WITH WHICH BENTLEY INDIA HAS AVAILED CORPO RATE SERVICES DURING THE PERIOD 1 APRIL 2006 TO 31 MARCH 2 007. ITA NO.5730/DEL/2011 9 SERVICES RENDERED TO BENTLEY INDIA ARE IN THE NATURE OF CORPORATE MARKETING, MANAGEMENT, HUMAN RESOURCES, LEGAL AND ACCOUNTING/FINANCE. TOTAL AMOUNT ALLOCATED TO BENTLEY INDIA DURING THE PERIO D 1 APRIL 2006 TO 31 ST MARCH 2007 WAS USD 826,299.86. A DETAILED COMPUTATION FOR THIS ALLOCATION IS ENCLOSED AS ANNEXURE A. THE AMOUNT ALLOCATED TO BENTLEY INDIA ABOVE REPRESENTS AND IS INTENDED TO RECOVER ONLY ACTUAL COSTS INCURRED B Y BENTLEY SYSTEMS INC. IN THIS CONNECTION AND DOES NOT INCLUDE ANY PROFIT ELEMENT. FOR BENTLEY SYSTEMS INC. SD/- DAVID HOLLISTER CHIEF FINANCIAL OFFICER ANNEXURE A ANNEXURE A ANNEXURE A ANNEXURE A COMPUTATION OF CORPORATE SERVICE CHARGE COMPUTATION OF CORPORATE SERVICE CHARGE COMPUTATION OF CORPORATE SERVICE CHARGE COMPUTATION OF CORPORATE SERVICE CHARGE THE CORPORATE SERVICE CHARGES HAVE BEEN ALLOCATED TO BENTLEY SYSTEMS INDIA PRIVATE LIMITED (BENTLEY INDIA) BASED ON REVENUE EARNED BY BENTLEY INDIA AND THE GLOBAL REVENUE OF BE NTLEY GROUP. THE DETAILED COMPUTATION OF CORPORATE SERVICE CHARGES ALLOCATED TO BENTLEY INDIA IS AS FOLLOWS: BENTLEY GROUP BENTLEY INDIA S. NO. PARTICULARS BASIS AMOUNT IN USD 1 REVENUES ACTUAL 401,313,000 6,382,430 2 ALLOCATION PERCENTAGE (A) INDIA REVENUE/ GLOBAL REVENUE 1.59% 3. WAIVER OF CHARGES KEEPING IN MIND THE ARMS LENGTH PRINCIPLE (BORNE BY BENTLEY SYSTEMS INC.) (B) 0.66% 4. TOTAL CORPORATE SERVICE COST (C) ACTUAL 88,405,480.76 5 CORPORATE SERVICE CHARGE ALLOCATED TO BENTLEY INDIA (A-B)*C 7. A PERUSAL OF THE ABOVE CONTENTS OF THE WRITTEN SUBM ISSIONS FILED BY THE ASSESSEE BEFORE THE TPO SHOWS THAT THE DATA WAS PROVIDED BY ITA NO.5730/DEL/2011 10 THE ASSESSEE BEFORE THE TPO CONCERNING THE INTERNATIONA L TRANSACTION PERTAINING TO AVAILING OF INTRA GROUP SERVICES BY TH E ASSESSEE FROM ITS ASSOCIATE ENTERPRISES. AS TO HOW THIS DATA IS INADEQUATE , HAS NOT BEEN MADE CLEAR BY THE LD. DRP AND IT HAS MERELY BEEN OBSE RVED THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE POSITION PUT FORTH BY THE TPO WAS BEING ACCEPTED IN THE ABSENCE OF ADEQUATE DATA. THE ASSESSEES OBJECTIONS IN THIS REGARD WERE, AS SUCH, REJ ECTED WITHOUT PASSING A SPEAKING ORDER. 8. IN THE AFOREMENTIONED CIRCUMSTANCES, WE DEEM IT PR OPER TO REMIT THIS MATTER TO THE FILE OF THE LD. DRP, TO BE DECIDE D AFRESH IN ACCORDANCE WITH LAW ON CONSIDERING THE AFORESAID DATA PROVIDED BY THE ASSESSEE BEFORE THE TPO. 9. THE DECISION ON GROUND NOS.1 TO 3 RAISED HEREIN WOU LD DEPEND DIRECTLY ON THE DECISION BY THE DRP ON GROUND NOS.4 A ND 5. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05.09.20 12. SD/- SD/- [A.N. PAHUJA] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 05.09.2012. DK ITA NO.5730/DEL/2011 11 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES