The Hon’ble Tribunal held that where assessee had consistently from year to year followed a methodology of segregating cost of centres of sales & marketing, delivery services and client care and clubbing same under head ‘software distribution segment’, which in turn, were re-charged by assessee from its AEs with markup, then such a methodology adopted merits to be accepted and cost plus revenue would have to be removed from software development segment. Assessee in this regard had furnished complete details in written submissions, wherein as against revenue from services segment, software distribution expenses; hence assessee had earned margin which worked out to 18.14%.

Where TPO himself had considered cost incurred on sales & marketing, delivery services and client care cost centres to be attributable to distribution segment and where assessee had re-charged cost with 18% markup to its AEs, then cost plus revenue related to said cost should also be attributed to distribution segment. TPO had accepted assessee’s segmental bifurcation to arrive at TP adjustments. Cost allocated to software distribution segment had neither been challenged nor been disturbed by TPO, wherein operating cost used by TPO for margin computation of software distribution segment matches total expenses, operating cost used by TPO for margin computation of software distribution segment. Accordingly, Tribunal held that no adjustment was warranted in hands of assessee under head ‘software distribution segment’.  Tribunal excluded comparables Infobeans Systems Pvt. Ltd., Persistent Systems Pvt. Ltd., Cybercom Datamatics Information Solutions Ltd and Cybermate Infotek Ltd as functionally different companies. The Tribunal held that forex exchange fluctuation should be treated as operating income for TP purposes and required to be included in margins of software development segment for computing PLI of assessee.