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These cross appeals are directed against the order dt.02.07.2012 of Commissioner of Income Tax (Appeals) for the Assessment Year 2005-06.

2. The assessee has raised the following grounds :

IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited GROUNDS RELATING TO LEGAL ISSUES

1.

The Order of the learned Commissioner of Income Tax (Appeals) - IV to the extent prejudicial to the appellant is bad in law.

5. Ground Nos.3 to 11 are regarding the Most Appropriate Method for determination of ALP and consequential TP Adjustment.

6. The assessee is a company engaged in the business of development of computer software and providing other related services.

During the year under consideration, the assessee has reported its financial results as well as international transactions as reproduced by the Transfer Pricing Officer in paras 2.3 and 2.4 as under :

IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited Thus it is clear from the international transactions reported by the assessee that there are diversified activity constituting the international transactions. To benchmark its international transactions, the assessee adopted the Transactional Net Margin Method (TNMM) as Most Appropriate Method (MAM) and compared its entity level PLI with comparable prices. The TPO accepted the entire international transactions at arm's length however the CIT (Appeals) held that cost plus method is MAM in the case of the assessee to determine the ALP IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited and accordingly adopted the cost plus method. The CIT (Appeals) then compared the assessee price with the comparable companies and directed the TP Adjustment. Aggrieved by the order of the CIT (Appeals) the assessee raised this issue in this appeal.

ordinate bench of this Tribunal in the case of M/s. Kshema Technologies Ltd. Vs. ACIT (supra) while dealing with an identical issue has held in para 11.3 as under :

IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited " 11.3 We have heard the rival submissions and considered the relevant material on record. We find that the assessee took its operating margin at entity level and then compared the same with the mean margins of the selected comparables. The TPO has not objected to its methodology of the assessee but rejected certain comparables selected by the assessee and included the some more comparables in the set of comparables for determining the ALP. It is pertinent to note that as per the provisions of Transfer Pricing, the entity level margin of the assessee cannot be considered for the purpose of bench marking the international transactions when the assessee is having both international as well as third party transactions.

IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited IT(TP)A Nos.1104 & 1258/Bang/2012 Mphasis Limited In view of the decision of Hon'ble jurisdictional High Court in assessee's own case, we decide this issue in favour of the assessee.