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3. Brief facts of the case are as follows:-

The assessee is an Indian Company, a subsidiary of Kodiak Networks Inc., USA. It is engaged in the business of software development service to Kodiak Networks Inc, USA. The return of income for concerned asst. year was filed on 28/11/2006 declaring an income of Rs.11,97,597/-. The return of income was taken up for scrutiny and the case was referred to TPO u/s 92CA for determination of arm's length price. During the year, the assessee company had the following international transactions with its Associate Enterprise (i) rendering of software development services; (ii) marketing and customer support services; (iii) purchase of capital goods; (iv) sale of capital goods; and (v) reimbursement of expenses. There is no objection by the TPO on the pricing of the international transactions with respect to marketing and customer support services, purchase and sale of capital goods and reimbursement of expenses. The TP adjustment has been made only with respect to rendering of software development services to the tune of Rs.1,73,67,933/-.

a) Software product company

b) Software development company

c) Software customisable company

d) Software trading company As regard to software customisation company buys software products in the form of license from third parties or uses its own software products for customisation to suit the requirements of the customer. In this case only right to use the software is passed on to the customers. But these may be companies which does only customisation based on the software products bought directly by the customers. In such situation customisation includes coding which in a way are a kin to software development service providers. Thus if a company is only into pure customisation, the same is also considered as a software development service providers.

Similar submission also made before the TPO and considered the assessee's objections. The TPO have also asked information by issue of notice u/s 133(6) of the Income Tax Act and in compliance, M/s Tata Elxsi Limited clarified that product development services mainly develops software for customers who look for solution through embedded software.

Innovations design engineering provides products, design and engineering for automotive consumer goods and electronics enclosures. It delivers concept of now products though computers models, using a team of highly specialised industrial designers and graphics specialists and generals 3D CAD models and specification for products.

M/s Accel Transmatic Ltd vide its letter dated 27-01-2009 clarified in regard to Ushus technologies that (kindly refer para 4 page 75 of paper book).

"Ushus Technologies is the technology division of M/s. Accel Transmatic Ltd that produces custom software development services to companies' world wide. Ushus technologies division services clients in offshore software development and on site consultancy"

From a clarification, it reveals that given by M/s.Accel Ushus Technologies division of Accel is exclusively software service division.