Adaptec. Ltd. is engaged in the business of software, design and development and testing in the field of storage solutions. It filed its tax return declaring income of Rs.89,51,330. Since assessee is functioning as service provider to it’s group parent on cost + 10% margin basis.
Following an audit, the tax authorities selected 17 comparable companies, and arrived at an arithmetic mean of 25.26% and issued an assessment of additional taxable income of Rs.63,53,365.
Adaptec filed an appeal with the Income Tax Appellate Tribunal.
Judgment of the Court
The Court ruled predominantly in favour of the tax authorities but remanded the case for recalculations.