Appeal allowed, new comparables included, adjustments accepted. Decision on 06/11/2017.

The Tribunal allowed the appeal, excluding WAPCOS and Mahindra Consulting Engineers Ltd. as comparables for the TSS segment and including Kirloskar Consultants Limited. Working capital adjustment and proportionate adjustment in the TSS segment were accepted. The decision was pronounced on 06th November 2017.

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Issues Involved:
1. Exclusion of WAPCOS and Mahindra Consulting Engineers Ltd. as comparables for the TSS segment.
2. Inclusion of Kirloskar Consultants Limited as a comparable for the TSS segment.
3. Exclusion of Sasken Communication Technologies Ltd. as a comparable for the CDS segment.
4. Denial of working capital and risk adjustment in both TSS and CDS segments.
5. Proportionate adjustment in the TSS segment.

Detailed Analysis:

1. Exclusion of WAPCOS and Mahindra Consulting Engineers Ltd. as comparables for the TSS segment:
The Tribunal examined whether WAPCOS and Mahindra Consulting Engineers Ltd. should be excluded as comparables for the Technical Support Services (TSS) segment. The assessee argued that these companies are functionally dissimilar. WAPCOS is engaged in consultancy services in Water Resources, Power, and Infrastructure, and Mahindra Consulting Engineers Ltd. provides multidisciplinary technical consultancy services. The Tribunal referred to the Delhi High Court's decision in Rampgreen Solutions P. Ltd., which held that functionally different companies cannot be considered as comparables. Consequently, both WAPCOS and Mahindra Consulting Engineers Ltd. were excluded from the list of comparables.

2. Inclusion of Kirloskar Consultants Limited as a comparable for the TSS segment:
The assessee contended that Kirloskar Consultants Limited was incorrectly rejected by the TPO on the grounds of failing the RPT filter of 25%. The Tribunal noted that Kirloskar Consultants Limited had been accepted as a comparable in the previous assessment year (AY 2010-11), and the RPT ratio was only 11.79%, which is below the 25% threshold. The Tribunal emphasized that the Revenue cannot take inconsistent stands in successive years without proper reasoning. Therefore, Kirloskar Consultants Limited was included as a comparable.

3. Exclusion of Sasken Communication Technologies Ltd. as a comparable for the CDS segment:
The assessee did not press the issue concerning the exclusion of Sasken Communication Technologies Ltd. as a comparable for the CDS segment, as the Dispute Resolution Panel (DRP) had already provided relief on this matter. Hence, this issue was not further deliberated.

4. Denial of working capital and risk adjustment in both TSS and CDS segments:
The Tribunal addressed the denial of working capital and risk adjustment by the TPO. The assessee argued that the TPO did not verify the working capital adjustment, which was allowed by the DRP in the preceding assessment year. The Tribunal found that the DRP's order was non-speaking on this issue and accepted the assessee's submissions, implying that the working capital adjustment should be considered.

5. Proportionate adjustment in the TSS segment:
The Tribunal considered the issue of proportionate adjustment as directed by the High Court. The assessee argued that the proportionate adjustment should not be confined to the value of international transactions. The Tribunal agreed with the assessee's submission and held that the proportionate adjustment should be taken into account accordingly.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the exclusion of WAPCOS and Mahindra Consulting Engineers Ltd. as comparables, and the inclusion of Kirloskar Consultants Limited as a comparable for the TSS segment. The Tribunal also accepted the assessee's submissions regarding working capital adjustment and proportionate adjustment in the TSS segment. The order was pronounced in the Open Court on 06th November 2017.

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