2023 (6) TMI 1280 - AT - Income Tax

Tribunal excludes APITCO from comparables list, favoring assessee in appeal. Potential resolution on PF contribution disallowance.

The Tribunal ordered the exclusion of APITCO from the list of comparables, allowing the assessee's grounds related to this issue. The appeal of the ... TP Adjustment - comparable selection - TPO included APITCO Ltd. as comparable for bench marking the international transaction - assessee is primarily engaged in the business of providing integrated range of Project Management, Cost Management and Management Consultancy Services to any entity engaged in the field of construction projects - HELD THAT:- APITCO provides numerous services which are not provided by the assessee, the assessee is not involved in to skill development entrepreneurship development and training, research studies, asset reconstruction and management Services, Energy Related Service, Tourism Infrastructure Development and Environmental Management. By going through the financial statement of the company for the Financial Year 2011-12, it is found that the APITCO is held by public share holder whereas the assessee is held by Private Limited Company. Services description suggests that APITCO works predominantly on government initiative project. More than 75% of the Revenue earned by the APITCO in the Financial Year 2011-12 was from the activities like Skill Development, Cluster Development, Research Studies, Micro Enterprises Development, Environmental Management etc. But the assessee is only engaged in providing Project Management, Cost Management and Management Consultancy Services. Thus, functionally APITCO is not a comparable company to the assessee. We are of the opinion that APITCO is functionally different and the same should be excluded from the list of comparables selected by the TPO.Appeal of the assessee is allowed. Issues Involved:1. Transfer Pricing Adjustment and Functional Comparability of APITCO Ltd.2. Disallowance on account of non-deposition of employee's contribution towards PF.Summary:1. Transfer Pricing Adjustment and Functional Comparability of APITCO Ltd.The primary issue raised by the assessee was the partial confirmation by the CIT(A) of the addition made by the AO/Transfer Pricing Officer (TPO) concerning the international transactions, which were deemed not to satisfy the arm's length principle under the Income-tax Act, 1961. The assessee contended that APITCO Ltd. was not functionally comparable to its operations. APITCO was engaged in activities like skill development and tourism development, which are predominantly government initiatives, unlike the appellant's business of providing construction project management, cost management, and management consultancy services.The Tribunal noted that APITCO's services and functional profile were significantly different from those of the appellant. APITCO's primary revenue came from government-related activities, making it an unsuitable comparable. The Tribunal referenced several judicial precedents to support the exclusion of APITCO from the list of comparables.Conclusion: The Tribunal ordered the exclusion of APITCO from the list of comparables, allowing the assessee's grounds related to this issue.2. Disallowance on account of non-deposition of employee's contribution towards PFThe second issue involved the disallowance of Rs. 42,40,062 by the AO under section 36(1)(va) of the Act due to the non-deposition of the employee's contribution towards PF within the stipulated time. The assessee argued that the amount was paid before the due date of filing the return of income and should be allowable. Despite detailed submissions by the assessee, the AO proceeded with the disallowance based on a CBDT Circular.Conclusion: The Tribunal did not specifically address this issue in the detailed judgment provided, as the primary focus was on the transfer pricing adjustment. However, the overall appeal of the assessee was allowed, implying that the disallowance issue might have been indirectly resolved in favor of the assessee.Final Order: The appeal of the assessee was allowed, and the order was pronounced in the open court on 28/06/2023.