TaxTMI 
TaxTMI 
2010 (11) TMI 634
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....nitial approval of Foreign Investment Promotion Board dt. 22nd Dec., 1993 provided to Bechtel Corporation, USA to establish a wholly-owned design, engineering and procurement subsidiary in India for providing export services to Bechtel Group's wordwide projects. The assessee company namely, Bechtel India (P) Ltd. is 99.99 per cent subsidiary of Bechtel Corporation, USA. The balance 0.01 per cent shareholding lies with American Bechtel Inc., USA. During the relevant financial year 2005-06 relevant to asst. yr. 2006-07 which is under consideration, the assessee was engaged in the business of export of customized electronic data in the form of designs, drawings, calculations and other relevant datasheets relating to project engineering and commercial solutions for power plants, refineries, petrochemical plants etc. The international transactions entered into by the assessee company with its AEs during the relevant year are summarized in the table below:- Sl. No. International transaction Method PLI Value (in Rs.) 1. Engineering services provided TNMM OP/OR 89,90,07,809 2. Engineering service received TNMM OP/OR 2,09,53,249 3. R....
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....rder before the DRP on 22nd Dec., 2009. DRP vide order dt. 30th March, 2010 confirmed the order of the TPO/draft assessment order of the AO. For the ready reference, the order of the DRP is reproduced below:- "Order under s. 144C of the IT Act, 1961:- A petition under s. 144C of the IT Act, 1961 was filed on 22nd Dec., 2009 bearing No. 7 with two Annexures. Form No. 35A contained 4 grounds of objections. With reference to the objections filed by the assessee notice under s. 144C(11) dt. 4th Feb., 2010 of the IT Act fixing the case for hearing on 23rd Feb., 2010 was issued. Copy of the above notice was also sent to the AO and the TPO to represent 'their' case. The TPO has responded the above notice in reply vide letter dt. 25th March, 2010 and the AO vide letter dt. 29th March, 2010. Ground Nos. 1 and 4 are general in nature. Ground No. 2 relates to reference of AO to TPO. The reference is found to be order. This ground is rejected. On 23rd Feb., 2010 Shri A.S. Narayanan, Shri Shyamal Mukherjee and Shri Tarun Arora appeared on behalf of the assessee's company and were directed to file and requisite submissions. The case was....
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....osen proper companies for benchmarking and has given opportunities to assessee. In these proceedings also, director of the company and chartered accountants were heard at length. The issues were discussed in detail benchmarking of TPO is held to be in order. These directions are being issued to AO to pass order under s. 144C." 5. In conformity with the directions of the DRP, an amount of Rs. 5,29,19,406 was added to the assessee's business income and the AO then passed the assessment order under s. 143(3) r/w s. 144C of the Act vide his order dt. 8th April, 2010 where the addition of Rs. 5,29,19,406 was made on account of ALP of the international transactions as determined by the TPO and further confirmed by the DRP. 6. Being aggrieved, the assessee is in appeal before us under s. 253(1)(d) whereunder any assessee aggrieved by an order passed by AO under sub-s. (3) of s. 143 or s. 147 in pursuance to the directions of the DRP or an order passed under s. 154 in respect of such order, may appeal to the Tribunal against such order. 7. The learned counsel for the assessee submitted that in the course of determining ALP of international transactio....
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....t the assessee was engaged in the engineering and design business which was customized and was transmitted electronically and since these services were notified for the purpose of s. 10A, s. 10B and s. 10HHE, the assessee was entitled to deduction under s. 80HHE of the Act. He further made a reference to Board's Notification No. SO 890(E), dt. 26th Sept., 2000 where for the purpose of ss.10A, 10B as well s. 80HHE, the engineering and design product or services were notified to be in the nature of information technology enabled the products or services. He, thus, contended that the TPO has wrongly chosen the comparables to determine ALP of the transactions made by the assessee with its AE. He, therefore, contended that comparables chosen or selected by the TPO are to be rejected or ignored as they fail to satisfy the test of functional analysis as the comparables have not similar functional profile to that of the assessee. 9. An alternative contention was also raised by the learned counsel for the assessee that even if the six comparables relied upon by the TPO are accepted for the purpose of determining the ALP, the three comparables out of six comparables are to be ignor....
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....ture of activities undertaken by the assessee, which continue to remain in the nature of engineering design/drawings etc., nor is the characterization of the assessee's function altered by the form of output i.e., engineering designs, drawings, calculations and other relevant data transmitted to AEs in the form of customized electronic data. All these contentions and submissions of the assessee have been rejected by the DRP by merely observing as under:- "TPO has chosen proper companies for benchmarking and has given opportunities to assessee. In these proceedings also, director of the company and chartered accountants were heard at length. The issues were discussed in detail benchmarking of TPO is held to be in order." From the aforesaid observations of the DRP it is clear to us that DRP has not given any reason or basis as to why and how the TPO was justified in choosing the comparables and how these comparables selected by TPO were having similar functional analysis with that of the assessee. DRP has not considered the order of the Tribunal of earlier year for the asst. yr. 2000-01 cited before it nor has examined and considered by passing speaking and reasoned orde....