TaxTMI 
TaxTMI 
2015 (12) TMI 1560
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....actions entered into by the assessee are as under: S. No. International Transaction Amount (in Rs.) 1. Engineering services/Other services 114,37,93,036/- 2. Financial and accounting support services 4,57,02,508/- 3. IT infrastructure support services. 5,50,04,596/- 4. Reimbursement of expenses(paid) 6,70,973/- 5. Reimbursement of expenses(received) 21,97,07,529/- 4. For benchmarking the international transactions, assessee selected TNMM as the most appropriate method (MAM), with Operating Profit to Total Cost(OP/TC) as Profit level Indicator (PLI). The approach followed by the assessee in the TP Study has been encapsulated in the table below: Nature of International Transaction Amount (In INR crores) Most Appropriate Method & Profit Level Indicator ('PLI') Results Appellant's PLI No. of Comparables Margin of Comparables in TP Study* Provision of engineering design and related services 114.38 Method: TNMM PLI: OP/TC 13.04% 6 11.79% Provision of FAS services 4.57 Method: TNMM PLI: OP/TC 15.00% 10 14.37%....
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....ld that the assessee has provided benefit to its AE, by way of advancement of interest free loan in the garb of delay of receipt of receivable. The ld.TPO used CUP method by selecting credit period of 30 days and applying the rate of 14.88%. 7. The adjustment made by ld. TPO has been presented below: S. No. Nature of international transaction Appellant's margin Arm's length margin determined by ld. TPO Adjustment u/s 92CA (in INR) 1. Provision of engineering design and related services 13.04% 21.00% 8,05,09,189 2. Provision of FAS services 15.00% 29.30% 54,91,653 3. Provision of IT Infrastructure support services 17.56% 29.30% 56,83,008 4. Outstanding Receivables N.A. 3,10,93,116 Total 12,27,76,966 8. Aggrieved by the draft assessment order of the ld.TPO, the assessee filed its objections before the DRP. The DRP directed as follows: I. Engineering design services: The ld. DRP accepted the approach and the comparable set considered by ld. TPO. The DRP also directed the ld. TPO to include a comparable selected by the assessee being UB Engineering Limited if it p....
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....cumstances of the case and in law, the ld. AO/ld. Transfer Pricing Officer/Ld. Dispute Resolution Panel erred in making an addition of INR 15,45,32,767/- to the returned income of the Appellant by re-computing the arm's length price of the international transactions pertaining to all three segments of the Appellant Company viz. engineering services, financial support and IT infrastructure support u/s 92 of the Act. Thus, in passing the order, the ld. AO/ld. TPO/ld. DRP erred in: 1.1Rejecting the comparable companies adopted by the Appellant in its transfer pricing documentation on the basis of additional/modified quantitative filters which lacked valid and sufficient reasoning. 1.2 Accepting companies which were functionally not comparable to the Appellant. 1.3 Including companies with high/supernormal margins as comparables. 1.4 Not considering the correct computation of operating margins of certain comparables. 1.5 Denying the benefit of economic adjustments on account of difference in risk profile in arriving at the arm's length margin. 1.6 That on facts and circumstances of the case and in law, the ld. AO/TPO/ld. DRP erred i....
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....ppraisal of projects in priority sectors) and to entrepreneurs operating in SME sector (preparation of project report, market studies and conducting training program's). However, over the years Kitco has evolved into a multifunctional and multi-disciplinary organization and has started offering consultancy service from 'concept to commissioning'. As portfolio of services offered by Kitco currently includes the following: • Project consultancy; • Detailed design engineering and project execution; • Technical services; • Environmental Engineering; and • HRD consultancy 12.2 The assessee fairly submits that Kitco is a 100% government owned undertaking, rendering services primarily to central/state government undertaking and PSUs. It is not in dispute that most of the clients or projects undertaken by this company are either for state government or government run institutions. The majority revenue (and profitability) of this company comes from government (state or center) run projects and that the company derives benefit out of its parental relation with the Government in getting contract. In other words, the compan....
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....in activities that extend from concept to commissioning. Whereas the assessee provides services as a captive unit to its overseas AEs. The diversified functions of this comparable company include pre-project activities, procurement assistance, project management, commissioning and coordination, inspection, construction and supervision. Further, there is no segmental accounting in the annual report of the Company which provides profitability, for the engineering design segment. Hence the same cannot be accepted as a comparable. 3) IBI Chematur Ltd. 12.7 The comparable Company is involved in activities beyond engineering design which assessee provides. Apart from detailed engineering, the comparable company, also provides project planning, management services, procurement assistance, project management, commissioning and coordination, inspection, construction and supervision etc. Further, there is no segmental accounting available in the annual report of the Company which provides profitability for the engineering design segment. The comparable company undertakes substantial R&D activities (R&D expense 5.41% of turnover) which is not a function performed by the assessee. Hence ....
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....at, annual report for F.Y.2010-11is available on the database of Capitaline Plus. It is relevant to note that the Ld. TPO/DRP has accepted M N Dastur & Co. Pvt. Ltd., as a comparable in the assessee's own case for assessment year 2009-10. Under such circumstances, we direct the A.O to include this company as a comparable. 7) Mott Macdonald Private Limited 12.11 The ld.TPO has rejected the company as a comparable on the ground of being widely diversified and that segmental information was not available. The ld.AR submitted that this comparable company is involved in the provision of multi-disciplinary management and engineering consultancy services like business advice for development planning to engineering design to project management. It is engaged in planning, developing and delivering projects across many sectors such as energy, industry, water and environment to transport, buildings, urban infrastructure and social development. We observe that the Ld.DRP has not given any reasons for rejecting this comparable. We observe that the functions of this comparable company are diversified in nature. As we have rejected company like TEC on similar ground, this company also canno....
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....althcare. It is submitted by the ld.AR that Accentia Technologies Ltd is also engaged into diversified activities such as Knowledge Process outsourcing(KPO), Legal process outsourcing(LPO), Data process Outsourcing(DTO), high end software services. It is also submitted by the ld.AR that segmental information in respect of this company is not available. It has been further brought to our notice that this company has been rejected by the Ld.TPO in the earlier year. The company has also had business restructuring during the year under consideration thereby giving rise to extraordinary circumstances. For all these reasons we direct the Assessing Officer to exclude this company as a comparable. 3) E4e Healthcare Business Services Private Limited This company has been included by the ld.TPO as a comparable. Functionally the company is into health care outsourcing services and in addition it also renders software development services. It is also observed that segmental information in respect of this company is not available. The company is also a 100% EOU, under STPI guidelines. We are therefore inclined to accept the contention of the assessee that this company should be excluded a....
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....ecting this company be considered by the TPO as a comparable, and to include the same in the event it satisfies all the filters applied by the ld.TPO. Ground nos. 1 & 2 stands disposed off accordingly. Adjustment on account of Receivables 14.7 During the course of the proceedings before TPO, he observed that payments on account of sales to the AE, is realized after a significant time period. The ld.TPO ascertained that payment for invoices raised by the assessee has not been paid within the stipulated time as provided in the service agreement and accordingly treated the delayed payments as loan facility advanced to the AE's. The ld.TPO charged 14.88% interest for the delayed period, beyond a period of 30 days. The ld. DRP upheld the adjustments made by the ld.TPO. 14.8. The ld.AR submitted that during the financial year, the assessee had entered into international transactions pertaining to provision of support services to its AE's. In this regards, the details of the invoices raised and the payment received with dated were submitted before the TPO/DRP. The ld.AR has submitted that thought there was no credit period that was specified in the service agreement, however the ass....