TaxTMI 
TaxTMI 
2015 (11) TMI 1562
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal before Hon'ble ITAT, which has restored the case back to the TPO for determining the ALP afresh by treating the company to be involved in the business of engineering design and drawing. In compliance to the order dated 22.12.2012 passed by the Tribunal and in consonance with the directions made by TPO/DRP, A.O. made an addition of Rs. 8,63,90,740/- on account of transfer pricing adjustment. 2. Feeling aggrieved, the assessee has again come up before the Tribunal and sought to set aside the impugned order dated 31.01.2015 passed by the A.O. u/s 254/143(3) read with Section 144C of the Act on the grounds inter alia that: "1. That on facts and circumstances of the case and in law, the Ld. AO 1 Ld. Transfer Pricing Officer ("TPO") / Ld. Dispute Resolution Panel ("DRP") erred in making an addition of INR 9,22,55,795/- to the returned income of the Appellant by re-computing the arm's length price of the international transactions under section 92 of the Act. Thus, in passing the order, the Ld. AO / Ld. TPO / Ld. DRP erred in: 1.1 Rejecting the comparable companies adopted by the Appellant in its transfer pricing documentation on the basis of additional/modified quantitative....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as a PLI as the most appropriate method for benchmarking the international transaction. However, the appellant has opted multiplier data in accordance with Rule 10B(iv) of Rule of OECD guidelines while benchmarking the international transaction. However Ld. TPO and A.O. differed with the assessee in adopting comparables for transfer pricing (TP). The TPO excluded comparables adopted by the assessee for selecting proper comparables functionally similar to that of the assessee company by following filters with criteria inter alia that companies whose data is not available for the financial year 2004-05; that companies whose engineering design and drawing consultancy service is less than Rs. 5 crores; that companies whose revenue and engineering design and drawing is less than 75% of total operating revenue; that companies having more than 25% related parties transaction of income, have been excluded and companies having different financial year ending (i.e. March 31st, 2004) and data of the company does not fall 12 months period i.e. 01.04.2003 to 31.03.2004, that the companies which are functionally different from the taxpayer and that the companies which are having peculiar economi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adopted by the appellant. In consonance with the directions issued by DRP, A.O. passed the revised arm's length transaction determined as 20.23% and consequently, made Transfer pricing by adding an amount of Rs. 9,22,55,795/-. 7. We have heard Ld. authorized representatives of both the parties and have gone through the material placed on record in the light of the facts and circumstances of the present case. 8. At the very outset, Ld. A.R. contended that except ground No.1 read with gourds 1.1, 1.2, 1.3 , 1.4 and 2, rest of the grounds are of academic nature and as such need no adjudication. 9. In consonance with the directions passed by Ld. TPO/DRP, A.O. has adopted the following final comparables: S.No. Company Name Working capital adjusted (OP/Total Cost) 1 Holtec Consulting Pvt. Ltd. 37.71% 2 Rites Ltd. 32,63% 3 TCE Consulting Engineers Ltd. 21,96% 4 UB Engineering Ltd 1.95% 5 Tata Projects Ltd 6.88% Mean 20.23% 10. Ld. A.R. for the assessee contended that TPO/DRP have arbitrarily selected the comparables which are functionally different for transfer pricing and at the same time, they have arbitrarily rejected the comparable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oresaid company as comparable. The crux of the same is lying at pages 73-75 of the appeal set. Major objection raised by the taxpayer is that the comparable company is engaged in providing services in the areas of engineering consultancy, traffic studies, exports of locomotives and maintenance of the locomotives, construction and project management for railway track, electrification together with traffic and software consultancy assignments. More so, its income from non consultancy services is less than 75% and this filter is applied by the TPO himself. 15. On other hand, the appellant company is engaged in engineering design and drawing for various overseas AEs to support overseas offices on turnkey project execution basis. Similarly, the cost of export sales and supply services constitutes merely 35.86% of the total cost. So keeping in view the fact that comparable company i.e. RITES Ltd. taken by TPO is functionally distinctive having been engaged in the area of engineering consultancy, traffic studies, export of locomotives and maintenance of the locomotives, construction and project management for railway track, electrification together with traffic and software consultancy a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lusion of Engineers India Ltd., a Government company form the list of comparables on the ground that profit motive is not relevant consideration in case of Government undertakings by relying on the judgements cited as M/s. Thyssen Krup Industries India Pvt. Ltd. in I.T.A. No. 6460/Mum/2012 New Delhi M/s. Avaya India Private Ltd. in I.T.A. No. 5150/Del/2010 (supra) and contended that the Government companies cannot be taken as comparables for TP by following the law laid down by Hon'ble Jurisdictional High Court in M/s. Avaya India Pvt. Ltd. and M/s. Thyussen Krupp Industries India Pvt. Ltd. (supra). The Government undertakings can even operate on losses in furtherance of social objectives of the Government. By relying on the judgement supra as well as on functional disparity between aforesaid comparable company and the appellant company, this company is ordered to be excluded from the list of comparables. 19. Regarding ground No.1 read with ground Nos. 1.1, 1.2, 1.3, 1.4, 1.5 and ground No.2, Ld. A.R. contended that the TPO/ DRP has arbitrarily rejected the functionally comparable companies namely Steewards Lloyed India Ltd. for TP. TPO's comments for rejection of aforesaid co....