TaxTMI 
TaxTMI 
2016 (11) TMI 1575
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.... 3. Facts apropos are that assessee an engineering services provider had filed its return for the impugned assessment year disclosing income of C3,31,83,584/- under normal provision and C6,37,96,564/- u/sec. 115JB of the Act. Since assessee had entered into international transaction with its Associated Enterprises exceeding a value of C15,00,00,000/- a reference was made to the ld. Transfer Pricing Officer (hereinafter referred to ''the TPO'') by the Assessing Officer. Profile of the assessee has been summarized by the ld. TPO at para 3 & 5 of the order dated 22.01.2015 and this is reproduced hereunder:- ''Saipem India is engaged in providing engineering and allied services. During the financial year 2010-11. Saipem India exported engineering service and paid technical service charge to its AEs belonging to the Saipem Group. Under the Engine ring services segment. the main activities of Saipem India could be categorised as follows: . Project Management; . Engineering ; . Procurement services and; . Site activities 'Saipem India is engaged in carrying out project management, engineering procurement assistance series, site supervision, comm....
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....espect of personal and rental cost) 95,505,056 Total Operating cost 1,274,997,732 Operating/Net profit 167,506,096 Operating profit/operating cost 13.14% The profit level indicator adopted was the ratio of operating profit to operating cost. As per assessee, its own PLI was much more than that of comparables and therefore there was no requirement for any adjustment on the pricing of its international transactions with the Associated Enterprises. 6. The ld. TPO after considering the comparables selected by the assessee was of the opinion that M/s.Stewarts & Lloyds Ltd was not an appropriate one. According to ld. TPO, M/s. Stewarts & Lloyds had incurred considerable material cost and was doing fabrication work. Though assessee submitted that material consumption of M/s.Stewarts & Lloyds Ltd as a percentage to its operating cost was only 8.02%, this was not accepted by the ld. TPO. According to ld. TPO, M/s.Stewarts & Lloyds Ltd was engaged in a different type of activity and had significant investments in plant and machinery. There were no segmental results and hence as per ld. TPO, M/s.Stewarts & Lloyds Ltd could not be considered as a proper com....
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....cost : 137,08,02,788 Arm's length revenue : 152,59,77,663 Operating Revenue : 144,25,03,828 Adjustment proposed : 8,34,73,835 9. When a draft assessment order in the lines mentioned above was proposed by the ld. Assessing Officer to the assessee, it chose to move the ld. Dispute Resolution Panel (hereinafter referred to as ''DRP''). Apart from objecting to idle time adjustment on PLI not being granted to it, assessee also assailed rejection of its comparable named M/s. Stewarts & Lloyds Ltd and inclusion of the new comparable called M/s. Mahindra Consulting Engineers Ltd. It also assailed non consideration of two new comparables suggested by it namely M/s. Desein Private Limited and Blue Star Design & Engineering Ltd, suggested by the assessee. ld. DRP disposed off these objections observing as under:- ''Since assessee's objections 1.4 to 1.13 are interrelated, the same are being taken up together. The submissions of the assessee on these objections have duly been considered. As regards assessee's objection of TPO rejecting its TP study and applying fresh filters, the issue has been dealt in detail by the TPO. Reaso....
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....astructure especially in the area of Special Economic Zone, Water supply and sewage, solid waste mangement etc. As per ld. Authorised Representative M/s. Mahindra Consulting Engineers Ltd though it had an intention to do infrastructure consulting services in partnership with an M/s.SAFAGE, France, this had not happened during the relevant previous years. According to him, functional profile of M/s. Mahindra Consulting Engineers Ltd clearly showed that they were not in oil and refinery sector. As per ld. Authorised Representative they were doing infrastructure consultancy. Thus, according to him, M/s. Mahindra Consulting Engineers Ltd was wrongly considered as a good comparable. 11. Adverting to the exclusion of M/s. Stewarts & Lloyds Ltd, ld. Authorised Representative submitted that the said company was considered by ld. TPO himself in TP orders for assessment years 2008- 09, 2009-2010 and 2010-2011 as a good comparable. According to him, there was no change in the functional profile of M/s. Stewarts & Lloyds Ltd which warranted rejection of that comparable for the impugned assessment year. As per ld. Authorised Representative cost of raw material incurred by the said company wa....
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....ered the rival contentions and perused the orders of the authorities below. First question whether M/s. Mahindra Consulting Engineers Ltd was rightly considered as a good comparable. In the transfer pricing study under the heading 'statement of facts' assessee had given the functional profile of M/s. Saipem group, of which assessee was a member as under:- 'Saipem Group is a global turnkey contractor in the oil and gas industry., 43 percent of the group is owned by Eni, an Italian multinational Oil and Gas Company. Eni operates in the oiI and gas electricity generation (and sale. petrochemicals, oilfield services, construction and engineering Industries. Eni is active in 79 countries with a staff of about 80,000 employees. Saipem Group is a global leader In the provision of engineering, procurement, project Management and construction services with distinctive capabilities In the design and the execution of large - scale offshore and onshore projects. and technological competences such as gas monetisation and heavy oil exploitation. The Saipem group has a strong local presence in strategic and emerging areas such as West Africa, North Africa, Former Soviet Union Countries (....
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....d gas) and utilities and offsite services. Basically Saipem India'soffer1ngs can be categorized as follows: 1. ENGINEERING SERVICES This encompasses performing feasibility studies, basic and detail engineering and technical assistance related to onshore I offshore plant design works; This includes support engineering. coordination of design activities, economical, feasibility and conceptual studies, process studies, analysis and drawings related to the method of performing the construction activities, design and engineering services for various disciplines i.e. civil, structural, mechanical, electrical, instrumentation, piping etc. 2. PROJECTS SERVICES This consist of undertaking technical assistance to the projects of clients and performing services such as coordination of design activities. field engineering, commissioning assistance, construction supervision, material control. project control. planning. quality control I assurance. and safety at construction sites and other technical assistance activities 3. PROCESS ENGINEERING SERVCIES This consist of the execution of the process activities for both the primary onshore process systems (refinery. chemica....
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....r review, your Company consolidated its presence in Infrastructure Consulting Sector and registered a high growth in several areas of operation. Your Company's income for the year has increased to Rs. 1,1 01.56 takhs as compared to Rs. 936.89 lakhs in the previous year, registering a growth of 17.58%. Prom before taxation for the year was Rs. 253.54 lakhs as compared to Rs. 175.65 lakhs for the. previous year, representing an increase of 44.34%. During the year under review, your Company has bagged several prestigious and first of its kind assignments. Your Company has further strengthened its position in Infrastructure Sector by providing consultancy services in the areas Zones, Water supply and Solid waste management, Urban infrastructure Agri and Horti infrastructure, Social infrastructure, Marine infrastructure, Industrial infrastructure . Renweable energy, sustainability studies, , Institutional strategies I Planning studies, Industrial plats and systems. etc:--'" Your Company has also implemented several innovative and sustainability ideas in its projects and is augmenting its efforts to consolidate its position as a front runner in innovate projects. Your compa....