TaxTMI 
TaxTMI 
2016 (6) TMI 1340
X X X X Extracts X X X X
X X X X Extracts X X X X
....in law in enhancing the income of the Assessee by INR 13,147,114. 3.1. The Ld. AO/ Ld. TPO/ Hon'ble DRP erred on the facts and in the circumstances of the case and in law in framing the order u/s 92CA of the Income Tax Act, 1961 ('the Act') on findings which are erroneous in law, contrary to the facts and based on mere conjectures and surmises. 3.2. The Ld. AO/ Ld. TPO/ Hon'ble DRP failed to appreciate the submissions made/ contentions raised by the Assessee and further erred in making observations, assertions and inferences in the order, which were both factually incorrect as well as legally untenable. 4. The Ld. AO/ Ld. TPO/ Hon'ble DRP erred in enhancing the income of the Assessee by INR 13,147,114 holding that the international transactions of the Assessee pertaining to provision of application engineered software development and related services do not satisfy the arm's length principle envisaged under the Act and in doing so, have grossly erred in: 4.1. disregarding the Arm's Length Price ('ALP') as determined by the Assessee in the Transfer Pricing ('TP') documentation maintained by it in terms of sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....round No. 3 to 3.2 were not pressed and ground No. 5 is prematurely raised. So these grounds do not require any comments on our part. 4. At the first instance Ld. Counsel for the assessee argued ground No. 4.6 which relates to the addition of Rs. 1,31,47,140/- on account of arm's length price adjustment by including certain companies in the final set of comparables and excluding certain companies claimed to be comparable to the assessee. 5. Facts of the case in brief are that the assesse was engaged in providing application engineering, software development and related services for ovation control systems as a part of the work and filed the revised return of income declaring an income of Rs. 2,83,86,373/- on 26.3.2013. Assessee entered into international transactions for which reference was made to the transfer pricing officer (TPO) to determine the arms length price on such transactions u/s 92CA(3) of the Income Tax Act 1961 (hereinafter referred 'the Act'). The assessee had taken the operating profit to total cost (OP/TC) ratio as the profit level indicator (PLI) by applying Transactional Net Margin Method (TNMN) and arrived at the PLI of 14.09% whereas the average PLI of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....venue 204,406,844 Arm's Length Value of purchases at a margin of 20.52% 246,351,128 Purchase Price shown 233,204,014 105% of purchase price 244,864,215 Proposed Adjustment u/s 92CA 1,31,47,114 8. The AO passed the draft assessment order by making the above addition proposed by the TPO. Thereafter, the assessee filed objections before the Ld. DRP who did not find merit in the objections of the assessee except that the working capital adjustment is to be done and the TPO to recheck whether the comparable M/s. Mitcon Consultancy & Engg. Services Ltd clears the service income filter. On the directions of the Ld. DRP the AO passed the assessment order. 9. Being aggrieved the assessee is in appeal. Ld. Counsel for the assessee submitted that M/s. Mohindra Consulting Engineers Ltd. selected by the TPO as comparable was discarded and directed to be removed by this bench of the ITAT in ITA No. 5343/Del/2012 for assessment year 2008-09 vide order dated 13th April, 2016 in assessee's own case. Copy of the said order was furnished which is placed on record. It was further submitted that M/s. Mitcon Consultancy and Engg. Services Ltd. is functionally dissimilar ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le companies for the international transactions included M/s. Mahindra Consulting Engineers Ltd. which has been directed to be excluded by the ITAT vide order dated 13th April, 2016 in ITA No. 5343/Del/2012 in assessee's own case and the relevant findings have been given in para 20 to 24 of the said order which read as under :- "20. The Id. AR for the assessee contended that this comparable company is functionally dissimilar, having significant related party transactions and relied upon order passed by Delhi Tribunal in case cited as Bechtel India (P.) Ltd. Vs. Addl.CIT - 146 ITD 733 (Delhi - Trib.). 21. The TPO, while selecting the Mahindra as a comparable company, has returned the following findings :-: "The assessee has objected to the use of this company as a comparable on account of being functionally different and submitted that consultancy services provided by this comparable company in multidisciplinary areas. In contrast, the services provided by the Assessee are in of an entirely different nature. Further, the Assessee has provided arguments on application of related party transaction filter to reject companies having controlled transac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial infrastructure, ports and harbor & offshore terminal, horticulture, coal handling, etc., the same cannot be compared with the assessee company which is into application "Engineered Software Development and Related Services". This comparable has been rejected by the coordinate Bench of the Tribunal in case cited as Bechtel India (P.) Ltd. (supra) and restored the file back to the TPO. Ld. DR for the revenue has not controverted the proposition mooted out by the assessee as to the aforesaid decision of the coordinate Bench in Bechtel India (P.) Ltd. (supra)." 13. We, therefore, by respectfully following the aforesaid order direct the TPO not include M/s. Mohindra Consulting India Ltd. while working out the Arm's length price adjustment. As regard M/s. Mitcon Consultancy and Engg. Services Ltd. it appears that the Ld. DRP directed the TPO to recheck as to whether the said company cleared the service income filter. The relevant observations of the Ld. DRP are as under :- "The above extract from the AR of the Company and the ones done by the TPO shows that the assessee contention in respect of lack of functional comparability is wrong. However as regards the assessee cla....