TaxTMI 
TaxTMI 
2019 (1) TMI 952
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....conclusion that it was 'expedient and necessary' to refer the matter to the Ld. TPO for computation of the arm's length price, as required under section 92CA(1) of the Act. 3. The Ld. AO/Ld. TPO/ Ld. Dispute Resolution Panel ('DRP') erred on facts and in law in making an upward adjustment to the arm's length price of the Appellant's international transaction in relation to provision of engineering design services amounting to INR 7,44,04,229 by: 3.1. Rejecting the comparable companies selected by the Appellant in its Transfer Pricing documentation; 3.2. Accepting companies, which are not comparable to the Appellant in terms of functions, assets and risks; 3.3. Erroneously ignoring comparable companies, obtained by way of a fresh search, provided by the Appellant as a response to the show cause notice; and 3.4. Not granting an economic adjustment for the risk mitigated environment in which the Appellant operates. 4. That on the facts and circumstances of the case and in law the Ld. AO/ Ld. TPO erred in not examining the validity of initiation of penalty proceedings u/s 271 (1) (c) of the Act. That the appellant craves le....
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....ting Engineering Services India Pvt.Ltd. Data for the current year is not available in the public domain. Hence, not a suitable comparable. 3. Development Consultants Ltd. Data for the current year is not available in the public domain. Hence, not a suitable comparable 4. Engineering Projects (India) Ltd. This company is in construction business of many spheres. Hence, not a suitable comparable. 5. Kitco Ltd. This is a suitable comparable. 6. KLG Systel Ltd. (Life Cycle Solutions Segment) This company fails service income filter (28.19%) and this company as per disclosure made in Annual Report is in Computer Software & Hardware. Hence, not a suitable comparable. 7. Project and Development India Limited. This is a suitable comparable. 8. Simon India Limited This company is engaged in 'Construction contract' which are functionally different from the tax payer and fails service filter also (4.09%). Hence, not a suitable comparable. 2.5. Ld.TPO has not disputed regarding functional profile of assessee, most appropriate method used and PLI in respect of service rendered by assessee. Only dispute raised by Ld.TPO is in respect o....
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....tor") and other Fluor affiliates in variety of jurisdictions, to assist in performing work on the project (also referred to as sub-contractors"). At page 35 of paper book volume 1 of transfer pricing study, categorises assessee as providing engineering design and related services. It has been submitted that once a contract has been awarded by ultimate customer, Fluor Affiliates may sub-contract different tasks such as engineering design, procurement, commissioning etc. to different group companies depending upon their core competency. Final service provided to end-user, generally requires integration of different services, sub-contracted to different group companies. The engineering design activities sub-contracted to assessee, are thus part of the total contract awarded to the Fluor Affiliates by an unrelated party. Briefly, functions performed by assessee (more particularly detailed at page 35-37) are as under: a. Business Development: As the affiliate is responsible for all marketing efforts for engineering design and related services rendered by assessee, and assessee has no role to play, vis-a-vis business development. b. Engineering Design Services: As....
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....sponsible for retaining skilled and trained workforce to carry out its activities and foreign exchange risk as the remuneration is received by assessee in foreign currency. 6. Thus based upon the above FAR, assessee is characterised as performing engineering design services as a sub contractor to Fluor Affiliate, exposed to limited risk associated with carrying out such business. 7. On the basis of above, we shall compare FAR undertaken by the comparables disputed by assessee for being included/excluded as the case may be. 8. Before we proceed to examine comparables, several decisions of various Tribunals have been cited by parties regarding its inclusion /exclusion by submitting that, these comparables should be excludible/includible based on those decisions. We are of the view that each decision has rendered particular comparable excludible/includible, based on facts of that case, as well as FAR of assessee whose issues are decided. We are also aware about precedent value of those decisions, while deciding comparables regarding its suitability. However, we feel, paramount importance shall be on Rule 10B (2) of Income Tax Rules 1962 which is as under:- "(2) For t....
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....of this tribunal as well as Hon'ble high courts in support of its exclusion. Ld.CIT DR however submitted that, in the process of comparability analysis Rule 10 B (2) has to be considered and merely because a particular company is owned by government would not lead to its exclusion under less functional dissimilarity is established. We have perused submissions advanced by both sides and the light of the records placed before us. Functional profile of this company, as submitted by assessee, and as per annual report placed at page 277-309 of paper book is as under: KITCO, the first Technical Consultancy Organization(TCO) in India, was established in 1972 by Industrial Development Bank of India, other national and state level financial institutions, Govt. of Kerala and 7 Public Sector Banks for rendering services to Entrepreneurs, Govt. Departmental PSUs, Local Bodies, etc. Presently, Small Industries Development Bank of India (SIDBI) is the prime shareholder with 49% shares of the company. Would KITCO successfully implemented projects like Cochin International Airport Ltd., , Cochin Special Economic Zone, etc and is involved in implementing a multimodal Mobility Hub at ....
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.... not on a sub-contract basis. From the above, it is evident that this comparable is not functionally comparable due to difference in functions performed by this company with that of assessee, In our view this company cannot be compared with limited functions performed by assessee, because it is the nature of services rendered and not per se rendering of services that is relevant in accepting or rejecting it as comparable. Therefore, we direct exclusion of this comparable from the list of comparables. (III) TCE Consulting Engineers Ltd. Ld. TPO included this comparable into the final list, as it provides engineering and designs services to its customers. On the contrary Ld.Counsel submitted before us that it is not a fit comparable as it is functionally dissimilar. On the contrary Ld. CIT DR placed reliance upon the observations of Ld. TPO/DRP. We have perused submissions advanced by both sides in the light of records placed before us. It is submitted that this company is engaged in providing highend technical services. Profile submitted by the assessee at page 310-395 of paper book volume 1 shows that it successfully managed complex engineering projects across ....