AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 655
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.... Ground 1 General ground challenging the transfer pricing adjustment of Rs. 498.73 Lacs Erred in making transfer pricing adjustment amounting to Rs. 498.73 Lacs to the value of international transactions of HTI by rejecting the analysis undertaken by HTI to determine arm's length price for its international transactions. International transactions pertaining to management and administrative cost allocation Ground 2 Addition to total income treating the Arm's Length Price ('ALP') of costs allocated by AEs for administrative and managerial services as NIL Erred in making transfer pricing adjustment amounting to Rs. 147.54 Lacs to the value of international transactions by treating the arms length price of cost allocated by AEs for administrative and managerial services as NIL. Ground 3 Inappropriate application of Comparable Uncontrolled Price ('CUP') method instead of applying Transactional Net Margin Method ('TNMM') Erred in ignoring the arm's length results on applying TNMM considering the cost allocation as part of cost base of the Assessee and applying CUP method inappropriately for determination of ALP of the said....
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....anticipated additions made to the total income on account of Transfer Pricing adjustment. Ground 14 Initiating penalty proceedings under section 271(1)(c) of the Act Erred in initiating penalty proceedings under section 271(1)(c) of the Act, without considering the fact that adjustment to transfer price is mainly on account of difference of opinion between the Assessee and the TPO regarding set of comparables companies and adjustments on account of functional and risk differences, consequently resulting in an adjustment to income. The Appellant craves leave to add, alter, amend, amplify or modify any or all of the above grounds of appeal at or before the time of hearing of the appeal. The Appellant prays that appropriate relief be granted based on the grounds of appeal and facts and circumstances of the case. 4. The assessee has also filed additional grounds of appeal which read as under:- On facts and in circumstances of the case, learned AO / TPO: Grounds in respect of international transaction pertaining to provision of Business support services ('BSS Segment') Additional Ground 15 Functionally not similar companies should be rejected erred in not....
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....96/Del/2013 for assessment year 2008-09 has also laid down similar proposition. 9. The learned Departmental Representative for the Revenue fairly pointed out that the issue stands covered by order of Tribunal. He was asked to produce remand report from the Assessing Officer. However, no such report has been filed till date. 10. On perusal of record and the order of Tribunal in assessee's own case for assessment year 2008-09, we find that in ITA No.359/PUN/2013 vide order dated 02.11.2018, the issue has been deliberated upon in paras 4 to 6 and reference is being made to the same, but is not being reproduced for the sake of brevity. Following the same parity of reasoning, we remit this issue back to the file of Assessing Officer to examine the facts and decide the issue of applicability of APAs to assessee's case for the year under consideration in principle. The grounds of appeal No.2 and 3 and additional ground of appeal No.17 are thus, allowed for statistical purposes. 11. The issue in grounds of appeal No.4 to 6 and additional ground of appeal No.15 is with regard to international transaction pertaining to rendering of supply base development and other back office services....
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....assessee and Saket Projects Limited arose before the Tribunal in assessee's own case in assessment year 2008-09 and the Tribunal had excluded the same on functionality difference as it was engaged in organizing events. The learned Authorized Representative for the assessee has referred to the business profile of Saket Projects Limited for the instant assessment year and has brought to our notice that there was no change in business profile of Saket Projects Limited during the year. In such circumstances, we find merit in the plea of assessee that a concern which is not functionally comparable being engaged in organizing events for various kinds of sponsors, cannot be held to be functionally comparable to the assessee engaged in the business of Business Support Services segment. Further, a company showing fluctuating profit levels in comparison to various years, where in assessment year 2006-07 the segmental margins were 76.76%, in assessment year 2007-08 were 11.25%, in assessment year 2008-09 were 159.37% and in assessment year 2009-10 were 143.76%, we are of the view that a concern showing such fluctuation in its margins cannot be held to be comparable. Such is the view taken by ....
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....ear, since the finding of TPO has been reversed by Tribunal in assessment year 2008-09. 20. The learned Authorized Representative for the assessee fairly pointed out that in case Saket Projects Limited and TSR Darashaw Limited are excluded from final list of comparables, then the margins in BSS segment would be within +/- 5% range and there is no need to adjudicate the issue of exclusion of ICRA Online Limited and risk adjustment as they would become academic. In view thereof, we do not adjudicate other connected issues raised in BSS segment and direct the Assessing Officer to exclude Saket Projects Limited and TSR Darashaw Limited in the said BSS segment and work out the arm's length price of international transactions and if the same is within +/- 5% range, then no adjustment is to be made in the hands of assessee. 21. The next issue raised in the present appeal vide grounds of appeal No.7 to 10 and additional ground of appeal No.16 is of adjustment pertaining to Application Engineering Services Segment. 22. Brief facts relating to the issue are that the nature of services rendered in Application Engineering Services Segment essentially comprise of customization of desi....
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....ssee, though the entire operating revenue earned by assessee was reported under the head 'Income from Engineering Consultancy Services'. Accordingly, we hold that Vardaan Projects Ltd. needs to be excluded from final list of comparables in the hands of assessee in Application Engineering Services segment. The ground of appeal No.7 raised by assessee is thus, allowed. 27. Now, coming to ground of appeal No.8, which is against rejection of CG VAK Software & Exports Ltd. (in short 'CG VAK'). The assessee is aggrieved by rejection of CG VAK and has pointed out that the said concern was functionally comparable to the assessee. 28. The learned Authorized Representative for the assessee pointed out that the assessee was engaged in ITES services and even CG VAK was engaged in medical transcription i.e. in ITES services. Our attention was drawn to order of TPO at page 2315 of Paper Book, wherein in assessment year 2008-09, he had selected the said concern as functionally comparable in the final list of companies. It was also pointed out that on comparison of financials of CG VAK for both the years, there were no changes observed in functionality of said company and hence, the said conce....
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....fore both the authorities was on that ground of supernormal profitability. But this contention of assessee was not accepted by any of the authorities. However, before us, the learned Authorized Representative for the assessee has pointed out that the financials of Agrima Consultants International Ltd. which were available in public domain covers period only upto 31.12.2008. Since the said concern was unlisted company, data for the three months was not available in public domain. 34. We find that the Hon'ble Bombay High Court in CIT Vs. PTC Software (I) (P) Ltd. (supra) have held that provisions of Rule 10B(4) of the Income Tax Rules are clear in as much as it obliges that data to be used for comparability analysis should be of the same financial year in which international transactions were entered into by tested parties. Applying the said principle, we hold that in case the data for same financial year as followed by assessee is not available in public domain, then the margins of said concern could not be applied to benchmark the international transactions of said segment. In this regard, as this issue was not raised before any of the authorities below, this needs verification. ....
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....said concern was showing fluctuating profits. 39. On perusal of record and after hearing both the learned Authorized Representatives, we find that as in other cases, objection of assessee before the authorities below was supernormal profits earned by the said concern. We find that it was exceptional year of performance for the said concern as reported by Directors in its report that KPO division had reported 52.4% growth in operational income over the previous year on account of addition of new processes. Hence, ICRA Online Ltd. being KPO division could not be held to be functionally comparable during the year, to the assessee and hence, the same is directed to be excluded. 40. The next concern the assessee wants to be excluded is Mahindra Consulting Engineers Ltd., which was engaged in infrastructure relating project i.e. in construction field and it could not be held to be functionally comparable to the assessee. The learned Authorized Representative for the assessee placed reliance on the decision in M/s. CISCO Systems (India) Pvt. Ltd. Vs. DCIT (2014) 50 taxmann.com 280 (Bangalore - Trib.). Further, the said concern was recognizing revenue as per Accounting Standard-7 i.e. ....
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.... Consulting Engineers Ltd. are following different accounting methods, then the said concern needs to be rejected as comparable; in turn, we rely on the ratio laid down in Ciena India (P.) Ltd. Vs. ITO (2015) 59 taxmann.com 92 (Delhi-Trib.). 44. The learned Authorized Representative for the assessee vide ground of appeal No.9 raised the issue of Cepha Imaging Pvt. Ltd. to be included, which was identified by the assessee during TP proceedings; but during the course of hearing, the said issue of inclusion of Cepha Imaging Pvt. Ltd. was not pressed, hence the same is dismissed as not pressed. 45. Now, coming to last issue of Microgenetics. The learned Authorized Representative for the assessee pointed out that in case updated margins are to be applied, then the said concern would be included in the final list of comparables. The assessee had not included the said concern in TP study report. After updated margins were applied by the TPO, no such concern was selected and even before the DRP, the learned Authorized Representative for the assessee was not able to point out the para in which the said issue was raised. However, in the written note, it relied on DRP directions for asses....