TaxTMI 
TaxTMI 
2019 (7) TMI 655
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....RP and consequentially the learned AO have: 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 o....
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....es Erred in denying adjustment on account of differences in the functional and risk profile of comparable companies vis-a-via the assessee. Ground 13 Levy of interest under section 234B of the Act Erred levying interest under section 234B of the act on account of unanticipated 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 file....
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....ilar issue arose before the Tribunal in assessee's own case in assessment year 2008-09 and the said issue has been set aside to the file of Assessing Officer to apply legal propositions mentioned therein and decide the issue in the light of APAs. It was also mentioned by the learned Authorized Representative for the assessee that the Delhi Bench of Tribunal in Ranbaxy Laboratories Ltd. Vs. ACIT in ITA No.196/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 ap....
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....e can be excluded in final analysis. 14. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 15. We have heard the rival contentions and perused the record. The assessee is aggrieved by inclusion of Saket Projects Limited in final set of comparables in BSS segment. We find that similar issue of functional difference in activities of 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 segm....
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....lusion of TSR Darashaw Limited stands covered by order of Tribunal in assessment year 2008-09, wherein the said concern was excluded being not functionally comparable to the assessee. Following the same parity of reasoning, we direct that the said concern be excluded. We find no merit in the observations of TPO that a concern which was selected by assessee in its TP study in earlier years cannot be excluded in this year, 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, the....
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....te, which is placed at pages 2196 to 2198 of Paper Book-5, wherein it is reported that Vardaan Projects Ltd. was rendering services of financial structuring, financial analysis, financial arrangements, etc. and was also engaged in asset valuation for compliance with IFRS and others. In such case, where the segmental details were not available, then the said company could not be held to be functionally comparable to the assessee, 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....
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.... was aggrieved by inclusion of Agrima Consultants International Ltd. on the ground of supernormal margins and this plea of information not available was not raised before any of the authorities. 33. We have heard the rival contentions and perused the record. The perusal of order of TPO / DRP reflects that Agrima Consultants International Ltd. was proposed to be included in final list of comparables. The objection of assessee before 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....
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....he next concern which the assessee wants to be excluded is ICRA Online Ltd. The learned Authorized Representative for the assessee in respect of said concern pointed out that it was KPO company and filed outsource segment of said concern. It was an exceptional year of performance because of addition of new process. Our attention was drawn to Directors report at page 2177 of Paper Book-5 in this regard. It was also pointed out that the 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 Consu....
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....y assessee that the said concern was following different accounting method i.e. AS-7 i.e. where the revenue is recognized on estimate basis, based on completion of project; on the other hand, the assessee had recognized its revenue on mercantile system of accounting. This aspect needs verification at the end of Assessing Officer. Accordingly, we direct the Assessing Officer to verify the same and in case the assessee and the concern Mahindra 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 ....