AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 459
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....Sargent Lundy Ltd. as comparable ignoring the fact that the functional profiles of these companies are different from the profile of the assessee." "AY 2005-06 1. The Ld. DRP has erred in law and on facts in directing the TPO to exclude M/s. NTPC Electricity Supply Company Ltd. as comparable ignoring the fact that Organisation of Economic Cooperation and Development (OECD) Guidelines advocate use of TNMM Method as it allows comparability of the functions rather than strictly focusing on product/service comparability as in the case of Cost Plus Method, Resale Price Method and Comparable Uncontrolled Price Method. 2. The Ld. DRP has erred in law and on facts in directing the TPO to include M/s. U.B. Engineering Ltd., Tata Projects Ltd. and L&T Sargent Lundy Ltd. as comparables ignoring the fact that the functional profiles of these companies are different from the profile of the assessee." 2. This is second round of litigation as in the first round, coordinate Bench of the Tribunal had remitted the matter back to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) afresh by treating the company to be involved in the business of engineering design an....
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....mand proceedings, TPO conducted fresh TP study and chosen 7 new comparables having margin of 32.47% as against taxpayer's margin of (-) 6.77% and thereby made an addition of Rs. 13,67,89,416/- for AY 2004-05. 6. Likewise, in AY 2005-06, having identical facts, the taxpayer chosen 10 comparables in its TP study out of which TPO rejected 9 comparables by applying various filters, conducted fresh TP study chosen 4 new comparables qua provision of design engineering services and the 5 comparables having margin of 29.46% as against taxpayer's (-) 0.56%, the TPO made addition of Rs. 13,44,93,575/-. 7. The Revenue carried the matter before the ld. DRP by filing objections having limited grievance that the TPO has arbitrarily excluded 3 comparables selected by the taxpayer in its TP study in AYs 2004-05 & 2005-06 viz. UB Engineering Ltd., Tata Project Ltd. and L&T Sargent & Lundy Ltd. on the ground that these comparables failed service income filter of 75%. Accepting the contentions raised by the taxpayer, the ld. DRP directed the TPO to accept the aforesaid three comparables and consequently post-DRP directions, AO passed final order with revised arm's length margin determined by AO at ....
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....PO has not rejected aforesaid 3 comparables on ground of functional dissimilarity rather rejected the same on ground of failing service income filter. For ready perusal, findings of the TPO rejecting comparables contained in para 4.7 of the TP order of AYs 2004-05 & 2005-06 containing identical comments are as under :- AY 2004-05 Company Name Comments of the TPO 1 L & T -Sargent & Lundy Ltd. Service income less than 75%, hence rejected 2 Tata Projects Ltd. Service income less than 75%, hence rejected 3 U B Engineering Ltd. Service income less than 75%, hence rejected AY 2005-06 Company Name Comments of the TPO 1 L & T -Sargent & Lundy Ltd. Service income less than 75%, hence rejected 2 Tata Projects Ltd. Service income less than 75%, hence rejected 3 U B Engineering Ltd. Service income less than 75%, hence rejected 12. When we examine para 4.4.4 of TP order the ld. TPO has categorically applied service income threshold income of 75% to ensure selection of companies having functional profile similar to that of the taxpayer. So, ld. TPO applied filter that companies should have at least 75% of its revenue from technical consult....
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....ity of taxpayer vis-à-vis UB Engineering Ltd., Tata Project Ltd. and L&T Sargent & Lundy Ltd., this issue has been raked up before the Tribunal first time. 17. Moreover, when we examine the orders passed by the Tribunal in taxpayer's own case for AYs 2007-08, 2008-09 & 2010-11, UB Engineering Ltd. has been included by the TPO himself as a comparable and there is no change in the functional profile of the taxpayer ever. So, this contention of the ld. DR for the Revenue is not tenable. However, we direct ld. TPO to verify the data supplied by the taxpayer from annual report if the UB Engineering Ltd., Tata Project Ltd. and L&T Sargent & Lundy Ltd. are having service income of more than75% to retain as a suitable comparables. 18. In AY 2005-06, Revenue also challenged exclusion of NTPC Electric Supply Ltd. (NTPCESL) as a comparable by the ld. DRP on the ground that ld. DRP has ignored the fact that Organisation of Economic Cooperation and Development (OECD) Guidelines advocate use of TNMM Method as it allows comparability of the functions rather than strictly focusing on product/service comparability as in the case of Cost Plus Method, Resale Price Method and Comparable Uncon....
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....arnataka, Karnataka Power Transmission Corporation ltd. and MESCOM a draft Agreement for acquisition of electricity distribution business in Mangalore Circle has been sent to Government of Karnataka. 22. An Expression of interest was submitted to Gujarat Electricity Board for appointment as City distribution franchisee In the Cities of Baroda and Rajkot. Discussions are in progress for identification of a Suitable distribution area in Gujarat, which is to be handed over to the Joint Venture Company to ensure bankability of the proposed 1000 MW power project at Pipavav as per the provisions of the MOU signed between NTPC, Gujarat Power Corporation ltd. and Gujarat Electricity Board. NTPCESL has also decided to take up the distribution of electricity in the neighbouring areas of NTPC power stations. For this purpose the matter regarding required allocation of power from the unallocated quota of NTPC power stations has already been taken up with the Ministry of Power. Distribution of electricity in these areas is proposed to be undertaken by applying to the State Electricity Regulatory Commission for parallel license. As a pilot scheme, Electricity Distribution in the Korba Revenue D....