TaxTMI 
TaxTMI 
2020 (5) TMI 459
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....ude M/s. U.B. Engineering Ltd., Tata Projects Ltd. and L&T 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) afre....
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....gn Services (EDS) chosen 9 comparables in its Transfer Pricing (TP) study out of which 8 comparables have been rejected by the TPO by applying various filters and during the remand 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 ....
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..... and L&T Sargent & Lundy Ltd. as comparables on the ground that functional profile of these companies are different from the profile of the taxpayer?" 11. However, when we examine the TP order passed by the ld. TPO qua rejection of aforesaid 3 comparables to benchmark the international transactions, it is undisputed fact that the ld. TPO 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 ....
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....s when undisputedly there is no change in the business model of the taxpayer since 2007-08. 16. So far as contention raised by the ld. DR for the Revenue that ld. DRP has erred in including aforesaid 3 comparables by ignoring the fact that functional profiles of these companies are different from the profile of the taxpayer is concerned when undisputedly no such findings have been returned by the TPO nor he has questioned functional dissimilarity 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. ....
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....ur company will be executing the work in Kharagpur Block - 1 and 2 of West Midanapore Distt, of West Bengal. The NTPCESL is yet to undertake commercial activities in the area of distribution of power. It is exploring various options in this field. NTPCESL is in discussions with the Government of Karnataka for acquisition of Manglore circle of Manglore Electric Supply Company ltd. (MESCOM) in Karnataka. Based on the detailed discussions with Government of Karnataka, 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 distri....