TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 160
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....gineering services to related as well as unrelated parties. The return of income was filed declaring a total loss of INR 23,87,25,233/-. The assessee company had also entered into international transaction for which the reference was made to the Transfer Pricing Officer (TPO) to determine the Arm's Length Price of such transaction u/s. 92CA(3) of the Act. 3. The international transactions undertaken by the assessee during the year under consideration were essentially for rendering of technical consultancy services and availing of technical consultancy services. Details of international transaction as per Form No. 3CEB of the Assessee company were as under: S. No. Nature of Transactions Value (in INR) Method Applied 1 Rendering of Technical Consultancy Services 15,40,69,765 Transactional Net Margin Method with OP/OC as the PLI 2 Availing of Technical Consultancy Services 9,32,05,201 Other Method 3 Reimbursement of Expenses 5,51,01,620 Other Method 4 Recovery of Expenses 1,66,05,576 Other Method 4. In order to benchmark the international transaction of receipt of technical consultancy services, the assessee had adopted TNMM as the most ap....
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.... the directions of the CIT(A) 1 Autoline Design Software Limited -7.78% -7.78% 2 HSCC (India) Limited 61.61% Excluded 3 IIDC Limited 12.31% 8.64% 4 Kicons Limited 22.25% Excluded 5 Korus Engineering Solution Pvt. Ltd. 21.24% Excluded 6 Kratos Energy& Infrastructure Ltd. 3.77% 3.77% 7 Mitcon Consultancy & Engg. Services Ltd. 24.98% Excluded 8 Tata Consulting Engineers Ltd 16.47% 15.86% 9 Development Consultants P. Ltd. Not in TP Order 15.25% 10 Mahindra Consulting Engineering Ltd Not in TP Order 2.30% 11 Acropetal Technologies Limited Not in TP Order -5.86% Average 19.36% 4.60% 9. Thus, the adjustment of Rs. 5,12,47,767/- made on this account was reduced to Rs. 3,11,56,174/-. Thereafter, both the assessee and the Department filed their appeals before this Tribunal against the adjustment made by Ld. AO/Ld. TPO and relief granted by CIT (A) to the assessee, respectively. With respect to the assessee's appeal, the assessee subsequently filed an application under the "The Direct Tax Vivad se Vishwas Act, 2020" in order to buy peace and settle the dispute. 10. Now, the Department is before the Tribunal challenging order of the CIT (A) ....
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....greed with the assessee's contentions that this company is functionally dissimilar as it is engaged in execution contracts pertaining to solar power projects and other civil activities, the revenue of which is accounted as per the percentage completion basis given in accounting standard - 7. Accordingly, Ld. AO/TPO was directed to exclude it from the final set of comparables. Before us, the Ld. AR submitted that this company is engaged in execution of contracts relating to solar power projects and other civil activities. It is further submitted that these services are absolutely different from what the assessee is engaged into. Further, referring to Page number 607 of the paper book being the Annual Report of the said company, Ld. AR pointed out that the business/service nature of the comparable company is to engage in providing engineering design services and construction services for solar power and other civil activities. Without prejudice, it was argued by the Ld. AR that the Ld. TPO himself has mentioned that this company is involved in Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling services, while the....
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....;s contention that this company is engaged in a number of fields like Textiles, Banking and Financial Services, Energy and Carbon Consultancy Services and that the segmental accounts are not available. Accordingly, Ld. CIT(A) directed Ld. AO/TPO to exclude this company from the final set of comparables. Before us, the Ld. AR of the assessee referring to page number 639 of the paper book pointed out that the annual report of this company shows that it is engaged in providing multiple services such as banking & financial solution services, securitization and financial restructuring services, MITCO e-SCHOOL, and others services which are textiles, market research, infra consulting, wind power generation, decentralized power generation projects, energy and carbon consultancy service, etc. Having read the above, the Ld. AR referred to page number 698 of the paper book to demonstrate that the company is deriving revenue from (i) Consultancy fees (ii) vocational training (iii) IT Courses and (iv) income from laboratories. The AR mentioned that even if the consultancy services are considered comparable to the assessee there are no segmental accounts available. For this purpose the AR ref....
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....uality to end customer as it lies with the Appellant. c. Marketing Strategy and development Appellant rendering of technical consultancy services to overseas AEs - Overseas AEs prepare their own marketing strategy for their projects with independent customers and the Appellant only provides technical consultancy services to its overseas AEs based on their demand and need. Thus, the Appellant is not responsible for preparing marketing strategy & development. Appellant availing of technical consultancy services from overseas AEs - The Appellant prepares its own marketing strategy for its projects with independent customers and the overseas AEs only provides technical consultancy services to the Appellant based on its demand and need. Thus, the overseas AEs are not responsible for preparing marketing strategy & development. d. Pricing Appellant rendering of technical consultancy services to overseas AEs - The pricing related decisions for contracts entered between the overseas AEs and independent customers are taken by the respective overseas AEs. The Appellant has no role to play in such decisions; and is only engaged in providing technical consultancy services to its overs....
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....ons are at arm's length. Now, the only dispute before us is with regard to three comparables, namely, (i) Kicons Limited; (ii) Korus Engineering Solutions Limited; and (iii) Mitcon Consultancy & Engg. Services Limited. All the aforesaid three companies were selected by the TPO for which the assessee had objected for inclusion of said companies. The ld. CIT (A) after considering the functional comparability and going through the details have directed the TPO/AO to exclude the said three companies from the final set of comparables. 16. Insofar as Kicons Limited is concerned, the TPO had included the said comparable on the ground that this company is functionally comparable. From the perusal of the TPO's order itself, it is seen that this company is involved in legal, accounting, book-keeping &auditing activities, tax consultancy, market research & public opinion polling, business and management consultancy. Apart from that, this company is engaged in execution of contracts for solar power projects and other civil activities, the revenue of which has been accounted as per the percentage completion method in accordance with AS-7. This fact has been appreciated by the ld. CIT (....