TaxTMI 
TaxTMI 
2022 (2) TMI 160
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....It is engaged in the business of providing engineering 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 t....
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.... giving effect to the order of the CIT (A) dated 07/02/2019, can be highlighted in the following manner: S.No. Comparable OP/OC% as per the TPO's order OP/OC% as per 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....
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....olved in Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy. The TPO further mentioned that the company is not engaged in solar power projects and other civil activities; hence it is a suitable comparable. Ld. CIT(A) agreed 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 servic....
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....l comparability and for the reason that segmental accounts are not available. Rejecting the arguments of the assessee Ld. TPO mentioned that this company is engaged in providing technical & engineering consultancy services to its clients and accordingly, considered the same in final set of comparables. On the contrary the Ld. CIT(A) agreed with the assessee'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. A....
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....ng party (i.e. overseas AEs in this case). Thus, the Appellant is not responsible for ensuring quality to end customer as it lies with the overseas AEs. Appellant availing of technical consultancy services from overseas AEs - The responsibility of ensuring the quality to independent customers lies with the contracting party (i.e. Appellant in this case). Thus, the overseas AEs are not responsible for ensuring quality 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, th....
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....; and secondly, the overseas AEs operate as low risk bearing technical consultancy service providers by providing technical services to the assessee. In order to benchmark, the said international transaction of receipt of technical consultancy services, the assessee adopted TNMM as the MAM and after taking a set of 8 comparables, average margin of 12.14% was worked out and the assessee had shown PLI of 22.32% using segmental data and accordingly, it was reported that international transactions 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 ....