TaxTMI 
TaxTMI 
2019 (10) TMI 1581
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....erred in law in disposing off the objection of the assessee in summary manner without analyzing and appreciating the facts of the assessee's case. 5. The learned AO's order based on the findings of the learned Transfer Pricing Officer and the directions of the learned Dispute Resolution Panel u/s.144C(5) of the Income- tax, is erroneous, untenable in law and on facts for the various reasons and not limited to the following: - 5.1. The TPO as well as the DRP and consequently the AO have grossly erred in law and on facts and in the circumstances of the case in erroneously: 5.1.1. Rejecting the scientifically run search process of the assessee without cogent reason 5.1.2. Rejecting the search process of the assessee was bad in law in view of the facts the final set of 7 comparables of the Ld. TPO had 3 of the originally chosen comparables by the assessee. 5.1.3. Carrying out a new search process based on erroneous filters 5.1.4. Cherry Picking the comparables 5.2. The TPO as well as the DRP and consequently the AO have grossly erred in law and on facts and in the circumstances of the case for the choice of comparable compa....
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....nclusion/exclusion of certain comparables. 4. Facts of the case, in brief, are that the assessee is a subsidiary of Rolls Royce Overseas Holding Limited and operates in India primarily in the power generation and oil and gas markets with a range of reciprocating engines covering gas engines, HFO engines and crude oil engines. It also undertakes servicing contracts wherein it purchases spare parts from overseas Rolls Royce entities for subsequent sale. The company also undertakes services such as repair and maintenance and other services including technical project management and marketing support. It filed its return of income on 9th October, 2013 declaring total income of Rs.75,72,74,676/-. The Assessing Officer referred the matter to the TPO u/s 92CA for determination of the arm's length price of the international transaction entered into by the assessee. The TPO noted that the assessee during the year under consideration has entered into the following transactions:- No. Nature of transaction Method Value of transaction (in Rs.) 1. Purchase of spares for trading TNMM (PLI as OP/OR) 8,18,13,383 2. Provision of technical services TNMM (PLI as OP/....
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.... Tribunal. 9. The ld. counsel for the assessee submitted that the assessee is operating in trading and service segment and the only area of dispute is the service segment comprising PMS, MSS and technical services. In AE service segment, the assessee is providing more than 95% of the risk free services and only 10% technical services. Referring to page 209 of the paper book, he submitted that this was also submitted before the Assessing Officer. Further, there is no change in the facts from assessment year 2007-08 onwards including assessment year 2011-12. He submitted that the assessee had selected 11 comparables with 15.63% margin based on three year average as per TP study copy of which is placed at page 175 of the paper book. He submitted that out of seven comparables proposed by the TPO, only three comparables selected by the assessee were included. So far as the various comparables selected by the TPO and upheld by the DRP are concerned, the ld. counsel for the assessee submitted that the assessee is non-risk bearing in support services segment and high end chosen by the TPO and upheld by the DRP should be excluded. Referring to the order of the Tribunal in assessee's own ....
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....d. Hence highly technical. See profile on PB Pg.311-312) Moreover all TATA group companies own IPR which makes it functionally different from assessee which does not own any IPR Covered by ITAT order for A.Y. 2011-12 in assessee's own case. (Para 17 PB Pg.324) M/s Verizon (India) Pvt. Ltd. Vs JCIT [ITA No. 4187/Del/2010], "EIL RITES, WAPCOS AND TCE operate in engineering consultancy industry, the risks and returns vary significantly from those of the marketing support services company operating on a cost plus model." Delhi ITAT in Fluor Daniel India Pvt. Ltd., New... vs ACIT, ITA 973/DeI/2006 Therefore, in our view it is apparent that this company is engaged in providing high end engineering consulting services which is not comparable with limited functions performed by assessee. Therefore we direct to exclude this comparable. 5 HSCC (India) Ltd. HSCC India Ltd. is a Government of India enterprise set up in 1983 with an authorized capital of Rs.20 million. HSCC is one of the few organization in South East Asia, rendering comprehensive range of professional consultancy services in health-care and other social sectors, in India and a....
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....ly similar to that of the assessee and was taken as the assessee's comparable in the preceding two years, therefore, this comparable should be included in the final list of comparables. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Siemens Technology Services Pvt. Ltd. [TS-220-ITAT-2016 (MUM)- TP], he submitted that the Tribunal in the said decision has held that if a company was a good comparable in earlier years because of functional similarity, it should have been included for arriving at the average PLI of comparables. So far as inclusion of Cyber Media Research & Services is concerned, he submitted that the assessee had filed objections before the TPO for not including the above comparable. However, the TPO had excluded this comparable merely because its turnover decreased from the previous year from Rs.12.70 crore to Rs.3.33 crore in the year under consideration and alleged abnormal reduction in revenue. He submitted that this observation of the TPO is without any basis since in subsequent year it again increased to 5.61 crore. He submitted that the TPO had applied turnover criteria for obtaining comparables of above Rs.1 crore as per page 12 of....
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.... no revenue from trading or finished goods sale as there is no or negligible cost of goods and nil inventory. Accordingly, he submitted that this company should be included in the final list of comparables. He submitted that the ld. DRP upheld the exclusion of the above two comparables in an ad hoc manner by just referring to the reasoning given by the TPO and without giving any cogent reason for not appreciating the submissions of the assessee. He accordingly submitted that both the companies be included in the final list of comparables. 13. The ld. DR, on the other hand, strongly supported the order of the A.O./TPO/DRP. So far as the various comparables which have been tested by the Tribunal in assessee's case in the preceding years are concerned, she relied on the order of the A.O./TPO/DRP. So far as the new comparables are concerned, she submitted that the FAR analysis has not been considered by the A.O./TPO/DRP and, therefore, merely on the basis of the submissions made by the ld. counsel for the assessee, these companies cannot be included/excluded. She submitted that she has no objection if these comparables are restored to the file of TPO/A.O. for verification of the fun....
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....tmental PSUs, Local Bodies, etc. Presently, Small Industries Development Bank of India (SIDBI) is the prime shareholder with 49% shares of the company. 2. The aim of setting up of TCO, which had the blessing of Govt. of India and the Reserve Bank of India, was to provide professional technical consultancy assistance to banks by appraisal of projects for priority sector lending and to entrepreneurs in the 5MB Sector by way of preparation of Project Reports & Market Studies and conducting training programmes for entrepreneurship development. Subsequently similar TCOs were set up in almost all the states with one of the National Financial Institutions (IDBI, IFCI or ICICI) as the prime shareholder. 3. KITCO has successfully implemented projects like Cochin International Airport Ltd., Titanium Sponge Project, International Marina, Cochin Special Economic Zone, etc and presently implementing a multimodal Mobility Hub at Cochin, all of which are first of its kind in the country in their own respect. KITCO has successfully completed the Phase-1 of CIAL Golf Course & Country Club and Ghallah Wentworth Golf Course at Muscat, Sultanate of Oman, thereby establishing itself i....
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....lected by TPO is engaged in online portal activities such as employment website, matrimonial website and its major revenue is advertisement and subscriptions. It has diversified services such as recruitment related, real estate related, matrimonial related services and owns significant Rolls Royce India Private Limited V DCIT ITA No 6636 Del 2015 A.Y. 2011-12 intangibles/websites such as naukri.com, 99 acre.com etc. Therefore this company is functionally different as it is providing an advertisement space as well as online portal based on subscription by the buyer and seller of the services compared to services provided by the assessee of marketing support services . In view of this we direct ld. TPO for exclusion of this comparable." 16. Respectfully following the decision of the Tribunal in assessee's own case and in the absence of any contrary material brought to our notice, we direct the TPO to exclude this company from the list of comparables. 17. So far as TCE Consulting Engineers Ltd., is concerned, we find the Tribunal in assessee's own case in the immediately preceding assessment year at para 17 of the order has discussed the issue and has directed the A.O./TPO to ex....
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....s is concerned, it is the submission of the ld. counsel for the assessee that it passes all the filters adopted by the TPO. It has also been the submission of the ld. counsel for the assessee that since this company is functionally similar and was taken as assessee's comparable in previous two years i.e., 2010-11 and 2011-12, therefore, this being a good comparable in the earlier years because of functional similarity, it should be included in the list of comparables. In view of the above submission of the ld. counsel for the assessee, we restore this issue to the file of the A.O./TPO with a direction to verify as to whether the above company passes the filters adopted by the TPO himself and in case it passes all the filters adopted by the TPO, then, the TPO/A.O. is directed to include this company as a comparable for arriving at the average PLI of the comparables. 21. So far as the company Cyber Media Research & Services is concerned, we find the TPO excluded this company merely because its turnover decreased from Rs.12.70 crore the previous year to Rs.3.33 Crore in the year under consideration. It is the submission of the ld. counsel that in subsequent year the turnover has go....
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....ng or finished goods sale as there is no or negligible cost of goods and nil inventory. We, therefore, deem it proper to restore this issue to the file of the A.O./TPO with a direction to verify that it does not fail 75% service income filter as alleged by him in the order and also to verify as to whether the above companies perform similar kind of support functions as performed by the assessee company and if found correct, then to retain this company in the final list of comparables. Ground of appeal No.5 to 7 are accordingly allowed in the terms indicated above. 24. Ground of appeal No.8 was not pressed by the assessee for which ld. DR has no objection. Accordingly the same is dismissed. 25. The Corporate Tax grounds and other grounds are as under:- "Corporate Tax 10. That the Ld. DRP/AO has erred in law in confirming the addition on account of unbilled revenue write off and security deposit write off of Rs. 1,15,59,310 & Rs. 12,98,441/- respectively. 11. That the Hon'ble DRP has erred in law and on facts in holding that unbilled revenue write off shall be entitled to be allowed only when found to be credited again in books of the assessee in subs....
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.... offered to taxation in earlier years. So, it is allowable .Further reliance is placed on the case of M/s Nortel Networks India Pvt. Ltd. ITA No. 1938/Del/2009. Relying on the above facts and the case laws, we hereby submit before your honour that the assessee case is very much identical to the case Nortel Networks India Pvt. Ltd. As mentioned supra that is Assessee Company claimed the amount of unbilled revenue written off hence it should be allowed." 29. However, the Assessing Officer did not accept the submissions made by the assessee and made addition of Rs.1,15,59,310/-. The assessee approached the DRP and the DRP restored the issue to the file of the Assessing Officer with certain directions. Subsequently, the Assessing Officer passed the order retaining the same addition by observing as under:- "6.5 I have considered the submission and accompanying documents. However, upon a perusal of the submission of the assessee, it is not clear whether the amount actually booked as revenue of Rs. 38.98 Cr. From M/s Rolls Royce International Ltd. during F.Y 2011-12 includes the sum of Rs. 1,15,59,310/- booked as unbilled-revenue during F.Y. 2010-11. As per directions....