TaxTMI 
TaxTMI 
2019 (10) TMI 1581
X X X X Extracts X X X X
X X X X Extracts X X X X
....nner 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 companies by erroneously: 5.2.1. Determining the ALP of the international transactions of the assessee related to project man....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arily 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/OC) 5,72,53,977 3. Provision of project management Services 1,24,70,910 4. Provision of Marketing Support Services 40,11,67,754 5. Recharge of payroll expenses NA 1,41,34,741 6. Reimbursement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 case for assessment year 2010-11 and 2011-12, he submitted that the Tribunal has given the finding that the assessee is providing approximately 90% of risk free support services and the comparables should be selected which assumes low or no risk. He submitted that there is no change in facts of the case during the year under consideration. He submitted tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isks 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 abroad. The services of HSCC's being government of India enterprise, have been utilized by various organization, both in Public and Private Sectors, Central Government Department, State Governments as also international agencies like the World Bank, WHO, among others for their projects in India and abroad. It undertakes various IT projects and Procurement projects as evident from the website of the company. Hence highly technical. See profil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the TPO's order. Therefore, the TPO cannot artificially reject this criteria and apply any turnover test for rejecting this company. He submitted that the DRP in para 10 of the order has upheld the exclusion of this comparable for being functionally different. Since there is no abnormal business circumstances in the year under consideration so as to warrant exclusion of Cyber Media Research & Services from the final list of comparables when it was a good comparable in the last ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 functionality test and the FAR analysis. 14. We have considered the rival arguments made by both the sides. So far as the companies Aptico Ltd. and Kitco Ltd. are concerned, we find the Tribunal in assessee's own case, vide ITA No.6336/Del/2015, order dated 22nd April, 2016 for assessment year 2011-12, has directed the TPO for exclusion of the companies holding that they are functionally different and they are not comparable with that of the assessee. The relevant observations of the Tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p 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 in an area, which was considered to be the forte of European Consultants. The prestigious overseas assignments KITCO so far has completed include the technical evaluation of electrical power distribution network at King Abdul Aziz International Airport, Jeddah. 4. All its clients are either central government, state government, PSU etc. Snapshot enclosed. 5. It is working In divisions like infrastructure, tourism, aviation, IT services, HRD, financial services etc. which are dissimilar to the functional profile of the assessee company. Sn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 exclude this company from the list of comparables. The relevant observation of the Tribunal reads as under:- "17. Regarding TCE Consulting Engineers Ltd. it is submitted that it is also engaged in providing highly technical services. The profile submitted by the assessee shows that it has successfully managed complex engineering projects across the infrastructure spectrum and also associated with prestigious urban infrastructure facilities such as Airports, Railway and Aerotropolis engineering consulting projects. Therefore it is apparent that this company is engaged in providing hig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 gone up to Rs.5.61 crore. Further, the TPO has applied the turnover criteria of more than Rs.1 crore and, therefore, it is the submission of the ld. counsel that the TPO should not have artificially rejected this criteria and applied another turnover test for rejecting this comparable. We find force in the above argument of the ld. counsel. However, the submission of the ld. counsel that the turnover of the above comparable company has gone up in the subsequent year and that it passes all the filters of the TPO needs verification at the level of A.O./TPO. We, therefore, remit this issue to the file of A.O./TP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 subsequent year. 12. That the Hon'ble DRP has erred in law in not appreciating that the condition of Sec 36(l)(vii) read with Sec 36(2) has already been complied with to claim the allowance of unbilled revenue write off. 13. That the Hon'ble DRP and consequently Ld. AO has grossly erred in law and on facts, in the circumstances of the appellant's case in confirming the addition of security deposit written off amounting to Rs. 12,98,441/- merely on the basis of assumptions, surmises and conjectures. 14. That the Hon'ble DRP has erred in law in holding that the claim of security deposit write off shall be allowed only if it was receive....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions. 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 of DRP, the claim of assessee shall be allowed only if a contra entry of Rs.1,15,59,310/- is found credited again during the year under consideration. Since, the contra reversal entry is allowable subject to the same amount being credited during FY 201-12, the claim of the assessee is not allowed in the absence of credit amount booked in the accounts. In view of this, the amount of Rs. 1,15,59,310/- on account of unbilled revenue written off shall be disallowed. Since, I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately." 30. Aggrieved with such order of the A.O./TPO/DRP, the assessee is in appeal before....