TaxTMI 
TaxTMI 
2015 (8) TMI 1604
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.....1018/Ahd/2011. 2. The only ground raised in this appeal by the Revenue reads as under:- "1 The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 56,75,810/- made on account of TPO order u/s. 92CA(3) of the Act." 3. The facts of the case are that the Assessee is a Private Limited Company which derives income from the business of Engineering and related activities. For the year under consideration the operating margin of the Assessee was 10.23%. The Transfer Pricing Officer worked out operating margin of comparables at 22.47% as under:- 1. TCE Consulting Engineers Ltd. 24.02% 2. Water & Power Consultancy Services Ltd. 9.33% 3. L & T -Sargent & Lundry Ltd. 4.32% 4. Agrima Cons....
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....50% and therefore the same cannot be considered as comparable in view of the decision of ITAT Delhi discussed by the appellant in its submission. 3. The activities of this company are quite different than the appellant company. In a broad categorization, both the companies may be put in same broader category but there is no functional similarity. As discussed earlier and detailed by the appellant, there are no common functions or line of business carried on by the appellant and Certification Engineers International Limited. In absence of same line of business and functional similarity, the profitability of this company cannot be compared with the appellant. In view of the above, Certification Engineers International Limite....
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....it has more than 50% transaction with the related parties then the same cannot be considered as a proper comparable. He pointed out that in large number of cases, ITAT has taken view that if related party transaction is more than 25% then the said company cannot be considered as a comparable. In support of his contention he relied on the following decisions:- 1. Delhi ITAT in the case of Global Logic India (P)Ltd. Vs. DCIT (12 taxmann.com 295. 2. Mumbai ITAT in the case of ACIT vs. Hapag Lloyd Global Services (P) Ltd. (34 taxmann.com.241). 3. Mumbai ITAT in the case of ACIT vs. Zee Entertainment Enterprises Ltd. (ITA No.2414/MUM/2013). 4. Bangalore ITAT in the case of M/s. Cisco Systems (India) Pvt. Ltd. ....
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.... from comparable. 7. We have carefully considered the arguments of both the sides and perused the material placed before us. It is not in dispute that the net profit of CEI Ltd., was 93.32% which was abnormally high and therefore, the probability of some abnormal factor for such high profit cannot be ruled out. This opinion of the CIT(A) has not been controverted before us. CIT(A) has also recorded that the CEI Ltd., is a Government of India undertaking and its prices are regulated by the Government and therefore it cannot be compared with non government company whose prices are determined by the market forces. CIT(A) has also recorded the fact that the related party transaction in the case of CEI Ltd., was more than 50%. This has also n....
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....e therefore, allocated total depreciation in the ratio of turnover of both the units. CIT(A) sustained the order of the A.O. with the following finding. "2.3. I have considered the facts of the case, assessment order and appellant's submission. Appellant claimed higher depreciation in non-exempt unit as compared to exempt unit. The reasons for that are auditor has certified the claim and separate asset registers are kept for both the units. However Assessing Officer found that vehicles, plant and machinery and computer software are more related to turnover and therefore the use of these assets should be allocated on the basis of turnover. The maintenance of separate register for fixed assets cannot preclude appellant's one unit usi....