TaxTMI 
TaxTMI 
2026 (9) TMI 1324
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....) of the Act dated 27.07.2017 was issued. Notice u/s 142(1) of the Act was issued on 17.08.2018. The assessee company is engaged in the business of Consultancy Services and Civil contractors. The assessee company had entered into international transactions with its associated enterprises. A reference was made u/s 92CA(3) of the Act to the Transfer Pricing Officer (T.P.O.), New Delhi for determining the Arm's Length price. The T.P.O. made the relevant inquiries and verified the documents. Ld. TPO passed order u/s 92CA(3) of the Act on 25.10.2019. In pursuance to order of TPO, ld. AO passed assessment order dated 29.01.2020 making addition of Rs. 17,96,524/- u/s 92CA of the act on account of Arm's Length Price international transactions. 3. Against order dated 29.01.2020 of ld. AO, the assessee filed appeal before ld. CIT(A) which was dismissed vide order dated 14.03.2022. 4. Being aggrieved, the appellant/assessee preferred present application for condonation of delay of 325 days in filing appeal and the appeal filed by the assessee on following grounds: "Appeal under section 253(1) of the Income-tax Act, 1961 ("the Act") against the order dated January 29, 2020 (rece....
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..../assessee submitted that there is delay of 325 days in filing appeal due to outbreak of COVID Pandemic and the Board of Directors and other key managerial persons based in Chaina. The explanation of delay of 325 days in filing appeal does not smack of malafides, therefore, the delay of 325 days in filing appeal is condoned. 6. Ld. Authorized Representative for appellant/assessee submitted that Ground of appeal No. 1 is general in nature, whereas Ground of appeal No. 2 relates to the transfer pricing adjustment of Rs. 17,96,524/- in relation to the international transactions. Ld. TPO took 7 comparables namely; (i.) Tata Consulting Engineers Ltd. ("TATA") (ii) Consulting Engineers Group Ltd. ('Consulting') (iii) Feedback Infra Pvt. Ltd. ('Feedback') (iv) Crux Consultants Pvt. Ltd. ('Crux') (v) Mahindra Consulting Engineers Ltd. ('Mahindra') (vi) Kitco Ltd. ('Kitco') (vii) D R A Consultants Ltd. ('DRA'). If 4 comparables namely (i) Crux Consultants Pvt. Ltd. ('Crux') (ii) Mahindra Consulting Engineers Ltd. ('Mahindra') (iii) Kitco Ltd. ('Kitco') (iv) D R A Consultants Ltd. ('DRA') are excluded then the assessee shall be at arm's length. The reasons for exclusion of 4 companies were....
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....mstances, the impugned order of the Tribunal holds that the Engineers India Ltd. could not be considered to be comparable for the reason that contracts between Public Sector undertakings are not driven by profit motive alone but other consideration also weigh in such as discharge of social obligations etc. Thus, it is not comparable. Moreover, from the annual report, it is clear that the revenue earned in executing turnkey project for other public sector undertakings was much more than the filter of 25%, which has been applied by the TPO in his order under Section 92CA(3) of the Act, while taking TRF Ltd. as a comparable on the ground that its related party transaction was not in excess of 25% of its total turnover. Thus, applying consistent filter of 25% or less of related party transaction alone to be considered comparable, Engineers India Ltd. could not be considered to be comparable. (Refer Page no. 6 to 7 of case law paper book) Direct Case laws for Kitco In this regard reliance is placed on the coordinate bench's ruling in the case of Bechtel India Pvt Ltd [TS-638-ITAT-2015 (DEL)-TP] wherein the Hon'ble Delhi Tribunal, excluded Kitco on the ....
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....erly Kerala Ishutrial and Technical Consultancy Organization LAM), estalised in 1972, is Engineering, Management & Project comultancy firm in lodia. Some of the other fields where KITCO is a propeyer Skill Certification and Placement Services. The Company is also a dedicated Mediuza Enterprise (SME) sector. At present KITCO in having 10 dinisie vir faste opany is also a dedicated provider of professional technical cancy sent to fall a Engineering. Hunain Resonce Development. Management and Financial Consultancy. Technical Services. Seaports and E Engineering. KITCO is the only consultancy organization in the state having ELA accreditation. The strength of KITCO is a core tem of well qualified and experienced professionals in various branches of engineering and in management, media, marketing, economics, finance etc ambering more than 288. In this regard reliance is placed on the Hon'ble Delhi High Court's ruling in the case of Principal Commissioner of Income-tax vs. Fluor Daniel India (P.) Ltd. [2024] 169 taxmann.com 508 (Delhi) [25-11-2024], the Hon'ble High Court has examined the order of Hon'ble Tribunal, wherein the detailed examination of ownership, b....
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....not be considered to be a fit comparable. However, we observe that functions performed, risks assumed and assets owned by this company is huge and fast as compared to that of assessee who is acting as a sub-contractor for its AE, rendering engineering and design services and is remunerated on cost plus basis. We therefore reject this company as it does not satisfy the functionality test with that of assessee's" 12. We find no infirmity with the aforesaid decision. Undisputedly, Kitco Ltd. was working in divisions like infrastructure, tourism, aviation, IT services, HRD and financial services, which were not similar to the functions performed by the Assessee. As noted above, the Assessee was engaged in engineering and design services. (Refer Page No. 56 to 57 of case law paper book) In this regard reliance is also placed on the coordinate bench's ruling in the case of Lummus Technology Heat Transfer BV (TS-1176-ITAT-2019 (DEL)-TP) wherein the Hon'ble Delhi Tribunal, held that Kitco performs diversified business activities and not a suitable comparable for routine provider of design engineering services. Relevant extract is as under. ....
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..... TPO as a comparable, is not an appropriate comparable company for the purpose of transfer pricing analysis. The financial statements of the said company for the period subsequent to 31 March 2015 are not available in the public domain. Further, as per the records available on the Ministry of Corporate Affairs ("MCA") portal, the company is non-compliant with statutory filing requirements and has not regularly filed its financial statements and annual returns. In the absence of reliable and updated financial information, the company fails the basic transparency and data reliability criteria required for comparability analysis. Refer Screenshots of MCA Portal and reproduced below. The Appellant further wishes to highlight that no reliable information relating to the nature of business operations, service lines, or other qualitative functional details of the company is available in the public domain. The company's official website does not contain adequate disclosures regarding its activities, and no meaningful business description or functional profile is available even on publicly accessible platforms such as LinkedIn. In the absence of such essentia....
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....rdingly, Crux ought to be excluded from the final set of comparables. In this regard, reliance is placed on the following rulings, wherein it has been consistently held that companies lacking reliable and publicly available financial information cannot be adopted as comparables: ➤ Softbrands India (P.) Ltd. vs. DCIT [2016] 73 taxmann.com 231 (Bang - Trib.) It is clear from the above reasons recorded by the TPO that the Annual Report of this company is not available for the year under consideration and further the notice issued under Section 133(6) of the Act was also not responded by the company to submit the information. Therefore, there was no information available regarding the basic facts and revenue details of this company. The assessee has not filed any record before us even the Annual Report of this company is not available. Accordingly, we do not find any merit or substance in the objections raised by the assessee against the rejection of this company by the TPO. (Refer Page No. 120 of Case Law paper book) ➤ ACIT vs. CH2M Hill (India) (P.) Ltd. [2022] 134 taxmann.com 303 (Delhi - Trib.)[21-01-2022), wherein It was held that ....
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.... Fails Employee Cost Filter (15%) As per Ld. TPO, the employee cost filter of 25% of total sales has been applied. Refer Screenshots from TP Order below: f) Companies that have employee cost that is less than 25% of sales: The rationale for this filter is that companies that are engaged in providing services similar to yours will respire a minum level of expenditure as personnel expense. Employees cost constitutes the major component of cost in any service sector. Very low employee cost, vez, less than 25% of total sales, indicates that company is either engaged in some other business or it laas outsourced the service functions to a third party, ie, it is not rendering services on its own. Such companies cannot be treated as functionally comparable to the assessee, (Refer Page No. 154 of paper book 1) As per Annual reports, DRA also have lower employee cost and fails such filter. Relevant workings are provided as under. DRA is engaged in various projects with Government authorities with diversified set of activities which are grossly distinguishable for limited engineering and consulting support provided the appellant as under ....
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....he margins of DRA based on the figures reported in its financial statements. Upon verification of the financial statements, the Appellant noted a difference in the weighted average margin (WAVG) as compared to the margin adopted by the Ld. TPO. Accordingly, the margins have been recomputed using the audited and publicly available financial data to ensure correctness and consistency in the benchmarking analysis. The detailed computation of the corrected margins is produced below for your ready reference. It is therefore respectfully submitted to consider the corrected margins of DRA for the purpose of determination of the arm's length price. (Refer Page 781 to 828 of Paper book 1 for Annual Report of DRA for FY 2014-15 and FY 2015-16). 4.2.4 Mahindra Consulting Engineers Limited ('Mahindra') Mahindra is a multidisciplinary engineering consultancy organization providing Engineering, Project Advisory Services and Infrastructure Consulting. Mahindra offers wide range of services in both domestic and international market right from project conceptualization, market demand, feasibility studies, planning, design, engineer Notes forming part ....
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.... functional profile that this company is part of Mahindra Partners'. It does not show functional profile of Mahindra Consulting Engineers. However it shows that this company is engaged in providing services and has proved its capability to execute innovative projects and to penetrate into new areas of operation. It is further submitted that it is engaged in providing infrastructure engineering and consulting services. Therefore, it is apparent that it is functionally different. We therefore direct to exclude this company, in view of highly technical capabilities of executing infrastructure development projects vis-a-vis that of assessee who is rendering engineering and related services as a subcontract limited to specific functions as per the requirement of its affiliate." (Refer Page No. 58 of case law paper book) In this regard reliance is also placed on the coordinate bench's ruling in the case of Alcatel-Lucent India Ltd. vs. Income-tax Officer, Ward 1(4), New Delhi [2018] 92 taxmann.com 427 (Delhi -Trib.) [06-04-2018), wherein the Hon'ble Delhi Tribunal, examined the business profile and revenue classification of Mahindra Consult....
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.... of this company from the list of comparables. (Refer Page No. 163 of case law paper book) Further, the Appellant would like to submit that the Mahindra entity forms part of the reputed Mahindra Group and similarly benefits from strong brand recognition, established market presence, and group synergies. In this regard reliance is placed on the following rulings wherein companies having huge brand cannot be considered as fit comparable ➤ In this regard reliance is placed on recent coordinate bench's ruling in the case of Netradyne Technology India Pvt. Limited [TS-533-ITAT-2025 (Bang)-TP], wherein it was held that comparable having huge brand value have an added advantage in gaining new clients and extracting new work from existing clients, accordingly, should be excluded from comparability. The relevant extract is as under: 22. We also direct to exclude the above comparable selected by the Id TPO for one more reason. All these companies are a part of renowned conglomerate and has huge brand value in the market of ITes/software development. These brands do have an added advantage in gaining new clients, extracting/mining new wo....
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....rom that of the assessee; Accentia was engaged in KPO services in the healthcare sector. (Refer Page No. 185 to 186 of case law paper book) Accordingly, it is clearly evident that the nature and scope of services performed by Mahindra are materially different from those undertaken by the Appellant, both in terms of functional profile and scale of operations. Further, Mahindra, being part of a well-established and reputed business group, enjoys significant brand value, strong market presence, and group-driven business advantages, which materially influence its revenue generation capacity, risk profile, and profitability. Such brandled intangibles and market positioning are not comparable to the Appellant's relatively limited-risk and routine service profile. In view of the functional dissimilarity coupled with the impact of brand intangibles and scale, Mahindra fails the comparability criteria and ought to be excluded from the final set of comparables for the purpose of determining the Arm's Length Price. Corrected Margins to be considered (17.21% computed by Ld. TPO) Without prejudice to the above submissions, the Appellant has also recom....
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.... development and management of urban infrastructure, agro infrastructure, social infrastructure, port and harbor and offshore terminal and industrial infrastructure etc. It also worked on innovative projects like centre of excellence of horticulture, dedicated offshore terminal for coal handling. Hon'ble High Court of Delhi in B.C. Management Services (P.) Ltd. [2018] 89 taxmann.com 68 (Delhi) excluded companies having high brand value which impacted profitability by observed as under: "13. The exclusion of second comparable ICRA Techno Analytics Ltd. was on the basis that it had engaged itself in processing and providing software development and consultancy and engineering services/web development services. The reasons for execution were functional dissimilarities and that segmental data were unavailable. Again the findings of the ITAT are reasonable and based on record. The third comparable that the AO/TPO excluded is TCS E-serve. The ITAT observed that though there is a close functional similarity between that entity and the assessee, however, there is a close connection between TCS E-serve and TATA Consultancy Service Ltd. which was high brand value; that distinguished....
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.... Ltd, KITco, DRA consultants limited as comparables for determining arm's length price of the international being illegal, is set aside. Ground of appeal No. 2 is accepted. 9. Ground of appeal No. 3 and 4 being consequential are left open. 10. In the result, the application for condonation of delay of 325 days in filing appeal and the appeal filed by the assessee are allowed. Order pronounced in the open court on 10.09.2026. ============= Document 1Name of Comparable Reason for exclusion Ground for Inclusion Angelique International Ltd ('Angelique') Fails service income filter greater than 75%. Exclusion Accepted Hindustan Construction Co Ltd ('Hindustan') Falls service income filter greater than 75%. Qualifying service income filter Petron Engineering Construction Ltd ('Petron') Fails service income filter greater than 75%. Qualifying service income filter Techno Electric & Engineering Company Ltd ('Techno') Fails service income filter greater than 75%. Qualifying service income filter NBCC (India) Ltd ('NBCC') Govt. Co and FAR Dissimilarity Functionally comparable For exclusion of comparable included by Ld. TP....
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....'s regiment office is al Cocian med los traschisi at Titvodiun mil Common, mainly ongaga# # Recimomit id Tanto fewsuoi developinent activities Document 3 KITCO itw consultares HOHE ABOUTUS - DIVISIONS - PROJECTS ENMANELMENT CLIENTS GALLERY - TENDERS PLACEMENT PARK WORLD CLASS SOLUTIONS FROM CO TO COMMISSIONING Ä Aviition & Mobility Hubs O himstructure & Urban Planning O Taximm Lesure & Sports O Healthcare Infrastructure O Environmental Engineering O Technical Stimes O Human Resources Development Ä Management & Fievincul Consultancy Services 4 0 - Document 4 G magoeicontent/mcargicsat/w/me/masme-data/MD5/company- master info.html Company Name HỌC NOME Registration Number Date of theorporation Emoit it Registered address Address ut which the books of account are to be maintained Listed in stock Exchange(s) (v/r) Category of Company Subcategory of the Company Class of Company ACTIVE compliance Authoriand Copitur (fr) Poid up Capital (Na) Dois of last AOM Dott of Balance Sheet CRUX CONTIATANTE PRIVATE LIMITED KOC Delhi 0821 c//H infolar jeuxconsultants[dot]com JOSMOHAN PLACE (....
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.... (A) SIGNIFICANT ACCOUNTING POLICIES 1. Company Overview The company was incorporated in May 2009 with an objective to provide consultancy services in the field of engineering, infrastructure development, water supply, sewerage, energy saving etc. The company is engaged in providing consultancy services in energy saving. infrastructure development and water supply projects to its clients, which mainly comprise of the Cement Plants and Municipal Corporations. Who we are DRA Consultants Limited (DRA) provides wide range of advisory services in Urban and Industrial sector with specialized expertise in 3-R (Reduce- Recycle-Reuse), 3-P (Public-Partnership) & Performance audits apart from other fortes. By devising innovative solutions for improvement in the present utilities, DRA has brought about significant changes. DRA'S projects in water supply, conservation, cost reduction and energy conservation hold testimony to the impact that solutions can have on the herculean challenge the cities of developing countries/Industry faces in the present scenario, Established in the year 1990, ORA Consultants Ltd. is an ISO 9001 - 2015, ISO 14001 - 2015 and ISO 45001 - 2018 cer....