Dongfang Electric (India) Pvt. Ltd., Kolkata V. ACIT,Circle-14(1), Kol, Kolkata

ITA 127/KOL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5368 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; Rectification of order; Principle of natural justice; International transaction
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI ABY T. VARKEY, JUDICIAL MEMBER) ITA NO. 127/KOL/2017 ASSESSMENT YEAR: 2012-13 DONGFANG ELECTRIC (INDIA) PVT. LTD.........................................................................APPELLANT PLOT NO. AH-5 PREMISES NO. 16-1111 ACTION AREA IA NEW TOWN KOLKATA 700 107 [PAN : AACCD 9336 K] VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-14(1), KOLKATA..........................RESPONDENT APPEARANCES BY: SHRI NAGESHWAR RAO, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. DR. P.K. SRIHARI, CIT SR. D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 29 TH , 2019 DATE OF PRONOUNCING THE ORDER : OCTOBER 23 RD , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF ASSESSING OFFICER PASSED U/S 143(3) R.W.S. 144C(5) OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 25/11/2016, FOR THE ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPERVISION, ERECTION & COMMISSIONING, REPAIR & MAINTENANCE AND SPARE PARTS SUPPLY, TO VARIOUS POWER PLANT AND ALSO AS A CONSULTING ENGINEER. THE INTERNATIONAL TRANSACTIONS THAT ARE THE SUBJECT MATTER OF THIS APPEAL OF THE ASSESSEE, ARE:- A) IMPORT OF SPARE PARTS; B) PAYMENT FOR TECHNICAL SERVICE; AND C) PAYMENT OF ROYALTY FOR CONTRACT SERVICES 2.1. THE ASSESSEE ADOPTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM). PROFIT LEVEL INDICATOR (PLI) WAS OPERATING PROFIT BY OPERATING REVENUE. TESTED PARTY MARGIN FOR IMPORTED SPARES BY APPLYING THE PLI WORKED OUT TO 3.92% AND IT WAS CONCLUDED THAT THE TRANSACTION OF IMPORT OF SPARE PARTS WAS AT ARMS LENGTH PRICE (ALP). FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH FOR THE COMBINED TRANSACTION OF PAYMENT OF SERVICE CHARGES AND ROYALTY, TNMM WAS CHOSEN AS MAM AND OP/OR WAS CONSIDERED AS PLI . THE TESTED PARTY MARGIN WAS WORKED OUT AT 0.62 % AND WAS CONSIDERED AS ALP. THE TPO IDENTIFIED FRESH COMPARABLES FOR BOTH THE TRADING SEGMENT AND TECHNICAL SEGMENT AND COMPUTED THE ALP AND RECOMMENDED ADJUSTMENTS IN BOTH THE SEGMENTS. THOUGH, THE ASSESS EE GAVE DETAILED JUSTIFICATION FOR WORKING CAPITAL ADJUSTMENT, THE TPO DID NOT GRANT THE SAME. OBJECTIONS WERE RAISED BEFORE THE DRP. THE DRP REJECTED THE CONTENTION OF THE ASSESSEE THAT THE TPO HAS NOT PROVIDED THE ASSESSEE WITH THE DETAILS OF THE SEARCH COMPARABLES. THIS, IN OUR VIEW, IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE DRP UPHELD THE ORDER OF THE TPO TO A LARGE EXTENT. AS THE DRP HAD NOT ADJUDICATED ALL THE OBJECTIONS RAISED BY THE ASSESSEE, A REC DRP ISSUED MODIFIED DIRECTIONS DT. 22 2.2. THE ASSESSING OFFICER PASSED AND ORDER U/S 143(3) R.W.S. 144C(5) OF THE ACT ON 25/11/2016, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,94, MAKING ADJUSTMENT /ADDITIONS PRELIMINARY EXPENSES AND DISALLOWANCE U/S 40A(3) OF THE ACT. OTHER CORPORATE DISALLOWANCES WERE ALSO MADE. BEFORE US, THE ASSESSEE DISPUTES THE TRANSFER WITH REGARD TO THE TE CHNICAL SERVICES SEGMENT I.E., THOUGH THE ASSESSEE HAS RAISED A NUMBER OF GROUNDS, THE ISSUE BEFORE US, ARE REGARDING THE FOR THE PURPOSE OF COMPUTATION OF ARMS LENGTH PRICE. AS TO WHETHER A PARTICULAR COMPANY IS TO BE INCLUDED AS A COMPARABLE COMPANY OR NOT FOR THE PURPOSE OF COMPUTATION OF ALP OF THE INTERNATIONAL 3. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: 2 FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH FOR THE COMBINED TRANSACTION OF PAYMENT OF SERVICE CHARGES AND ROYALTY, TNMM WAS CHOSEN AS MAM AND OP/OR WAS . THE TESTED PARTY MARGIN WAS WORKED OUT AT 0.62 % AND WAS THE TPO IDENTIFIED FRESH COMPARABLES FOR BOTH THE TRADING SEGMENT AND TECHNICAL SEGMENT AND COMPUTED THE ALP AND RECOMMENDED ADJUSTMENTS IN BOTH THE SEGMENTS. EE GAVE DETAILED JUSTIFICATION FOR WORKING CAPITAL ADJUSTMENT, THE TPO DID NOT GRANT THE SAME. OBJECTIONS WERE RAISED BEFORE THE DRP. THE DRP REJECTED THE CONTENTION OF THE ASSESSEE THAT THE TPO HAS NOT PROVIDED THE ASSESSEE WITH THE DETAILS OF THE SEARCH PROCESS EMPLOYED BY HIM FOR SELECTING THE COMPARABLES. THIS, IN OUR VIEW, IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE DRP UPHELD THE ORDER OF THE TPO TO A LARGE EXTENT. AS THE DRP HAD NOT ADJUDICATED ALL THE OBJECTIONS RAISED BY THE ASSESSEE, A REC TIFICATION PETITION WAS FILED AND IN RESPONSE, THE DRP ISSUED MODIFIED DIRECTIONS DT. 22 ND MARCH, 2017. THE ASSESSING OFFICER PASSED AND ORDER U/S 143(3) R.W.S. 144C(5) OF THE ACT ON 25/11/2016, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,94, /ADDITIONS UNDER THE TRANSFER PRICING PROVISIONS, INTEREST ON TAX, PRELIMINARY EXPENSES AND DISALLOWANCE U/S 40A(3) OF THE ACT. OTHER CORPORATE MADE. BEFORE US, THE ASSESSEE DISPUTES THE TRANSFER PRICING (TP) ADJUSTMENTS MADE CHNICAL SERVICES SEGMENT I.E., PAYMENT FOR TECHNICAL SERVICES. THOUGH THE ASSESSEE HAS RAISED A NUMBER OF GROUNDS, THE ISSUE ARE REGARDING THE INCLUSION AND EXCLUSION OF CERTAI N COMPARABLE COMPANIES, FOR THE PURPOSE OF COMPUTATION OF ARMS LENGTH PRICE. HENCE WE ADJUDICATE ONLY THE ISSUE AS TO WHETHER A PARTICULAR COMPANY IS TO BE INCLUDED AS A COMPARABLE COMPANY OR NOT FOR THE PURPOSE OF COMPUTATION OF ALP OF THE INTERNATIONAL TRANSACTION. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: - ITA NO. 127/KOL/2017 ASSESSMENT YEAR: 2012-13 DONGFANG ELECTRIC (INDIA) PVT. LTD FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH FOR THE COMBINED TRANSACTION OF PAYMENT OF SERVICE CHARGES AND ROYALTY, TNMM WAS CHOSEN AS MAM AND OP/OR WAS . THE TESTED PARTY MARGIN WAS WORKED OUT AT 0.62 % AND WAS THE TPO IDENTIFIED FRESH COMPARABLES FOR BOTH THE TRADING SEGMENT AND TECHNICAL SEGMENT AND COMPUTED THE ALP AND RECOMMENDED ADJUSTMENTS IN BOTH THE SEGMENTS. EE GAVE DETAILED JUSTIFICATION FOR WORKING CAPITAL ADJUSTMENT, THE TPO THE DRP REJECTED THE CONTENTION OF THE ASSESSEE THAT THE TPO HAS NOT PROVIDED EMPLOYED BY HIM FOR SELECTING THE COMPARABLES. THIS, IN OUR VIEW, IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE DRP UPHELD THE ORDER OF THE TPO TO A LARGE EXTENT. AS THE DRP HAD NOT ADJUDICATED ALL THE TIFICATION PETITION WAS FILED AND IN RESPONSE, THE THE ASSESSING OFFICER PASSED AND ORDER U/S 143(3) R.W.S. 144C(5) OF THE ACT ON 25/11/2016, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,94, 68,890/- INTERALIA PROVISIONS, INTEREST ON TAX, PRELIMINARY EXPENSES AND DISALLOWANCE U/S 40A(3) OF THE ACT. OTHER CORPORATE PRICING (TP) ADJUSTMENTS MADE TECHNICAL SERVICES. THOUGH THE ASSESSEE HAS RAISED A NUMBER OF GROUNDS, THE ISSUE S THAT WAS ARGUED N COMPARABLE COMPANIES, HENCE WE ADJUDICATE ONLY THE ISSUE AS TO WHETHER A PARTICULAR COMPANY IS TO BE INCLUDED AS A COMPARABLE COMPANY OR NOT TRANSACTION. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES 4. AS REGARDS INCLUSION /EXCLUSION OF COMPARABLE COMPANIES: CADES DIGITECH PRIVATE LIMITED: 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL RESULTS TO RETAIN THE COMPARABLE, IN CASE, HE FINDS THE CLA EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE BEFORE TAX FOR THE FINANCIAL YEARS 2009 ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009 THUS, THIS COMPANY WAS EXCLUDED AS A COMPARABLE ON WRONG ASSUMPTION OF FACTS BY THE TPO. NOT CARRYING OUT THE DIRECTIONS OF THE DRP B ACCORDANCE WITH LAW . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE DIGITECH PVT. LTD. , AS A COMP CLAIM OF THE ASSESSEE, THAT THE COMPANY HAD TO 2011-12. TELECOMMUNICATIONS CONSULTANTS INDIA LTD. (SEG): ORDER DT. 22 ND MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL RESULTS AND TO RETAIN TH IS CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE COMPANY HAD EARNED PROFIT BEFO ALSO CLAIMS THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009-10 TO 2011- 12. NOT CARRYING OUT THE DIRECTIONS OF THE DRP BY THE TPO/ASSESSING OFFICER, IS NOT IN ACCORDANCE WI COMPANY BEING EXCLUDED AS A COMPARABLE INCLUDE TELECOMMUNICATIONS CONSULTANTS INDIA LTD., AS A COMP THE ALP AFTER VERIFYING THE CLAIM EARLIER YEARS. ACCUSPEED ENGINEERING SERVICES INDIA LTD.: 22 ND MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL RESULTS TO RET AIN THE COMPARABLE, IN CASE, HE FINDS THE CLAIM OF THE ASSESSEE AS CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED 3 /EXCLUSION OF COMPARABLE COMPANIES: - CADES DIGITECH PRIVATE LIMITED: - THE DRP VIDE RECTIFICATION ORDER DT. 22 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL RESULTS TO RETAIN THE COMPARABLE, IN CASE, HE FINDS THE CLA IM OF THE ASSESSEE AS CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE STATES THAT THIS COMPANY HAD EARNED PROFIT FOR THE FINANCIAL YEARS 2009 -10 TO 2011- 12. IT WAS ALSO ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009 THUS, THIS COMPANY WAS EXCLUDED AS A COMPARABLE ON WRONG ASSUMPTION OF FACTS BY THE NOT CARRYING OUT THE DIRECTIONS OF THE DRP B Y THE TPO/ASSESSING OFFICER, . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE , AS A COMP ARABLE, WHILE COMPUTING THE ALP AFTER VERIFICATION OF THIS CLAIM OF THE ASSESSEE, THAT THE COMPANY HAD EARNED PROFITS FROM FINANCIAL YEAR 2009 TELECOMMUNICATIONS CONSULTANTS INDIA LTD. (SEG): - THE DRP VIDE RECTIFICATION MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE RETAIN TH E COMPARABLE, IN CASE, HE FINDS THE CLAIM OF THE ASSESSEE CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE COMPANY HAD EARNED PROFIT BEFO RE TAX FOR THE FINANCIAL YEARS 2009- 10 & 2011 THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 12. NOT CARRYING OUT THE DIRECTIONS OF THE DRP BY THE TPO/ASSESSING IS NOT IN ACCORDANCE WI TH LAW. WRONGFUL ASSUMPTION OF FACTS RESULTED IN THIS COMPANY BEING EXCLUDED AS A COMPARABLE . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE TELECOMMUNICATIONS CONSULTANTS INDIA LTD., AS A COMP ARABLE, WHILE COMPUTING THE ALP AFTER VERIFYING THE CLAIM OF THE ASSESSEE THAT IT HAD IN FACT EARNED PROFITS, IN THE ACCUSPEED ENGINEERING SERVICES INDIA LTD.: - THE DRP VIDE RECTIFICATION ORDER DT. MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL AIN THE COMPARABLE, IN CASE, HE FINDS THE CLAIM OF THE ASSESSEE AS CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED ITA NO. 127/KOL/2017 ASSESSMENT YEAR: 2012-13 DONGFANG ELECTRIC (INDIA) PVT. LTD THE DRP VIDE RECTIFICATION ORDER DT. 22 ND MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL RESULTS TO RETAIN IM OF THE ASSESSEE AS CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THAT THIS COMPANY HAD EARNED PROFIT 12. IT WAS ALSO CLAIMED THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009 -10 TO 2011-12. THUS, THIS COMPANY WAS EXCLUDED AS A COMPARABLE ON WRONG ASSUMPTION OF FACTS BY THE Y THE TPO/ASSESSING OFFICER, IS NOT IN . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE CADES ARABLE, WHILE COMPUTING THE ALP AFTER VERIFICATION OF THIS EARNED PROFITS FROM FINANCIAL YEAR 2009 -10 THE DRP VIDE RECTIFICATION MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE E COMPARABLE, IN CASE, HE FINDS THE CLAIM OF THE ASSESSEE CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE CLAIMS THAT THIS 10 & 2011 -12. IT WAS THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 12. NOT CARRYING OUT THE DIRECTIONS OF THE DRP BY THE TPO/ASSESSING TH LAW. WRONGFUL ASSUMPTION OF FACTS RESULTED IN THIS . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO ARABLE, WHILE COMPUTING OF THE ASSESSEE THAT IT HAD IN FACT EARNED PROFITS, IN THE THE DRP VIDE RECTIFICATION ORDER DT. MARCH, 2017, DIRECTED THE TRANSFER PRICING OFFICER (TPO) TO VERIFY THE FINANCIAL AIN THE COMPARABLE, IN CASE, HE FINDS THE CLAIM OF THE ASSESSEE AS CORRECT. THE TPO HAD EARLIER EXCLUDED THIS COMPARABLE ON THE PRESUMPTION THAT IT INCURRED PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE EARNED PROF IT BEFORE TAX FOR THE FINANCIAL YEARS 2009 THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009 2011- 12. NOT CARRYING OUT THE DIRECTIONS OF THE DRP BY THE TPO/ASSESSING OFFICER, IS IN ACCORDANCE WITH LAW . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE ENGINEERING SERVICES INDIA LTD. (SEG) VERIFYING THIS CLAIM OF THE ASSESSEE THAT IT IS NOT A PERSISTENT LOSS MAKING COMPANY. TATA CONSULTING ENGINEERING LTD. (TCEL): COMPANY IS DIFFERENT FROM THE FUNCTIONAL PROFILE OF TATA CONSULTING ENGINEERING LTD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SERVICE IN THE FIELD OF POWER AND ALSO PROVI DES AFTER SALES SERVICE TO ITS CUSTOMERS CONSULTANCY AND MANAGEMENT SERVICES WHICH INCLUDES DESIGN AND ENGINEERING CONSULTANCY. TCEL IS ENGAGED IN MULTIFARIOUS ACTIVITIES. SEGMENTAL DATA IS NOT AVAILABLE. ON THESE FACTS, T HE LD. D/R, AGREED THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE. IN VIEW OF THE ABOVE, WE DIRECT THE TPO/ASSESSING OFFICER TO EXCLUDE TCEL AS A COMPARABLE WHILE COMPUTING THE ALP. ACROPETAL TECHNOLOGIES LTD.: ITS REVENUE IS FROM IT. IT IS ALSO ENGAGED IN R&D ACTIVITIES. THE DRP IN ITS RECTIFICATION ORDER DT. 22 ND MARCH, 2017, DIRECTED THE TPO TO VERIFY THE MARGIN AND USE THE CORRECT FIGURES. THE TPO IS BOUND BY THE DIRECTIO THE TPO IS DIRECTED TO EXCLUDE THE COMPARABLE WHILE COMPUTING THE ALP. CONDUCTING THE VERIFICATION AS DIRECTED BY THE DRP. 4.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WOULD NOT BE INSISTING INCLUSION OF THE FOLLOWING COMPARABLES COMPARABLES HAVE BEEN ACCEPTED BY THE BENCH 1) SIMON INDIA LTD. 2) MN DASTUR & CO. PVT. LTD. 3) MAHINDRA CONSULTING ENGINEERS LTD. HENCE, WE DO NOT ADJUDICATE THE INCLUSION OR COMPANIES. WE HAVE THESE ISSUES OPEN FOR ADJUDICATION AT THE APPROPRIATE TIME. 4 PERSISTENT LOSS. THE FINANCIALS PRESENTED BY THE ASSESSEE CLAIMED THAT THIS COMPANY HAD IT BEFORE TAX FOR THE FINANCIAL YEARS 2009 -10 & 2011- 12. IT WAS ALSO THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009 12. NOT CARRYING OUT THE DIRECTIONS OF THE DRP BY THE TPO/ASSESSING OFFICER, IS . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE ENGINEERING SERVICES INDIA LTD. (SEG) , AS A COMP ARABLE, WHILE COMPUTING THE ALP AFTER VERIFYING THIS CLAIM OF THE ASSESSEE THAT IT IS NOT A PERSISTENT LOSS MAKING COMPANY. CONSULTING ENGINEERING LTD. (TCEL): - THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY IS DIFFERENT FROM THE FUNCTIONAL PROFILE OF TATA CONSULTING ENGINEERING LTD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SERVICE IN THE FIELD OF POWER AND ALSO DES AFTER SALES SERVICE TO ITS CUSTOMERS , WHERE AS TCEL IS IN THE FIELD OF PROJECT, CONSULTANCY AND MANAGEMENT SERVICES WHICH INCLUDES DESIGN AND ENGINEERING IS ENGAGED IN MULTIFARIOUS ACTIVITIES. SEGMENTAL DATA IS NOT AVAILABLE. HE LD. D/R, AGREED THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE. IN VIEW OF THE ABOVE, WE DIRECT THE TPO/ASSESSING OFFICER TO EXCLUDE TCEL AS A COMPARABLE WHILE COMPUTING THE ALP. ACROPETAL TECHNOLOGIES LTD.: - THIS COMPANY IS ENGAGED IN IT INDUSTRY AND 79% OF ITS REVENUE IS FROM IT. IT IS ALSO ENGAGED IN R&D ACTIVITIES. THE DRP IN ITS RECTIFICATION MARCH, 2017, DIRECTED THE TPO TO VERIFY THE MARGIN AND USE THE CORRECT FIGURES. THE TPO IS BOUND BY THE DIRECTIO NS OF THE DRP. IN VIEW OF THE ABOVE DISCUSSION, THE TPO IS DIRECTED TO EXCLUDE THE COMPARABLE WHILE COMPUTING THE ALP. CONDUCTING THE VERIFICATION AS DIRECTED BY THE DRP. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WOULD NOT BE INSISTING INCLUSION OF THE FOLLOWING COMPARABLES , IF HIS PLEADINGS ON THE ISSUE OF OTHER COMPARABLES HAVE BEEN ACCEPTED BY THE BENCH :- SIMON INDIA LTD. MN DASTUR & CO. PVT. LTD. MAHINDRA CONSULTING ENGINEERS LTD. HENCE, WE DO NOT ADJUDICATE THE INCLUSION OR EXCLUSION OF THE ABOVE THREE WE HAVE THESE ISSUES OPEN FOR ADJUDICATION AT THE APPROPRIATE TIME. ITA NO. 127/KOL/2017 ASSESSMENT YEAR: 2012-13 DONGFANG ELECTRIC (INDIA) PVT. LTD THAT THIS COMPANY HAD 12. IT WAS ALSO CLAIMED THAT THE ASSESSEE HAD EARNED OPERATING PROFITS FOR THE ASSESSMENT YEAR 2009 -10 TO 12. NOT CARRYING OUT THE DIRECTIONS OF THE DRP BY THE TPO/ASSESSING OFFICER, IS NOT . THUS, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE ACCUSPEED ARABLE, WHILE COMPUTING THE ALP AFTER VERIFYING THIS CLAIM OF THE ASSESSEE THAT IT IS NOT A PERSISTENT LOSS MAKING COMPANY. THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY IS DIFFERENT FROM THE FUNCTIONAL PROFILE OF TATA CONSULTING ENGINEERING LTD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SERVICE IN THE FIELD OF POWER AND ALSO AS TCEL IS IN THE FIELD OF PROJECT, CONSULTANCY AND MANAGEMENT SERVICES WHICH INCLUDES DESIGN AND ENGINEERING IS ENGAGED IN MULTIFARIOUS ACTIVITIES. SEGMENTAL DATA IS NOT AVAILABLE. HE LD. D/R, AGREED THAT THIS COMPANY CANNOT BE TAKEN AS A COMPARABLE. IN VIEW OF THE ABOVE, WE DIRECT THE TPO/ASSESSING OFFICER TO EXCLUDE TCEL AS A IS ENGAGED IN IT INDUSTRY AND 79% OF ITS REVENUE IS FROM IT. IT IS ALSO ENGAGED IN R&D ACTIVITIES. THE DRP IN ITS RECTIFICATION MARCH, 2017, DIRECTED THE TPO TO VERIFY THE MARGIN AND USE THE CORRECT NS OF THE DRP. IN VIEW OF THE ABOVE DISCUSSION, THE TPO IS DIRECTED TO EXCLUDE THE COMPARABLE WHILE COMPUTING THE ALP. AFTER THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE WOULD NOT BE INSISTING ON THE HIS PLEADINGS ON THE ISSUE OF OTHER EXCLUSION OF THE ABOVE THREE WE HAVE THESE ISSUES OPEN FOR ADJUDICATION AT THE APPROPRIATE TIME. 5. THE NEXT ARGUMENT OF THE ASSESSEE IS THAT WORK GRANTED. THE DRP ON THIS ISSUE, THE PANE L DIRECTS THE TPO TO VERIFY THE MARGIN CALCULATIONS AND CORRECT IF ANY ERRORS ARE THERE. THE ADJUSTMENT IN WORKING CAPITAL HAS TO BE GIVEN ASSESSEE IS ABLE TO MAKE OUT A CASE FOR VARYING PROFILE OF WORKING CAPITAL AND THAT ADJUSTMENT IS CALLED THE PANEL IS HENCE NOT ABLE TO ALLOW THE ADJUSTMENT TO THE ASSESSEE. THIS OBJECTION IS HENCE DISMISSED. 5.1. IN VIEW OF THE ABOVE, THE TPO IS DIRECTED TO CONSIDER THE CLAIM OF THE ASSESSEE FOR WORK ING CAPITAL ADJUSTMENT AFRESH. THIS IS TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NO. 2356/KOL/2017; ASSESSMENT YEAR 2013- 14. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES 6. THE ASSESSEE, IN THIS CASE HAS RAISED A NUMBER OF OTHER OBJECTIONS INCLUDING THE ARGUMENT THAT THERE WAS NO VALID REFERENCE MADE TO THE TPO ETC. THE FINAL ASSESSMENT ORDER IS TIME BARRED DUE TO THE FACT THAT THE REFERENCE WAS MADE BY THE ASSESSING OFFICER TO THE TPO WAS, BAD IN LAW OFFICER COMPLETELY FAILED TO GIVE EFFECT TO THE MANDATORY DIRECTIONS ISSUED BY THE DRP, FINAL ASSESSMENT ORDER HAS TO BE MODIFIED BY HOLDING THE ADJUSTMENTS MADE ON ACCOUNT OF TRANSFER PRICING (TP). AS THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT, THE TP ADJUSTMENT GETS NULLIFIED ON THE INCLUSION TELECOMMUNICATIONS CONSULTANTS INDIA LTD. LTD. (SEG), AND EXCLUSION OF COMPARABLE TECHNOLOGIES LTD., IF ORDERED BY THE BENCH, ADJUDICATION OF ALL THESE LEGAL ISSUES WOULD BE AN ACADEMIC EXERCISE. HENCE WE LEAVE THESE ISSUES OPEN. 7. IN THE RESULT, APPEAL OF TH KOLKATA, THE SD/- [ABY T. VARKEY] JUDICIAL MEMBER DATED : 23.10.2019 {SC SPS} 5 THE NEXT ARGUMENT OF THE ASSESSEE IS THAT WORK ING CAPITAL ADJUSTMENT IS TO BE ON THIS ISSUE, HAS DIRECTED AS FOLLOWS:- L DIRECTS THE TPO TO VERIFY THE MARGIN CALCULATIONS AND CORRECT IF ANY ERRORS ARE THERE. THE ADJUSTMENT IN WORKING CAPITAL HAS TO BE GIVEN IN CASE, THE ASSESSEE IS ABLE TO MAKE OUT A CASE FOR VARYING PROFILE OF WORKING CAPITAL AND THAT ADJUSTMENT IS CALLED FOR. THE ASSESSEE DID NOT ESTABLISH IT BEFORE THE PANEL. THE PANEL IS HENCE NOT ABLE TO ALLOW THE ADJUSTMENT TO THE ASSESSEE. THIS OBJECTION IS HENCE DISMISSED. IN VIEW OF THE ABOVE, THE TPO IS DIRECTED TO CONSIDER THE CLAIM OF THE ASSESSEE FOR ING CAPITAL ADJUSTMENT AFRESH. THIS IS IN LINE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NO. 2356/KOL/2017; ASSESSMENT YEAR 14. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN THIS CASE HAS RAISED A NUMBER OF OTHER OBJECTIONS INCLUDING THE ARGUMENT THAT THERE WAS NO VALID REFERENCE MADE TO THE TPO ETC. IT WAS CONTENDED THAT THE FINAL ASSESSMENT ORDER IS TIME BARRED DUE TO THE FACT THAT THE REFERENCE WAS MADE BY OFFICER TO THE TPO WAS, BAD IN LAW . THAT AS THE TPO AND THE LD. ASSESSING OFFICER COMPLETELY FAILED TO GIVE EFFECT TO THE MANDATORY DIRECTIONS ISSUED BY THE DRP, FINAL ASSESSMENT ORDER HAS TO BE MODIFIED BY HOLDING THE ADJUSTMENTS MADE ON ACCOUNT AS THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT, THE TP ON THE INCLUSION OF THE COMPARABLES CADES DIGITECH PVT. LTD. TELECOMMUNICATIONS CONSULTANTS INDIA LTD. AND ACCUSPEED ENGINEERING SERVICES INDIA AND EXCLUSION OF COMPARABLE S TATA CONSULTING ENGINEERING LTD. ORDERED BY THE BENCH, ADJUDICATION OF ALL THESE LEGAL ISSUES WOULD HENCE WE LEAVE THESE ISSUES OPEN. IN THE RESULT, APPEAL OF TH E ASSESSEE IS ALLOWED IN PART. KOLKATA, THE 23 RD DAY OF OCTOBER, 2019. [ J. SUDHAKAR REDDY ACCOUNTANT MEMBER ITA NO. 127/KOL/2017 ASSESSMENT YEAR: 2012-13 DONGFANG ELECTRIC (INDIA) PVT. LTD CAPITAL ADJUSTMENT IS TO BE L DIRECTS THE TPO TO VERIFY THE MARGIN CALCULATIONS AND CORRECT IF ANY IN CASE, THE ASSESSEE IS ABLE TO MAKE OUT A CASE FOR VARYING PROFILE OF WORKING CAPITAL AND FOR. THE ASSESSEE DID NOT ESTABLISH IT BEFORE THE PANEL. THE PANEL IS HENCE NOT ABLE TO ALLOW THE ADJUSTMENT TO THE ASSESSEE. THIS IN VIEW OF THE ABOVE, THE TPO IS DIRECTED TO CONSIDER THE CLAIM OF THE ASSESSEE FOR IN LINE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN I.T.A. NO. 2356/KOL/2017; ASSESSMENT YEAR 14. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN THIS CASE HAS RAISED A NUMBER OF OTHER OBJECTIONS INCLUDING THE IT WAS CONTENDED THAT THE FINAL ASSESSMENT ORDER IS TIME BARRED DUE TO THE FACT THAT THE REFERENCE WAS MADE BY . THAT AS THE TPO AND THE LD. ASSESSING OFFICER COMPLETELY FAILED TO GIVE EFFECT TO THE MANDATORY DIRECTIONS ISSUED BY THE DRP, FINAL ASSESSMENT ORDER HAS TO BE MODIFIED BY HOLDING THE ADJUSTMENTS MADE ON ACCOUNT AS THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT, THE TP CADES DIGITECH PVT. LTD. , ACCUSPEED ENGINEERING SERVICES INDIA TATA CONSULTING ENGINEERING LTD. AND ACROPETAL ORDERED BY THE BENCH, ADJUDICATION OF ALL THESE LEGAL ISSUES WOULD SD/- J. SUDHAKAR REDDY ] ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO: 1. DONGFANG ELECTRIC (INDIA) PVT. LTD PLOT NO. AH-5 PREMISES NO. 16-1111 ACTION AREA IA NEW TOWN KOLKATA 700 107 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6 DONGFANG ELECTRIC (INDIA) PVT. LTD ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE -14(1), KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES ITA NO. 127/KOL/2017 ASSESSMENT YEAR: 2012-13 DONGFANG ELECTRIC (INDIA) PVT. LTD TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES