Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 7135 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-09-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
I1
Next Hearing Date
11-08-2016
Assessment Year
2011-2012
Appeal Filed On
22-01-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KULDIP SINGH : JUDICIAL MEMBER ITA NO. 344/DEL/2016 ASSTT. YR. 2011-12 WSP CONSULTANTS INDIA PVT. LTD., VS. DCIT CIRCLE 27 (2), FC-24, SECTOR 16A, NEW DELHI. DISTT. GAUTAM BUDH NAGAR, NOIDA. PAN: AAACW 5220 F (APPELLANT ) ( RESPONDENT) APPELLANT BY : SHRI ATUL JAIN CA & MS. SUCHITA KANODIA CA RESPONDENT BY : SHRI MANISH KUMAR CIT(DR) DATE OF HEARING : 11/08/2016. DATE OF ORDER : 15/09/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECTE D AGAINST THE ASSESSMENT ORDER DATED 30.11.2015, PASSED BY THE AS SESSING OFFICER U/S 143(3) READ WITH SECTION 144C(5), PURSUANT TO DIREC TIONS OF LD. DRP. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPAN Y, INCORPORATED ON 18.3.2004, AS SUBSIDIARY OF WSP GR CYPRUS HOLDING LTD., NICOSIA CYPRUS, A GLOBAL BUSINESS PROVIDER, IN THE ASSESSMENT YEAR UNDER CONSIDERATION, WAS 2 PROVIDING DESIGN ENGINEERING, MANAGEMENT CONSULTANC Y SERVICES ACROSS THE BUILT AND NATURE ENVIRONMENT WORLDWIDE. THE COMPANY PROVIDED SERVICES TO TRANSFORM THE BUILT ENVIRONMENT AND RESTORE THE NAT URAL ENVIRONMENT AND ITS EXPERTISE RANGED FROM ENVIRONMENTAL REMEDIATION TO URBAN PLANNING FROM ENGINEERING ICONIC BUILDINGS TO DESIGNING SUSTAINAB LE TRANSPORT NETWORKS AND FROM DEVELOPING THE ENERGY SOURCES OF THE FUTURE TO ENABLING NEW WAYS TO EXTRACTING ESSENTIAL RESOURCES. 3. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS:- NO. NATURE OF TRANSACTION METHOD VALUE OF TRANSACTION 1 PURCHASE OF SOFTWARE TNMM 1,83,125 2 ENGINEERING CONSULTANCY SERVICES TNMM 8,49,15,100 3 IT SUPPORT SERVICES/ DESIGN SUPPORT SERVICES TNMM 3,35,10,245 4 REIMBURSEMENT OF EXPENSES INCURRED BY AE ON BEHALF OF COMPANY - 17,38,165 5 REIMBURSEMENT OF EXPENSES INCURRED BY COMPANY ON BEHALF OF AE - 19,31,512 4. THE ASSESSEE HAD JUSTIFIED THE ALP OF ITS INTERN ATIONAL TRANSACTIONS IN REGARD TO ENGINEERING CONSULTANCY SERVICES AND IT S UPPORT SERVICES PROVIDED TO THE AES BY APPLYING TRANSACTIONAL NET MARGIN MET HOD (TNMM). THE OPERATING PROFIT TO TOTAL COST (OP/TC) WAS TAKEN AS PLI IN THE TNMM 3 ANALYSIS. PLI OF THE COMPANY WAS ARRIVED AT 1.31% O N COST WHEREAS THE AVERAGE PLI OF THE COMPARABLE WAS ARRIVED AT 1.01% AS PER THE ANALYSIS IN THE TP REPORT. THE ASSESSEE HAD SELECTED FOLLOWING COMPARABLES IN THE ENGINEERING CONSULTANCY SERVICES AND IT SUPPORT SER VICE IN ITS TP STUDY REPORT:- NO. NAME OF COMPANY FY 2010-11 FY 2009-10 FY 2008 09 WEIGHTED AVERAGE 1 INDO ASIAN PROJECTS LTD. 0.71 1.43 - 3.07 0.21 2 ITD CEMENTATION INDIA LTD. NA 2.74 2.09 2.43 3 SRS REAL INFRASTRUCTURE LTD. 1.17 0.54 - 3.43 0.39 5. LD. TPO ISSUED A DETAILED SHOW CAUSE NOTICE IN WHICH HE, INTER ALIA, POINTED OUT THAT THE FINANCES CHARGES AMOUNTING TO RS. 31,610/- WAS TAKEN AS OPERATING EXPENSES AND PROVISION FOR LOSSES WRITTEN BACK OF RS. 7093239/- WAS TAKEN AS OPERATING INCOME, WHICH WERE TO BE CON SIDERED AS NON- OPERATING. 6. HE, ACCORDINGLY, SHOW CAUSED AS TO WHY THE PLI O F THE ASSESSEE BE NOT TAKEN AS -2.43%. LD. TPO FURTHER POINTED OUT THAT S INCE THE NATURE OF SERVICES PROVIDED WERE TECHNICAL IN NATURE, HENCE, COMPARABLES PROVIDING TECHNICAL SERVICES WERE TO BE USED FOR BENCH MARK T HE TRANSACTIONS RELATING TO ENGINEERING/ CONSULTANCY/ DESIGNING SUPPORT SERVICE S. LD. TPO AFTER 4 DECIDING THE FILTERS TO BE APPLIED PROPOSED FOLLOWI NG COMPARABLES FOR BENCH MARKING THE INTERNATIONAL TRANSACTIONS: NO COMPANY NAME OP/OC (%) 1 ASHOK LEYLAND PROJECT SERVICES LTD. 24.70% 2 BENGAL SREI INFRASTRUCTURE DEVP. LTD./ 42.14% 3 CERTIFICATION ENGINEERS INTERNATIONAL LTD. 78.45 % 4 GLOBAL PROCUREMENT CONSULTANTS LTD. 30.85% 5 HSCC (INDIA) LTD. 21.04% 6 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 14. 78% 7 KITCO LTD. 27.48% 8 MAHINDRA CONSULTING ENGINEERS LTD. 30.92% 9 MITCON CONSULTANCY & ENGG. SERVICES LTD. 40.19% 10 PALLAVAN TRANSPORT CONSULTANCY SERVICES LTD. 25 .59% 11 TCE CONSULTING ENGINEERS LTD. 29.29% 12 USHA HYDRO DYNAMICS LTD. 29.45% 13 GUJARAT INDUSTRIAL & TECHNICAL CONSULTANCY ORG LTD. 7.89% 14 IBI CHEMATUR (ENGINEERING & CONSULTANCY) LTD. 25.96% 15 RITES LTD. 58.27% 16 NTPC ELECTRIC SUPPLY COMPANY LTD. 18.01% AVERAGE 31.56% 7. LD. TPO ALSO CONSIDERED THE WORKING CAPITAL ADJU STMENT CLAIMED BY ASSESSEE AND POINTED OUT THAT THE WORKING CAPITAL A DJUSTMENT MAY BE WORKED OUT CONSIDERING THE TRADE PAYABLES AND RECEIVABLES ONLY OF THE TAXPAYER VIS A VIS THOSE OF THE COMPARABLE COMPANIES. 8. THE ASSESSEE IN ITS REPLY TO THE SHOW CAUSE NOTI CE TOOK FOLLOWING CONTENTIONS, AS NOTICED BY LD. TPO:- 5 3.2.1 THE ASSESSEE HAS STATED THAT TPO HAS NOT CONS IDERED SEGMENTAL OPERATING PROFIT OF THE COMPANY, THE ASSE SSEE HAS SUBMITTED DETAILS OF DOMESTIC TRANSACTION AND TRAN SACTION WITH AES. 3.2.2. ASSESSEE HAS ARGUED THAT SERVICES PROVIDED B Y IT ARE IN THE NATURE OF BUSINESS SUPPORT SERVICES IN RELATION TO ENGINEERING DISCIPLINES. 3.2.3. ASSESSEE HAS OBJECTED AGAINST THE USE OF CU RRENT YEAR DATA. 3.2.4. OBJECTION AGAINST FINANCE CHARGES AND PROVIS ION OF LOSSES WRITTEN BACK CONSIDERED AS NON-OPERATING BY THE TPO. 3.2.5. OBJECTION AGAINST FILTERS APPLIED BY THE TPO . 3.2.6. ASSESSEE HAS OBJECTED ON REJECTION OF COMPAR ABLES SELECTED BY IT. 3.2.7. ASSESSEE HAS OBJECTED AGAINST THE ADDITIONAL COMPARABLES PROPOSED BY THE TPO. 9. AS REGARDS ASSESSEES CONTENTION REGARDING SEGME NTAL PROFITABILITY SUBMITTED BEFORE TPO, HE POINTED OUT THAT ASSESSEE HAD NEVER SUBMITTED SEGMENTAL PROFITABILITY BEFORE SHOW CAUSE NOTICE. L D. TPO HAS REPRODUCED THE SEGMENTAL PROFITABILITY SUBMITTED BY THE ASSESS EE, WHICH WAS AS UNDER: PARTICULARS DOMESTIC TRANSACTION TRANSACTION WITH AES TOTAL AMOUNT AS PER P&L INCOME FROM CONSULTANCY FEE 98289291 85981307 184270 OTHER INCOME 7093239 - 7093239 6 TOTAL 105385530 85981307 191363837 OPERATING EXPENSES PERSONNEL EXPENSES 50752252 64088120 114840372 OPERATING & ADMIN EXPENSES 56488436 9058951 65547387 DEPRECIATION AND AMORTIZATION 4490454 3982100 8472554 FINANCE CHARGES 31610 - 31610 PROFIT BEFORE PRIOR PERIOD ADJUSTMENT AND TAX (6380222) 8852137 2471914 OP/OC -5.71% 11.48% 1.31% 10. WITH REFERENCE TO THE AFOREMENTIONED TABLE, LD. TPO POINTED OUT THAT ASSESSEE HAD NOT SUBMITTED BASIS OF ALLOCATION OF E XPENSES. HE FURTHER POINTED OUT THAT NOWHERE IN THE AUDIT REPORT SUCH SEGMENTAL WAS MENTIONED. HE, ACCORDINGLY, REJECTED THE CONTENTION OF ASSESSE E IN THIS REGARD. 11. AFTER CONSIDERING OTHER OBJECTIONS RAISED BY AS SESSEE, LD. TPO FINALLY SELECTED FOLLOWING COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS: NO COMPANY NAME OP/OC (%) 1 ASHOK LEYLAND PROJECT SERVICES LTD. 24.70% 2 BENGAL SREI INFRASTRUCTURE DEVP. LTD./ 42.14% 3 CERTIFICATION ENGINEERS INTERNATIONAL LTD. 78.45 % 4 GLOBAL PROCUREMENT CONSULTANTS LTD. 30.85% 7 5 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 14. 78% 6 KITCO LTD. 27.48% 7 MAHINDRA CONSULTING ENGINEERS LTD. 30.92% 8 MITCON CONSULTANCY & ENGG. SERVICES LTD. 40.19% 9 PALLAVAN TRANSPORT CONSULTANCY SERVICES LTD. 25. 59% 10 TCE CONSULTING ENGINEERS LTD. 29.29% 11 USHA HYDRO DYNAMICS LTD. 29.45% 12 GUJARAT INDUSTRIAL & TECHNICAL CONSULTANCY ORG LTD. 7.89% 13 IBI CHEMATUR (ENGINEERING & CONSULTANCY) LTD. 25.96% 14 RITES LTD. 58.27% 15 NTPC ELECTRIC SUPPLY COMPANY LTD. 18.01% AVERAGE 32.27% 12. LD. TPO DETERMINED THE ALP OF INTERNATIONAL TRA NSACTION RELATING TO ENGINEERING SERVICES AS UNDER: OPERATING COST 18,88,60,313 OP/OC% 32.27% ARMS LENGTH PRICE (ALP) 24,98,05,536 PRICE SHOWN IN THE INTERNATIONAL TRANSACTIONS 18,4 2,70,598 SHORTFALL BEING ADJUSTMENT U/S 92CA 6,65,34,938 13. LD. DRP AFTER CONSIDERING ASSESSEES OBJECTIONS DIRECTED THE TPO TO EXCLUDE AND INCLUDE CERTAIN COMPANIES AS COMPARABLE IN CALCULATING ALP. ACCORDINGLY, AFTER GIVING EFFECT TO LD. DRPS DIREC TIONS, ADJUSTMENT OF RS. 38754545/- WAS MADE BY AO. 14. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE US AGAINST THE FINAL ASSESSMENT ORDER PASSED BY AO AND HAS TAKEN FOLLOWI NG GROUNDS OF APPEAL: 8 1. ON FACTS, CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 27(2) ('LD. AO') ERRED IN COMPLETING THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C(4) OF THE INCOME-TAX ACT, 1961 (THE ACT') BY MAKING AN ADJUSTMENT OF INR 38,754,5 45 UNDER SECTION 92CA(4) OF THE ACT, ON ACCOUNT OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION PERTAINING TO PROV ISION OF BACK END SUPPORT IN RESPECT OF ENGINEERING AND DESIGNING SERVICES RENDERED BY ITS AES. 2. ON FACTS AND IN LAW, THE LEARNED DISPUTE RESOLUT ION PANEL- 2, NEW DELHI. ('HON'BLE DRP'), LD. AO AND DE PUTY COMMISSIONER OF INCOME TAX, TRANSFER PRICING OFFICE R - III(1)(1) ('LD. TPO') ERRED IN DISREGARDING THE APP ELLANT'S USE OF MULTIPLE YEAR/ PRIOR YEARS' DATA IN CONTRAVENTIO N OF THE PROVISION OF SECTION 92C OF THE ACT READ WITH RULE L0B AND RULE 10D(4) OF THE INCOME TAX RULES, 1962 ('THE RUL ES') THEREBY ERRED IN DISREGARDING THE DOCTRINE OF IMPOS SIBILITY OF PERFORMANCE IN CONTRAVENING SECTION 92D OF THE ACT. 3. ON FACTS AND IN LAW, THE LD. AO/ LD. TPO ERRED I N NOT FOLLOWING THE DIRECTIONS ISSUED BY THE HONBLE DRP TO RE- COMPUTE AND RESTRICT THE TRANSFER PRICING ('TP') AD JUSTMENT, ON PROPORTIONATE BASIS, TO THE VALUE OF INTERNATIONAL TRANSACTIONS ONLY. 4. ON FACTS AND IN LAW, THE LD. AO/ LD. TPO ERRED I N NOT FOLLOWING THE DIRECTIONS ISSUED BY THE HON'BLE DRP TO CORRECTLY COMPUTE THE OPERATING PROFIT MARGINS OF THE FINALLY SELECTED COMPANIES, THEREBY IGNORED THE CORRECT COMPUTATION PROVIDED BY THE APPELLANT DURING THE COURSE OF PROCEEDINGS 5. ON FACTS AND IN LAW, THE HON'BLE DRP ERRED IN UP HOLDING THE LD. AO/ LD. TPO'S REJECTION OF THE COMPARABILIT Y ANALYSIS UNDERTAKEN BY THE APPELLANT IN ITS TP DOCUMENTATION ; AND CONDUCTING A FRESH COMPARABILITY ANALYSIS BASED ON APPLICATION OF ADDITIONAL! REVISED FILTERS IN DETERMINING THE A LP OF THE INTERNATIONAL TRANSACTIONS. 9 6. ON FACTS AND IN LAW, THE HON'BLE DRP AND LD. AO/ LD. TPO ERRED IN INCLUDING CERTAIN NEW COMPANIES THAT A RE NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS P ERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED, THEREBY CONTRAVE NING THE PROVISIONS OF THE RULE 10B(2) OF THE INCOME TAX RUL ES, 1962 ('THE RULES'). 7. ON FACTS AND IN LAW, THE HON'BLE DRP AND LD. AO/ LD. TPO ERRED IN INCORRECTLY COMPUTING THE APPELLANT'S MARGIN BY USING THE FOLLOWING APPROACH; 1. USING ENTITY LEVEL MARGIN OF THE APPELLANT INSTE AD OF THE SEGMENTAL MARGIN PROVIDED FOR THE APPELLANT'S INTERNATIONAL TRANSACTIONS WITH THE THEREBY CONTRAVENING THE PROVISIONS OF RULE 10B(L) OF THE RULES; AND ANNEXURE AO 2. CONSIDERING PROVISION FOR UNFORESEEN LOSSES WRITTEN BACK AS NON-OPERATING IN NATURE. 8. ON FACTS AND IN LAW, THE HON'BLE DRP AND LD. AO/ LD. TPO ERRED IN NOT ALLOWING A RISK ADJUSTMENT UNDER R ULE LOB(L)(E) FOR DETERMINATION OF THE ALP TO ACCOUNT F OR THE DIFFERENCE IN THE RISK PROFILE OF THE APPELLANT AND OF COMPARABLE COMPANIES. ' 9. ON FACTS, CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN COMPUTING THE INTEREST. 10. ON FACTS AND IN LAW, THE LD. AO/ LD. TPO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) OF THE ACT WHEN THE FACTS OF THE CASE AND PROVISION OF THE LAW DO NOT WARRANT SUCH INITIATION OF PENALTY PROCEEDINGS. 15. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASS ESSEE IS A BACK END SUPPORT SERVICE PROVIDER AND WAS PROVIDING ARCHITEC TURAL CONSULTANCY SERVICES TO ITS AE. LD. COUNSEL POINTED OUT THAT ASSESSEE WAS ALSO ENGAGED IN PROVISION OF END TO END STRUCTURAL ENGINEERING A ND CONSULTANCY SERVICES TO 10 THIRD PARTIES IN INDIA UNDER DIRECT CONTRACT AND AS A FULL-FLEDGED ENTREPRENEUR ENGAGED IN NEGOTIATION OF PRICES, CONCLUSION OF CON TRACTS, SUB-CONTRACTING OF WORK BASED ON FURTHER NEGOTIATIONS WHERE REQUIRED, ASSUMING PROJECT RISK, CAPACITY UTILIZATION RISKS ETC. HE POINTED OUT THAT 47% OF THE REVENUE WAS DERIVED FROM AE AND 53% REVENUE WAS DERIVED FROM IN DEPENDENT THIRD PARTIES. AS REGARDS THE SERVICE RENDERED TO AE, LD. COUNSEL POINTED OUT THAT ASSESSEE OPERATED AS A LIMITED RISK SERVICE PROVIDE R WITH RESPECT TO PROVISION OF BACK END SUPPORT SERVICES WHEREIN AES WERE ENGAG ED IN FRONT ENDING DESIGN AND ENGINEERING BUSINESS WITH THIRD PARTIES. THESE CONSTITUTED ONLY 47% OF THE TOTAL REVENUE. 16. LD. COUNSEL POINTED OUT THAT ASSESSEE HAD PRESE NTED SEGMENTAL P&L A/C BEFORE TPO, WHICH WAS REJECTED WITHOUT ASSIGNI NG ANY BASIS AND THE ONLY REASON WAS THAT THEY WERE NOT AUDITED. LD. COU NSEL POINTED OUT THAT WHILE DRP DID NOT ACCEPT THE SEGMENTAL ANALYSIS PRO VIDED BY THE ASSESSEE, IT DID PROVIDE RELIEF BY PROVIDING PROPORTIONAL ADJUS TMENT TO THE ASSESSEE VIS- A- VIS ENTITY WISE ADJUSTMENT PROPOSED BY THE TPO I .E. LIMITING THE AMOUNT OF EXPENSES TO THE % OF REVENUE FROM THE AES I.E. 4 7%. LD. COUNSEL REFERRED TO PAGE 15 TO 17 OF THE PB, WHEREIN THE ORDER U/S 1 54/143(3) READ WITH SECTION 144C(4) DATED 16.2.2016 IS CONTAINED IN WHI CH PROPOSED ADJUSTMENT 11 U/S 92CA WAS DETERMINED AT RS. 1,88,49,387/-. THE A SSESSEE HAS GIVEN IN THE SYNOPSIS ITS WORKING AS UNDER: PARTICULARS REFERENCE TPOS COMPUTATION OPERATING COST OF THE APPELLANT (A) 142,555,679 ADD: DESIGN CONSULTANCY EXPENSES (RELATES TO INDEPENDENT THIRD PARTY TRANSACTIONS) (B) 46,304,634 TOTAL OPERATING COSTS OF THE APPELLANT (INCLUDING DESIGN CONSULTANCY EXPENSES) =(A)+(B) 188,860,313 OPERATING COSTS PERTAINING TO AE TRANSACTIONS (D)=*47% 88,764,347 ARMS LENGTH PRICE AT A MARGIN OF 18.10% (E)=(D)+18.10%(D) 104,830,693 INTERNATIONAL TRANSACTION OF RECEIPT ON ACCOUNT OF CONSULTANCY SERVICES (F) 85,981,307 PROPOSED ADJUSTMENT U/S 92CA (G)=(E)-(F) 18,849,387 17. LD. COUNSEL POINTED OUT THAT DESIGNING AND CONS ULTANCY EXPENSES RELATED TO INDEPENDENT THIRD PARTY TRANSACTIONS AND , THEREFORE, COULD NOT FORM PART OF OPERATING COST OF THE ASSESSEE. 18. LD. COUNSEL FURTHER POINTED OUT THAT IF THE D&E EXPENSES INCURRED SOLELY FOR INDEPENDENT THIRD PARTY TRANSACTIONS ARE EXCLUDED THEN ALP OF INTERNATIONAL TRANSACTION ON ACCOUNT OF CONSULTANCY SERVICES WOULD BE RS. 12 79,128,381 AS AGAINST THE AMOUNT RECEIVED AT RS. 8 5,981,307, THUS REQUIRING NO ADJUSTMENT. LD. COUNSEL HAS SUBMITTED FOLLOWING DETAILS IN THIS REGARD: PARTICULARS REFERENCE ASSESSEES COMPUTATION OPERATING COST OF THE APPELLANT (A) 142,555,679 OPERATING COST PERTAINING TO AE TRANSACTIONS (B)-(A)*47% 67,001,169 ARMS LENGTH PRICE AT A MARGIN OF 18.10% =(B)+18.10%(B) 79,128,381 INTERNATIONAL TRANSACTION OF RECEIPT ON ACCOUNT OF CONSULTANCY SERVICES (D) 85,981,307 PROPOSED ADJUSTMENT U/S 92CA (G)=(D)-(E) NO ADJUSTMENT 19. LD. COUNSEL HAS FILED ADDITIONAL EVIDENCE IN TH E PB IN SUPPORT OF ITS CONTENTION THAT SEGMENTAL MARGIN OF THE ASSESSEE IS TO BE CONSIDERED. LD. COUNSEL SUBMITTED CERTAIN DOCUMENTS BEFORE US, WHIC H, INTER ALIA, INCLUDES DETAILS IN RELATION TO DESIGN AND CONSULTANCY EXPEN SES WHICH WERE SOLELY INCURRED FOR INDEPENDENT THIRD PARTY BUSINESS. LD. COUNSEL POINTED OUT THAT FOR THE PURPOSE OF EXECUTING SUCH INDEPENDENT THIRD PARTY CONTRACTS, ASSESSEE IN TURN AVAILED SERVICES OF SUB-CONTRACTORS AND CON SULTANTS AND INCURRED D&C EXPENSES WHICH SHOWED THAT 100% OF SUCH AMOUNT WAS SUB-CONTRACTED TO OTHERS. IN THE PAPER BOOK ASSESSEE HAS SUBMITTED FOLLOWING DOCUMENTS: 13 BACK-UP DOCUMENTATION SUCH AS BACK-TO-BACK TRAIL OF CONTRACTS UNDERTAKEN BY THE APPELLANT WITH THIRD PARTIES AND SUB- CONTRACTED TO OTHERS PARTIES HAS BEEN SUBMITTED; INVOICES RAISED BY SUB-CONTRACTORS AND CONSULTANTS ON WSP CIPL; A TABULATION PROVIDING DETAILS TO ESTABLISH THAT SU CH D&C EXPENSES RELATED TO THIRD PARTY PROJECTS; AND A CERTIFICATE ISSUED BY THE STATUTORY AUDITORS OF W SP CIPL (FOR FY 10-11) PROVIDING THE TOTAL AMOUNT INCURRED ON 'D ESIGN CONSULTANCY' EXPENSES AND THE BREAK-UP THEREOF HAS BEEN SUBMITTED. 20. LD. COUNSEL FURTHER REFERRED TO PAGE 350 OF THE PB WHEREIN THE REPLY OF THE ASSESSEE BEFORE LD. TPO IS CONTAINED IN WHIC H SEGMENTAL OPERATING PROFITABILITY OF THE COMPANY WAS SUBMITTED BEFORE H IM. LD. COUNSEL FURTHER REFERRED TO PAGE 371 OF THE PB, WHEREIN DETAILS OF DOMESTIC NON AE AND AE COST IS SUMMARIZED. 21. LD. COUNSEL, THEREFORE, SUBMITTED THAT THE ENTI RE ADJUSTMENT SHOULD BE RECALCULATED AFTER EXCLUDING THE NON AE COST. HE SU BMITTED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO/ TPO TO EXAM INE THE ADDITIONAL EVIDENCE. 22. LD. DR SUBMITTED THAT AES BUSINESS COST CANNOT BE SEGREGATED FROM NONAES BUSINESS COST. HE POINTED OUT THAT COMPARAB LES WERE ALSO RENDERING SIMILAR SERVICES. HE POINTED OUT THAT LD. DRP HAS G RANTED SUFFICIENT RELIEF TO 14 ASSESSEE AND THE ISSUE OF EXCLUSION OF SUB-CONTRACT ING EXPENSES WAS NOT TAKEN BEFORE DRP. 23. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT RUL E 10 DEALS WITH DETERMINATION OF INCOME IN THE CASE OF NON-RESIDENT . LD. COUNSEL REFERRED TO RULE 10B(1)(E) WHICH DEALS WITH TNM METHOD FOR DETE RMINING THE ALP. HE POINTED OUT THAT THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE IS TO BE COMPUTED FOR INTERNATIONAL TRANSACTIONS AND, THEREF ORE, EXPENSES WHICH DO NOT PERTAIN TO AE CANNOT BE TAKEN INTO CONSIDERATIO N. HE FURTHER POINTED OUT THAT NONE OF THE COMPARABLES ENTERED INTO TRANSACTI ON WITH AE. 24. LD. COUNSEL FOR THE ASSESSEE HAS ADVANCED ARGUM ENTS IN REGARD TO VARIOUS COMPARABLES INCLUDED/ EXCLUDED BY LD. TPO W HICH WE WILL CONSIDER AFTER DECIDING THE ISSUE REGARDING ADDITIONAL EVIDE NCE FURNISHED BY ASSESSEE. 25. AS IS EVIDENT FROM LD. DRPS DIRECTION, IT HAS ACCEPTED THE ASSESSEES CONTENTION REGARDING LIMITING THE EXPENSES TO THE PERCENTAGE OF REVENUE FROM THE AE I.E. 47%. THUS, THOUGH LD. DRP DID NOT ACCEPT THE SEGMENTAL ANALYSIS SUBMITTED BY THE ASSESSEE BUT IN PRINCIPLE AGREED THAT ADJUSTMENT PROPOSED BY LD. TPO IS TO BE LIMITED TO THE AMOUNT OF EXPENSES TO THE PERCENTAGE OF REVENUE FROM THE AE. THEREFORE, IF CE RTAIN EXPENSES WERE NOT AT ALL INCURRED WITH REFERENCE TO EARNING OF AES R EVENUE, THEN THOSE EXPENSES HAD TO BE EXCLUDED FOR CORRECT COMPUTATION OF 47% OF EXPENSES 15 ATTRIBUTABLE TO AE. THIS EXERCISE HAS NOT BEEN CARR IED OUT BY LD. TPO BECAUSE NO SUCH PLEA WAS TAKEN BEFORE HIM. HOWEVER, THE ENT IRE DATA IS AVAILABLE ON RECORD AND, THEREFORE, IN ORDER TO ARRIVE AT CORREC T COMPUTATION THE ASSESSEES PLEA REGARDING SUB-CONTRACTING EXPENSES 100% ATTRIB UTABLE TO NON AE BUSINESS HAS TO BE EXAMINED. THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE IN SUPPORT OF ITS CONTENTION AND, THEREFORE, IT WOULD BE IN THE INTEREST OF JUSTICE THAT THE ADDITIONAL EVIDENCE IS ADMITTED FOR ARRIVI NG AT PROPER COMPUTATION OF ALP. WE, ACCORDINGLY, ADMIT THE ADDITIONAL EVIDENCE AND RESTORE THE MATTER BACK TO THE FILE OF LD. TPO TO EXAMINE THE ASSESSEE S PLEA IN THIS REGARD. IN CASE IT IS FOUND THAT D&E EXPENSES WERE ATTRIBUTABL E 100% TO INDEPENDENT THIRD PARTY TRANSACTION THEN THE SAME HAS TO BE EXC LUDED FOR COMPUTING THE OPERATING COST OF THE ASSESSEE BECAUSE OPERATING CO ST PERTAINING TO AE ONLY HAS TO BE CONSIDERED. 26. IN THE RESULT ASSESSEES PETITION UNDER RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 FOR ADMISSION OF A DDITIONAL EVIDENCE IS ALLOWED AND MATTER RESTORED TO FILE OF LD. TPO/AO F OR CONSIDERATION. 27. BEFORE WE EXAMINE THE CONTENTION OF ASSESSEE IN REGARD TO VARIOUS COMPARABLES, IT WOULD BE PROPER TO FIRST CONSIDER T HE FUNCTIONAL PROFILE OF ASSESSEE TO WHICH WE HAVE REFERRED TO EARLIER ALSO, IN ORDER TO FIND OUT 16 WHETHER ASSESSEE IS MERELY IMPARTING BACK OFFICE SE RVICES OR IMPARTING SERVICES WHICH REQUIRE EXPERTISE OF HIGH TECHNICAL NATURE. 28. LD. TPO IN PARA 2.2 HAS NOTED THAT ASSESSEE PRO VIDED SERVICES TO TRANSFORM THE BUILT ENVIRONMENT AND RESTORE THE NA TURAL ENVIRONMENT AND ITS EXPERTISE RANGED FROM ENVIRONMENTAL REMEDIATION TO URBAN PLANNING FROM DEVELOPING THE ENGINEERING ICONIC BUILDINGS TO DESI GNING SUSTAINABLE TRANSPORT NETWORKS AND FROM DEVELOPING THE ENERGY SOURCE OF THE FUTURE TO ENABLING NEW WAYS TO EXTRACTING ESSENTIAL RESOURCES . THIS CLEARLY SHOWS THAT ASSESSEE IS IMPARTING SERVICES OF VERY HIGH TECHNIC AL NATURE AND, THEREFORE, THE COMPARABLES WHICH ARE IMPARTING TECHNICAL CONSU LTANCY SERVICES WERE THE RIGHT COMPARABLES SELECTED BY LD. TPO. IN THE BACKD ROP OF THESE OBSERVATIONS NOW WE PROCEED TO EXAMINE THE VARIOUS COMPARABLES D ISPUTED BY ASSESSEE. ASHOK LEYLAND PROJECT SERVICES LTD. : 29. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S COMPARABLE HAS WRONGLY BEEN INCLUDED BECAUSE IT IS FUNCTIONALLY NO T COMPARABLE TO ASSESSEE. FURTHER, THERE WERE PECULIAR ECONOMIC CIRCUMSTANCES DURING THE YEAR INASMUCH AS ALPSL MERGED WITH ASHOK LEYLAND WIND E NERGY LTD. HE FURTHER POINTED OUT THAT THERE WERE OTHER INCOME AG GREGATING TO RS. 66,84,745/-. LD. COUNSEL FURTHER POINTED OUT THAT T HIS COMPANY HAS EARNED REVENUE MAINLY FROM WIND ENERGY SEGMENT AND THERE W AS LOSS IN THE PROJECT 17 SERVICE DIVISION. LD. COUNSEL RELIED ON THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISO RS (INDIA) PVT. LTD. IN ITA NO. 417/2014 DATED 27.4.2015 AND TECHBOOKS INT ERNATIONAL PVT. LTD. IN ITA NO. 240/2015 FOR AY 2010-11. 30. LD. CIT(DR) SUBMITTED THAT WIND ENERGY SEGMENT IS ONLY ONE PART OF WHOLE BUSINESS. HOWEVER, THIS WAS ALSO PROVIDING PO WER BLOCK COMMUNICATION AND SERVICE TRANSPORT INFRASTRUCTURE SERVICES ETC. 31. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. SINCE MAJOR PART OF THE REVENUE WAS DERIVED FROM WIND ENERGY SE GMENT, THEREFORE, THIS COMPARABLE COULD NOT BE SAID TO BE MAINLY IN TECHNI CAL CONSULTANCY BUSINESS AND, HENCE, THIS WAS NOT FUNCTIONALLY COMPARABLE TO ASSESSEE. MOREOVER, DURING THE YEAR THERE WAS EXTRAORDINARY EVENT BEING MERGER OF ALPSL WITH ASHOK LEYLAND WIND PROJECT SERVICES LTD. DUE TO WHI CH THERE WAS CLEAR POSSIBILITY OF DIFFERENTIAL ADVANTAGE IN RESPECT OF PROFITABILITY OF THIS COMPARABLE. WE, THEREFORE, DIRECT FOR EXCLUSION OF THIS COMPARABLE FROM THE LIST OF COMPARABLES. GLOBAL PROCUREMENT CONSULTANTS LTD. (GPCL) : 32. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HIS COMPANY WAS PROMOTED BY THE EXIM BANK OF INDIA AND PROVIDES PRO CUREMENT RELATED SERVICES AND INTER-ALLIED ACTIVITIES FOR PROJECTS I N INDIA AND ABROAD. IT DEALT IN 18 INDUSTRIES LIKE POWER, HYDRO, TRANSPORTATION INFRAS TRUCTURE ETC. FURTHER ACTED AS THE CLIENTS REPRESENTATIVE IN TAKING ON THE TOT AL RESPONSIBILITY OF PROCUREMENT ACTIVITIES, BY PROVIDING A COMPREHENSIV E RANGE OF PROCUREMENT RELATED ADVISORY SERVICES AND INTER ALLIED ACTIVITI ES FOR PROJECTS IN INDIA AND ABROAD. LD. COUNSEL SUBMITTED THAT THIS COMPARABLE HAS GOVERNMENT CONNECTION AND, THEREFORE, SHOULD BE EXCLUDED. HE P OINTED OUT THAT LD. DRP EXCLUDED ON THIS COUNT ONLY SEVEN COMPARABLES. HE R ELIED ON THE ORDER DATED OF THE ITAT DATED 15.2.2016 IN THE CASE OF MARUBENI ITOCHU STEEL INDIA PVT. LTD. VS. DCIT IN ITA NO. 1716/DEL/2014, WHEREIN THE MAJORITY REVENUE WAS DERIVED FROM GOVERNMENT ENTERPRISES AND WORLD BANK. LD. COUNSEL RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF THYSSEN KRUPP INDUSTRIES INDIA PVT. LTD. IN ITA NO. 2218/2013 DAT ED 28.3.2016 AND ALSO ON THE ORDER OF ITAT IN THE CASE OF ADIDAS TECHNICAL SERVICES P. LTD. VS. DCIT IN ITA NO. 1233/DEL/2015. 33. LD. DR SUBMITTED THAT GOVERNMENT COMPANIES CANN OT BE EXCLUDED PARTICULARLY WHEN THEY WERE MAKING PROFITS. AS REGA RDS THE RELIANCE PLACED BY LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF MARUBENI ITOCHU STEEL INDIA PVT. LTD. (SUPRA), LD. DR SUBMITTED THAT THE SAID COMPANY WAS INVOLVED IN STEEL BUSINESS SO WAS NOT COMPARABLE TO GLOBAL PROCUREMENT CONSULTANTS LTD. HOWEVER, THIS COMPANY IS COMPARABLE TO TESTED PARTY. 19 34. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. IN THE CASE OF MARU BENI ITOCHU STEEL INDIA PVT. LTD. (SUPRA) IN PARA 11.1 THE TRIBUNAL HAS NOT ICED THE ASSESSEES OBJECTION RAISED BEFORE LD. TPO THAT THIS COMPANY W AS ENGAGED IN PROVIDING CONSULTANCY SERVICES AND REVIEW OF PROCUREMENT PROC ESSES FOR VARIOUS PROJECTS FUNDED BY THE WORLD BANK. IN PARA 11.2 THE TRIBUNAL HAS NOTICED THAT AS PER THE ANNUAL REPORT, THIS COMPANY WAS PRO MOTED BY EXPORT-IMPORT BANK OF INDIA IN ASSOCIATION WITH LEADING INDIAN PU BLIC SECTOR AND PRIVATE SECTOR CONSULTANCY ORGANIZATIONS ON THE BASIS OF PU BLIC-PRIVATE PARTNERSHIP MODEL THAT OFFERS COLLECTIVE INDIAN EXPERIENCE AND EXPERTISE THROUGH THE PROVISION OF A RANGE OF ADVISORY SERVICES WITH PART ICULAR FOCUS ON PROCUREMENT. FROM THIS IT IS EVIDENT THAT THIS WAS NOT A GOVERNMENT COMPANY AND, THEREFORE, THE DECISION RELIED UPON BY LD. COU NSEL FOR THE ASSESSEE ARE OF LITTLE HELP TO IT. FURTHER WE FIND THAT THIS COMPAR ABLE WAS IMPARTING PRIMARILY CONSULTANCY SERVICES IN REGARD TO PROCUREMENT MANAG EMENT WHICH WAS TECHNICAL IN NATURE. THE ASSESSEE IS ALSO RENDERIN G CONSULTANCY SERVICES WHICH ARE HIGHLY TECHNICAL IN NATURE AND, THEREFORE , WE ARE NOT INCLINED TO ACCEPT THE CONTENTION OF THE LD. COUNSEL FOR THE AS SESSEE FOR EXCLUSION OF THIS COMPARABLE FROM THE LIST OF COMPARABLE. ACCORDINGLY , WE UPHOLD THE ORDER OF LOWER REVENUE AUTHORITIES IN REGARD TO THIS COMP ARABLE. 20 KITCO LIMITED : 35. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT K ITCO IS HELD BY SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) WITH 4 9% SHARES OF THE COMPANY AND, THUS, IT IS A GOVERNMENT CONNECTION CO MPANY AND, THEREFORE, IN VIEW OF THE DECISION OF HONBLE HIGH COURT IN THE C ASE OF THYSSEN KRUPP INDUSTRIES INDIA PVT. LTD. (ITA NO. 2218/2013), IT SHOULD BE EXCLUDED. HE FURTHER POINTED OUT THAT THE MAJOR SERVICE OFFERED BY KITCO WERE PROJECT CONSULTANCY, DETAILED ENGINEERING & PROJECT EXECUTI ON, TECHNICAL SERVICES, ENVIRONMENTAL ENGINEERING AND HRD CONSULTANCY. FURT HER, ASSESSEE WAS EXPANDING ITS BUSINESS ACTIVITIES BY INTRODUCING MO RE VERTICALS LIKE SEA PORTS, URBAN PLANNING AND FINANCIAL SERVICES ETC. FURTHER, KITCO WAS ALSO ENGAGED IN INFRASTRUCTURE ACTIVITIES. HE SUBMITTED THAT THERE WAS NO SEGMENTAL INFORMATION AVAILABLE IN THE ANNUAL REPORT. LD. COU NSEL RELIED ON THE ORDER OF THE ITAT IN THE CASE OF BECHTEL INDIA PVT. LTD. VS . DCIT DATED 21.12.2015 IN ITA NO. 1478/DEL/2015, WHEREIN AFTER TAKING NOTE OF THE FACT THAT KITCO WAS A 100% GOVERNMENT OWNED UNDERTAKING, RENDERING SERVICES PRIMARILY TO CENTRAL/ STATE GOVERNMENT UNDERTAKING AND PSUS AND THE MAJORITY REVENUE AND PROFITABILITY OF THE COMPANY CAME FROM GOVERNME NT (STATE OR CENTRE) RUN PROJECTS AND THAT THE COMPANY DERIVED BENEFIT OUT O F ITS PARENTAL RELATION WITH THE GOVERNMENT IN GETTING CONTRACT, EXCLUDED T HIS COMPARABLE 21 FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF M/S THYSSENKRUPP INDUSTRIES INDIA PVT. LTD. ITA NO. 6460/MUM/2012. 36. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. IN THE CASE OF BECH TEL INDIA PVT. LTD. (SUPRA), IN PARA 12.2 THE TRIBUNAL HAS NOTICED THE ASSESSEE S SUBMISSION THAT KITCO WAS A 100% GOVERNMENT OWNED UNDERTAKING. HOWEVER, L D. COUNSEL HAS POINTED OUT THAT ONLY 49% SHARES ARE HELD BY SIDBI AND, THEREFORE, THIS CANNOT BE HELD TO BE A GOVERNMENT COMPANY. LD. DR H AS VERY RIGHTLY POINTED OUT THAT IT IS A GOVERNMENT CONNECTION COM PANY AND NOT A GOVERNMENT COMPANY. HOWEVER, ADVANTAGE OF GETTING GOVERNMENT PROJECTS HAS AN INFLUENCE ON ITS PROFITABILITY. THEREFORE, S INCE MAJOR REVENUE WAS DERIVED FROM GOVERNMENT RUN PROJECTS, THEREFORE, IN VIEW OF THE DECISION IN M/S THYSSENKRUPP INDUSTRIES INDIA PVT. LTD. (SUPRA) , WE DIRECT FOR EXCLUSION OF THIS COMPARABLE FROM THE LIST OF COMPARABLES. MAHINDRA CONSULTING ENGINEERING LTD. (MCEL) : 37. LD. TPO INCLUDED THIS COMPARABLE ON THE GROUND THAT THIS COMPANY WAS ENGAGED IN VARIOUS ENGINEERING AND INFRASTRUCTU RE ACTIVITIES, WHICH WERE IN THE NATURE OF TECHNICAL SERVICES, AS RENDERED BY ASSESSEE ALSO. HE, THEREFORE, TREATED THIS COMPANY AS COMPARABLE TO AS SESSEE. 38. LD. DRP CONFIRMED THE TPOS ACTION. 22 39. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S COMPANY IS FUNCTIONALLY DIFFERENT AND RENDERS DIVERSIFIED ACTI VITIES. HE POINTED OUT THAT THIS COMPANY PROVIDED CONSULTANCY SERVICES IN WIDE AREA OF WATER, ENGINEERING, URBAN MOBILITY, TRANSPORTATION AND LOG ISTICS INDUSTRIAL PLANTS AND SYSTEMS, AGRICULTURE, FOOD AND RURAL INFRASTRUCTURE . HE FURTHER SUBMITTED THAT PECULIAR ECONOMIC CIRCUMSTANCES EXISTED INASMUCH AS STRATEGIC PARTNERSHIP WITH SAFEGE OF FRANCE TO ACHIEVE EXPONENTIAL GROWT H AND ENHANCE ITS MARKET SHARE WAS ENTERED INTO AND IN THE PROCESS SA FEGE ALONG WITH M&M AND MCET PURCHASED SHARES OF COMPANY. FURTHER, SUB- CONSULTANCY COST TO TOTAL PERSONNEL COST WAS 10.9-% AND TECHNICAL KNOW- HOW TO TOTAL FIXED ASSETS WAS 30.08%. HE RELIED ON THE DECISION OF ITAT DATE D 13.6.2016 IN THE CASE OF EMERSON PROCESS MANAGEMENT POWER & WATER SOLUTIO NS INDIA PVT. LTD. VS. ACIT, RENDERED IN 6816/DEL/2015, WHEREIN THIS C OMPARABLE WAS EXCLUDED. 40. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. AS FAR AS RELIANCE PLACED ON THE DECISION OF EMERSON PROCESS MANAGEMENT POWER & WATER SOLUTIONS INDIA PVT. LTD. (SUPRA) IS CONCERNED, WE ARE OF THE OPINION THAT T HE SAID DECISION IS OF LITTLE ASSISTANCE TO ASSESSEE AS IN THAT CASE ASSESSEE WAS ENGAGED IN PROVIDING APPLICATION ENGINEERING, SOFTWARE DEVELOPMENT AND R ELATED SERVICES FOR 23 AVIATION CONTROL SYSTEMS. HOWEVER, IN THE PRESENT C ASE ASSESSEE IS PRIMARILY ENGAGED IN PROVIDING HIGHLY TECHNICAL CONSULTANCY S ERVICES AND, THEREFORE, THIS COMPARABLE WAS RIGHTLY SELECTED BY LD. TPO. LD . COUNSEL HAS REFERRED TO CERTAIN PECULIAR ECONOMIC CIRCUMSTANCES NOTICED IN HIS ARGUMENT BUT THE EFFECT ON PROFITABILITY OF THESE CIRCUMSTANCES HAS NOT BEEN DEMONSTRATED AND, THEREFORE, MERELY BECAUSE SHARES OF ASSESSEE WAS AC QUIRED BY SAME ORGANIZATION WILL NOT BE OF ANY SIGNIFICANCE. WE, T HEREFORE, REJECT THE ASSESSEES CONTENTION ON THIS COUNT. MITCON CONSULTANCY & ENGINEERING SERVICES LTD. : 41. LD. TPO NOTICED IN THE ANNUAL REPORT FOR AY 201 0-11 THAT THIS COMPANY WAS ENGAGED IN PROVIDING ENGINEERING SERVIC ES WHICH WERE IN THE NATURE OF TECHNICAL SERVICES. HE REPRODUCED THE EXT RACTS FROM ANNUAL REPORT IN HIS ORDER. HE, THEREFORE, INCLUDED THIS COMPANY AS GOOD COMPARABLE. 42. LD. DRP CONFIRMED THE TPOS ACTION IN VIEW OF S IMILAR FAR. 43. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HIS COMPANY PROVIDES TECHNICAL SERVICES IN DIVERSIFIED FIELDS. MOREOVER, IT EARNED 37.87% REVENUE FROM DIVERSIFIED ACTIVITIES, NAMELY, VOCATIONAL TRA ININGS, IT TRAININGS AND LABORATORIES. FURTHER, VARIOUS CAPITAL GRANTS WERE RECEIVED FROM GOVT. OF INDIA. HE, THEREFORE, SUBMITTED THAT THIS CANNOT BE CONSIDERED AS GOOD COMPARABLE. 24 44. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. SINCE THIS COMPARAB LE IS DERIVING LESS THAN 75% OF REVENUE FROM CONSULTANCY SERVICES, THEREFORE , THIS CANNOT BE CONSIDERED AS A GOOD COMPARABLE WITH ASSESSEE, WHIC H IS PRIMARILY DERIVING ALMOST ENTIRE REVENUE FROM CONSULTANCY SERVICES. WE , THEREFORE, DIRECT FOR EXCLUSION OF THIS COMPARABLE FROM THE LIST OF COMPA RABLES. TCE CONSULTING ENGINEERS LTD. : 45. LD. TPO NOTED FROM THE WEBSITE OF THIS COMPANY THAT IT WAS ENGAGED IN VARIOUS PROJECT ENGINEERING SERVICES WHICH WERE IN THE NATURE OF TECHNICAL SERVICES AND, THEREFORE, IT WAS A GOOD COMPARABLE T O TAXPAYER. HE HAS REPRODUCED THE CONTENTS FROM THE WEBSITE IN HIS ORD ER. 46. LD. DRP CONFIRMED THE ACTION OF TPO, OBSERVING THAT IT WAS A GOOD COMPARABLE IN VIEW OF SIMILAR FAR. 47. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE OTHER INCOME DERIVED BY THIS COMPANY WAS 104.34 LACS WHICH INCLUDED MISC . RECEIPTS TO THE EXTENT OF RS. 103.44 LACS AND RECOVERIES OF BAD DEBTS WRIT TEN OFF RS. .90 LACS. FURTHER PROVISION FOR BAD AND DOUBTFUL DEBTS AND AD VANCES AND OTHER PROVISION AGGREGATED TO RS. 588.42 LACS. HE POINTE D OUT THAT THE TURNOVER WAS RS. 416.02 CRORES WHICH IS 22 TIMES MORE THAN T HE ASSESSEES TURNOVER OF RS. 18.42 CRORES. LD. COUNSEL RELIED ON VARIOUS DEC ISIONS WHERE THIS COMPARABLE HAS BEEN EXCLUDED. 25 48. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE AND FIND THAT PRIMAR ILY THE ASSESSEE IS PLEADING FOR ITS EXCLUSION ON THE GROUND OF FINANCIAL RESULT S. MOREOVER, HIS CONTENTION IS ALSO THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AS IT WAS PRIMARILY PROVIDING COMMISSIONING SERVICES. WE DO NOT FIND MU CH SUBSTANCE IN THIS PLEA OF ASSESSEE CONSIDERING THE FUNCTIONAL PROFILE OF ASSESSEE, BECAUSE THIS COMPANY WAS ALSO PROVIDING HIGHLY TECHNICAL SERVICE S PRIMARILY FOR COMMISSIONING OF PROJECT. 49. AS FAR AS LD. COUNSELS SUBMISSION REGARDING TU RNOVER IS CONCERNED, THE SAME CANNOT BE ACCEPTED BECAUSE THAT DOES NOT A FFECT THE PROFIT MARGIN DERIVED BY A COMPANY. WE, THEREFORE, CONFIRM THE OR DER OF LD. TPO AS CONFIRMED BY LD. DRP. IBI CHEMATUR (ENGINEERING AND CONSULTANCY) LTD. : 50. LD. TPO HAS OBSERVED THAT ASSESSEE OBJECTED TO THIS COMPARABLE ON THE GROUND OF NON-COMPARABLE FUNCTIONS AS THE COMPANY P ROVIDED A RANGE OF SERVICES-DETAILED ENGINEERING, INTELLIGENT 3D PLANT MODELING, 2D CONVERSION SERVICES, SMART PLANT INSTRUMENTATION, SMART PLANT ELECTRICAL, PIPING STRESS ANALYSIS, PROCUREMENT ASSISTANCE, PROCESS SIMULATIO N, PROCESS EQUIPMENT DESIGN, INSPECTION SERVICES, PROJECT PLANNING AND M ANAGEMENT AND ERECTION SUPERVISION. HE REJECTED THE PLEA OF ASSESSEE IN V IEW OF HIS FINDING IN 26 GENERAL DISCUSSION, WHEREIN AFTER CONSIDERING THE A SSESSEES FUNCTIONAL PROFILE, THE COMPANIES WHICH WERE PROVIDING TECHNIC AL SERVICES WITH SIMILAR EMPLOYEE PROFILE (ENGINEERS AND TECHNICAL PEOPLE) A S THAT OF TAXPAYER, IRRESPECTIVE OF THEIR SIZE AND RANGE OF SERVICES WE RE INCLUDED, INTER ALIA, OBSERVING THAT FINDING COMPANYS RENDERING EXACTLY SIMILAR SERVICES AS THAT OF TAXPAYER WAS A VERY DIFFICULT AND IMPOSSIBLE EXE RCISE. 51. LD. DRP CONFIRMED THE TPOS ACTION OBSERVING TH AT THIS WAS GOOD COMPARABLE IN VIEW OF SIMILAR FAR. 52. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HIS COMPANY WAS ENGAGED IN DIVERSIFIED ACTIVITIES SINCE APART FROM DETAILED ENGINEERING, THE COMPANY ALSO PROVIDED PROJECT PLANNING AND MANAGEME NT SERVICES. FURTHER, HE POINTED OUT THAT THIS COMPANY WAS ENGAGED IN SIG NIFICANT R&D ACTIVITIES AND NO SEGMENTAL INFORMATION WAS AVAILABLE. 53. HAVING HEARD BOTH THE PARTIES, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDERS OF LOWER REVENUE AUTHORITIES IN REG ARD TO THIS COMPARABLE BECAUSE THIS COMPANY WAS ALSO PROVIDING PRIMARILY H IGHLY TECHNICAL CONSULTANCY IN VARIOUS FIELDS. THE CONTENTION OF LD . COUNSEL THAT ONLY THOSE COMPARABLES SHOULD HAVE BEEN TAKEN INTO CONSIDERATI ON, WHICH WERE PERFORMING ALMOST SIMILAR TECHNICAL CONSULTANCY SER VICES AS ASSESSEE, IS DIFFICULT TO ACCEPT BECAUSE IDE-NTICAL REPLICA OF ASSESSEE COULD NOT BE FOUND. 27 UNDER TNMM IT IS BROAD COMPARABILITY OF COMPARABLES WHICH HAS TO BE TAKEN INTO CONSIDERATION. IT IS QUITE IMPOSSIBLE TH AT TWO COMPANIES WILL BE RENDERING SAME SERVICES. ACCORDINGLY, ACTION OF LD. TPO ON THIS COUNT IS UPHELD. 54. BEFORE PARTING WE MAY POINT OUT THAT WE HAVE CO NSIDERED IN DETAIL THE COMPARABLES ALSO AS BOTH THE PARTIES HAD ADVANCED A RGUMENTS ON THESE ASPECTS, BUT FIRST THE LD. TPO HAS TO EXAMINE THE A DDITIONAL EVIDENCE ADMITTED BY US AND IF THE ASSESSEE IS ABLE TO SUBST ANTIATE ITS CLAIM, THEN AS PER SUBMISSIONS OF ASSESSEE, NO ADDITION WOULD BE CALLE D FOR. AFTER CARRYING OUT THIS EXERCISE ONLY THE COMPARABLES SHOULD BE CONSID ERED FOR DETERMINING THE ALP. 52. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 16/09/2016. SD/- SD/- (KULDIP SINGH) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15/09/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.
Mehul