Emerson Process Management Power & Water Solutions India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 6816/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7529 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 06-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; International transaction; Revised return
• Section: 143(3); 92D; 244A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1: NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.:- 6816/DEL /2015 ASSESSMENT YEAR: 2011-12 EMERSON PROCESS MANAGEMENT POWER & WATER SOLUTIONS INDIA PVT. LTD., 204-206, TOLSTOY HOUSE, 15, TOLSTOY MARG, NEW DELHI 110 001. PAN AAACW2693N VS. ACIT CIRCLE-8(1) NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 30 TH OCTOBER , 2015 PASSED BY THE LD. CIT(A) U/S 143(3) /144C OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO THE ACT). THE F OLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL :- 1. THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSIN G OFFICER (LD. AO') IS BAD IN LAW. 2. THE LEARNED TRANSFER PRICING OFFICER ('LD. TPO') / LD. AO/ HON'BLE DISPUTE RESOLUTION PANEL ('DRP') ERRED IN NOT APPRE CIATING THAT NONE OF THE CONDITIONS SET OUT IN SECTION 92C(3) OF THE ACT ARE SATISFIED IN THE PRESENT CASE. ASSESSEE BY : SHRI ROHIT TIWARI, CA SHRI ANUBHAV RASTOGI, CA DEPARTMENT BY: SHRI PIYUSH JAIN, CIT(DR) DATE OF HEARING 06/06/2016 DATE OF PRONOUNCEMENT 13 /06/2016 ITA NO. 6816/DEL/2015 2 3. THE LD. AO/ LD. TPO/ HON'BLE DRP HAVE ERRED ON FACT S AND IN LAW IN ENHANCING THE INCOME OF THE ASSESSEE BY INR 13,147, 114. 3.1. THE LD. AO/ LD. TPO/ HON'BLE DRP ERRED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN FRAMING THE ORDER U/S 92CA OF THE INCOME TAX ACT, 1961 ('THE AC T') ON FINDINGS WHICH ARE ERRONEOUS IN LAW, CONTRARY TO TH E FACTS AND BASED ON MERE CONJECTURES AND SURMISES. 3.2. THE LD. AO/ LD. TPO/ HON'BLE DRP FAILED TO AP PRECIATE THE SUBMISSIONS MADE/ CONTENTIONS RAISED BY THE ASSESSE E AND FURTHER ERRED IN MAKING OBSERVATIONS, ASSERTIONS AN D INFERENCES IN THE ORDER, WHICH WERE BOTH FACTUALLY INCORRECT AS WELL AS LEGALLY UNTENABLE. 4. THE LD. AO/ LD. TPO/ HON'BLE DRP ERRED IN ENHANCING THE INCOME OF THE ASSESSEE BY INR 13,147,114 HOLDING THAT THE INT ERNATIONAL TRANSACTIONS OF THE ASSESSEE PERTAINING TO PROVISIO N OF APPLICATION ENGINEERED SOFTWARE DEVELOPMENT AND RELATED SERVICE S DO NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT AND IN DOING SO, HAVE GROSSLY ERRED IN: 4.1. DISREGARDING THE ARM'S LENGTH PRICE (ALP') A S DETERMINED BY THE ASSESSEE IN THE TRANSFER PRICING (TP') DOCU MENTATION MAINTAINED BY IT IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962 ('RULES ') AS WELL AS FRESH SEARCH; AND IN PARTICULAR MODIFYING/ REJEC TING THE FILTERS APPLIED BY THE ASSESSEE; 4.2. DISREGARDING MULTIPLE YEAR/ PRIOR YEARS' DATA AS USED BY THE ASSESSEE IN THE TP DOCUMENTATION AND HOLDING THAT C URRENT YEAR (I.E. FINANCIAL YEAR ('FY') 2010-11) DATA FOR COMPARABLE COMPANIES SHOULD BE USED; 4.3. REJECTING COMPARABILITY ANALYSIS UNDERTAKEN B Y THE ASSESSEE IN THE TP DOCUMENTATION AND CONDUCTING A F RESH COMPARABILITY ANALYSIS BASED ON APPLICATION OF ADDITIONAL/REVISED FILTERS, OR DISREGARDING ASSESSE E'S FILTERS IN DETERMINING THE ALP FOR THE INTERNATIONAL TRANSACTIONS; 4.4. INCLUDING COMPANIES HAVING HIGH TURNOVER IN T HE FINAL COMPARABLES' SET FOR BENCHMARKING A LOW RISK CAPTIV E UNIT SUCH AS THE ASSESSEE; 4.5. INCLUDING COMPANIES HAVING VOLATILE OPERATING PROFIT MARGINS IN THE FINAL COMPARABLES' SET FOR BENCHMARK ING A LOW RISK CAPTIVE UNIT SUCH AS THE ASSESSEE; ITA NO. 6816/DEL/2015 3 4.6 INCLUDING CERTAIN COMPANIES IN THE FINAL SET OF COMPARABLES THAT ARE NOT COMPARABLE TO THE ASSESSEE IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSU MED; AND EXCLUDING CERTAIN COMPANIES ON ARBITRARY/ FRIVO LOUS GROUNDS EVEN THOUGH THEY ARE COMPARABLE TO THE ASSE SSEE IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AN D RISKS ASSUMED; 4.7. BY COMMITTING A NUMBER OF FACTUAL/COMPUTATION AL ERRORS IN SELECTION/ REJECTION OF PROPOSED COMPARABLES AND/ O R IN THE OPERATING PROFIT MARK-UPS OF THE COMPARABLES; A ND 4.8. IGNORING THE BUSINESS/ COMMERCIAL REALITY THA T THE ASSESSEE UNDERTAKES MINIMAL BUSINESS RISKS AS AGAINST COMPAR ABLE COMPANIES THAT ARE FULL-FLEDGED RISK TAKING ENTREPR ENEURS, AND BY NOT ALLOWING A RISK ADJUSTMENT TO THE ASSESS EE ON ACCOUNT OF THIS FACT; 4.9. DISREGARDING JUDICIAL PRONOUNCEMENTS IN INDIA IN UNDERTAKING THE TP ADJUSTMENT. 5. THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDI NGS U/S 271(1)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY A DEQUATE SATISFACTION FOR SUCH INITIATION. 6. THE LD. AO HAS GROSSLY ERRED ON FACTS AND IN LAW BY PROPOSING TO COMPUTE INTEREST U/S 234D OF THE ACT AND WITHDRAW I NTEREST U/S 244A OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY S ATISFACTORY REASONS FOR THE SAME. 2. GROUND NO. 1 AND 2 ARE GENERAL IN NATURE 3. GROUND NO. 3 TO 3.2 WERE NOT PRESSED AND GROUND NO. 5 IS PREMATURELY RAISED. SO THESE GROUNDS DO NOT REQUIRE ANY COMMENT S ON OUR PART. 4. AT THE FIRST INSTANCE LD. COUNSEL FOR THE ASSESS EE ARGUED GROUND NO. 4.6 WHICH RELATES TO THE ADDITION OF RS. 1,31,47,140/- ON ACCOUNT OF ARMS LENGTH PRICE ADJUSTMENT BY INCLUDING CERTAIN COMPANIES IN THE FINAL SET OF COMPARABLES AND EXCLUDING CERTAIN COMPANIES CLAIMED TO BE COMPARABLE TO THE ASSESSEE. ITA NO. 6816/DEL/2015 4 5. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE WAS ENGAGED IN PROVIDING APPLICATION ENGINEERING, SOFTWARE DEVELOPMENT AND R ELATED SERVICES FOR OVATION CONTROL SYSTEMS AS A PART OF THE WORK AND F ILED THE REVISED RETURN OF INCOME DECLARING AN INCOME OF RS. 2,83,86,373/- ON 26.3.2013. ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS FOR WHICH R EFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) TO DETERMINE THE AR MS LENGTH PRICE ON SUCH TRANSACTIONS U/S 92CA(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED THE ACT). THE ASSESSEE HAD TAKEN THE OPERATING PROFIT TO TOTAL COST (OP/TC) RATIO AS THE PROFIT LEVEL INDICATOR (PLI) BY APPLYING T RANSACTIONAL NET MARGIN METHOD (TNMN) AND ARRIVED AT THE PLI OF 14.09% WHER EAS THE AVERAGE PLI OF THE COMPARABLES WAS ARRIVED AT 15.56% AS PER THE AN ALYSIS IN THE TP DOCUMENT. IT WAS CLAIMED BY THE ASSESSEE THAT THE P RICE CHARGED IN THE INTERNATIONAL TRANSACTIONS WAS WITHIN + / - 5% LIMI T. THEREFORE THE PRICE CHARGED IN THE INTERNATIONAL TRANSACTIONS WAS TO BE TREATED AS ARMS LENGTH. HOWEVER, THE TPO SELECTED FOLLOWING COMPARABLES TO BE USED T O DETERMINE THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS :- SL. NO. INTERNATIONAL TRANSACTION AMOUNT (IN RS.) 1. HSCC (INDIA) LTD. 21.04% 2. ACROPETAL TECHNOLOGIES LTD (ENGG. DESIGN SEGMENT) 14.36% 3. MAHINDRA CONSULTING ENGINEERS LTD. 30.92% 4. MITCON CONSULTANCY & ENGG. SERVICES LTD. 40.19 % 5. TCE CONSULTING ENGINEERS LTD. 29.29% MEAN 27.16% ITA NO. 6816/DEL/2015 5 THE TPO PROPOSED THE ADJUSTMENT U/S 92CA OF THE ACT AS UNDER :- OPERATING COST 209,951,858 ARMS LENGTH PRICE AT A MARGIN OF 27.16% 266,974,783 PRICE RECEIVED 233,204,014 105% OF INTERNATIONAL TRANSACTION 244,864,215 PROPOSED ADJUSTMENT U/S 92CA 33,770,769 THE TPO ACCORDINGLY PROPOSED AN ADJUSTMENT OF RS. 3 ,37,70,769/-. 6. THEREAFTER IN ACCORDANCE WITH THE CONFORMITY TO THE RECOMMENDATION OF THE TPO THE AO FRAMED DRAFT ASSESSMENT U/S 144(C)(I ) OF THE ACT AND PROPOSED TO ASSESS THE TOTAL INCOME OF THE ASSESSEE AT RS. 4,6377930/- AS AGAINST RETURNED INCOME OF RS. 28386373/-. 7. AGGRIEVED WITH THE DRAFT ASSESSMENT ORDER TH E ASSESEE FILED THE OBJECTION BEFORE THE LD. DISPUTE RESOLUTION PANEL (DRP) WHO I SSUED THE DIRECTIONS TO THE TPO TO ALLOW THE BENEFIT OF WORKING CAPITAL ADJUSTM ENT AND ALSO DIRECTED TO RE-COMPUTE SERVICE REVENUE FILTER OF THE COMPARABL E M/S. MITCON CONSULTANCEY & ENGG. SERVICES LIMITED. THE TPO PROV IDED THE WORKING CAPITAL ADJUSTMENT. ACCORDINGLY ARMS LENGTH MARGIN WAS ARR IVED AT 20.52% AS AGAINST EARLIER WORKED OUT AT 22.89%, IN THE FOLLOW ING MANNER :- SR. NO. NAME OF COMPARABLE WC ADJUSTED OP/TC% 1. HSCC INDIA LTD. 9.34 2. ACROPETAL TECHNOLOGIES LTD. (SEG.) 14.36 3. MAHINDRA CONSULTING ENGINEERS LTD. 28.44 4. MITCON CONSULTANCY AND ENGG. SERVICES LTD. 40.14 5. TCE CONSULTING ENGINEERS LTD. 28.31 6. CADES DIGITECH LTD. 2.53% AVERAGE 20.52% ITA NO. 6816/DEL/2015 6 THE TPO PROPOSED AN ADJUSTMENT OF RS. 1,31,47,114/- AS UNDER :- OPERATING REVENUE 204,406,844 ARMS LENGTH VALUE OF PURCHASES AT A MARGIN OF 20.52% 246,351,128 PURCHASE PRICE SHOWN 233,204,014 105% OF PURCHASE PRICE 244,864,215 PROPOSED ADJUSTMENT U/S 92CA 1,31,47,114 8. THE AO PASSED THE DRAFT ASSESSMENT ORDER BY MAKING THE ABOVE ADDITION PROPOSED BY THE TPO. THEREAFTER, THE ASSES SEE FILED OBJECTIONS BEFORE THE LD. DRP WHO DID NOT FIND MERIT IN THE OBJECTION S OF THE ASSESSEE EXCEPT THAT THE WORKING CAPITAL ADJUSTMENT IS TO BE DONE A ND THE TPO TO RECHECK WHETHER THE COMPARABLE M/S. MITCON CONSULTANCY & EN GG. SERVICES LTD CLEARS THE SERVICE INCOME FILTER. ON THE DIRECTIONS OF THE LD. DRP THE AO PASSED THE ASSESSMENT ORDER. 9. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT M/S. MOHINDRA CONSULTING ENGINEERS L TD. SELECTED BY THE TPO AS COMPARABLE WAS DISCARDED AND DIRECTED TO BE REMO VED BY THIS BENCH OF THE ITAT IN ITA NO. 5343/DEL/2012 FOR ASSESSMENT YE AR 2008-09 VIDE ORDER DATED 13 TH APRIL, 2016 IN ASSESSEES OWN CASE. COPY OF THE SA ID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD. IT WAS FURTHER SUBMITTED THAT M/S. MITCON CONSULTANCY AND ENGG. SERVICES LTD. IS FUNCTIONALLY DISSIMILAR AS IT WAS ENGAGED IN UNDERTAKING DIVERSIFIED SERVICES AND DERIVED REVENUE FROM THE ITA NO. 6816/DEL/2015 7 FOLLOWING SOURCES :- - CONSULTANCY ASSIGNMENTS - TRAINING PROGRAMMES - BIO TECHNOLOGY INCUBATION CENTRE - WIND ENERGY GENERATION - OTHER INCOME 10. IT WAS FURTHER SUBMITTED THAT THERE WAS NO SEGM ENTAL INFORMATION AVAILABLE IN THE ANNUAL REPORT OF THE SAID COMPANY. THEREFORE IT WAS NOT COMPARABLE TO THE ASSESSEE WHO PROVIDED CONTRACTS O F THEIR SOFTWARE DEVELOPMENT SERVICES TO ITS AE. IT WAS ALSO CONTEND ED THAT M/S. TATA CONSULTING ENGINEERS LTD. WAS ALSO FUNCTIONALLY DI FFERENT AS IT HAD DIFFERENT LINES OF SERVICES WHICH INCLUDED CONSTRUCTION MANAG EMENT CONSULTANCY, ADVANCE TECHNOLOGY AND SIMULATION, SOLUTION OVERVIE W AND PROJECT MANAGEMENT CONSULTANCY AND SERVICES WHICH MADE IT F UNCTIONALLY DIFFERENT FROM THE ASSESSEE. MOREOVER ITS TURNOVER WAS RS. 41 6.02 CRORES WHILE THAT OF THE ASSESEE WAS MERELY RS. 23.32 CRORES, SO IT ALSO DES ERVED TO BE REMOVED. IT WAS STATED THAT IF THE AFORESAID COMPARABLES ARE REMOVE D THEN OP/TC OF THE COMPARABLE COMPANIES FOR BENCHMARKING THE INTERNATI ONAL TRANSACTIONS WOULD BE WORKED OUT WITHIN THE +/- 5 % RANGE TO THE OP/TC MARGIN OF THE ASSESSEE AND NO ADJUSTMENT WAS WARRANTED ON ACCOUNT OF ARMS LENGTH PRICE. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGE NO. 2 0 OF THE DRPS ORDER AND DREW OUR ATTENTION TOWARDS THE OBSERVATION OF THE L D. DISPUTE RESOLUTION PANEL THAT M/S. MITCON CONSULTANCY AND ENGG. SERVI CES LTD. FAILED ON SERVICE ITA NO. 6816/DEL/2015 8 FILTER AND DIRECTED THE TPO TO RECHECK WHETHER IT C LEARS THE SERVICE INCOME FILTER. IT WAS STATED THAT THE AFORESAID DIRECTION OF THE LD. DRP WAS NOT FOLLOWED BY THE TPO. THEREFORE M/S. MITCON CONSULTANCY AND ENGINEERING SERVICE LTD. SHOULD NOT HAVE BEEN INCLUDED IN THE LIST OF THE COMPARABLES BY THE TPO. 11. IN HIS RIVAL SUBMISSIONS THE LD. CIT(DR) SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE OB JECTIONS RAISED BY THE ASSESEE WERE CONSIDERED BY THE LD. DRP AND THEREAFT ER THE DIRECTIONS WERE ISSUED TO THE AO WHO FRAMED THE ASSESSMENT BY MAKIN G THE ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICE WHICH MAY NOT BE DIST URBED. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PR ESENT CASE IT IS NOTICED THAT THE TPO WHILE WORKING OUT THE AVERAGE ADJUSTED OP/TC MARGIN OF THE COMPARABLE COMPANIES FOR THE INTERNATIONAL TRANSACT IONS INCLUDED M/S. MAHINDRA CONSULTING ENGINEERS LTD. WHICH HAS BEEN D IRECTED TO BE EXCLUDED BY THE ITAT VIDE ORDER DATED 13 TH APRIL, 2016 IN ITA NO. 5343/DEL/2012 IN ASSESSEES OWN CASE AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 20 TO 24 OF THE SAID ORDER WHICH READ AS UNDER :- 20. THE ID. AR FOR THE ASSESSEE CONTENDED THAT THIS COMPARABLE COMPANY IS FUNCTIONALLY DISSIMILAR, HAVING SIGNIFIC ANT RELATED PARTY TRANSACTIONS AND RELIED UPON ORDER PASSED BY DELHI TRIBUNAL IN CASE CITED AS BECHTEL INDIA (P.) LTD. VS. ADDL.CIT - 146 ITD 733 (DELHI - TRIB.). 21. THE TPO, WHILE SELECTING THE MAHINDRA AS A COM PARABLE COMPANY, HAS RETURNED THE FOLLOWING FINDINGS :-: 'THE ASSESSEE HAS OBJECTED TO THE USE OF THIS COMPA NY AS A COMPARABLE ON ACCOUNT OF BEING FUNCTIONALLY DIFFERE NT AND SUBMITTED THAT CONSULTANCY SERVICES PROVIDED BY THI S COMPARABLE ITA NO. 6816/DEL/2015 9 COMPANY IN MULTIDISCIPLINARY AREAS. IN CONTRAST, TH E SERVICES PROVIDED BY THE ASSESSEE ARE IN OF AN ENTIRELY DIFF ERENT NATURE. FURTHER, THE ASSESSEE HAS PROVIDED ARGUMENTS ON APP LICATION OF RELATED PARTY TRANSACTION FILTER TO REJECT COMPANIE S HAVING CONTROLLED TRANSACTIONS IN EXCESS OF 15% OF REVENUE , THE ASSESSEE HAS SUBMITTED THAT DURING THE FY 2007-08, MAHINDRA HAD TRANSACTIONS WITH ITS RELATED PARTIES TO THE EXTENT OF 15.51 % OF THE TOTAL REVENUE. HERE AGAIN THE OBJECTION OF THE ASSESSEE IS MAINLY ON VERTICALS OF THE COMPANY. IT HAS ALREADY BEEN DISCUSSED EARLIER IN THIS ORDER. THEREFORE, THIS COMPANY CAN ALSO BE USED AS A COMPA RABLE HAVING REGARD TO ASSESSEE'S FUNCTIONAL PROFILE. FURTHER THE TAXPAYER HAS OBJECTED THIS COMPANY ON T HE BASIS OF ITS OWN CONTENTION OF RPT FILTER. THIS HAS ALREADY BEEN DISCUSSED IN THE RELEVANT PARA IN THIS ORDER AND ACCORDINGLY THE COMPANY HAS LESS THAN 25% OF RPT. HENCE IT IS RETAINED.' 22. A PERUSAL OF THE PROFILE OF THE AFORESAID COMP ANY LYING AT PAGE 2 OF COMPENDIUM OF ANNUAL REPORT SHOWS THAT THIS COMP ANY IS INTO INFRASTRUCTURE SECTOR BY PROVIDING CONSULTANCY SERV ICES IN THE AREAS OF SPECIAL ECONOMIC ZONES, WATER SUPPLY & SEWERAGE, SO LID WASTE MANAGEMENT, URBAN INFRASTRUCTURE, AGRI INFRASTRUCT URE, SOCIAL INFRASTRUCTURE, PORTS & HARBOUR & OFFSHORE TERMINAL , INDUSTRIAL INFRASTRUCTURE, ETC. THE COMPANY HAS ALSO WORKED ON INNOVATIVE PROJECTS LIKE CENTRE OF EXCELLENCE FOR HORTICULTURE , DEDICATED OFFSHORE TERMINAL FOR COAL HANDLING AND IS AUGMENTING ITS EF FORTS TO CONSOLIDATE ITS POSITION AS A FRONT RUNNER IN INNOVATIVE PROJEC TS. 23. SIMILARLY, PERUSAL OF PAGE 24 OF COMPENDIUM OF ANNUAL REPORT GOES TO PROVE THAT THE COMPARABLE COMPANY IS HAVING RELATED PARTY TRANSACTIONS TO THE EXTENT OF 15.51 % OF THE TOTAL VALUE WHEREAS, ON THE OTHER HAND, THE ASSESSEE COMPANY IS INTO PROVIDING APPLICATION 'ENGINEERED SOFTWARE DEVELOPMENT AND RELATED SERVIC ES' TO ITS GROUP COMPANY WHICH IS DIAMETRICALLY DISSIMILAR TO THE FU NCTIONAL PROFILE OF THE COMPARABLE COMPANY. 24. THE TPO HAS DISPOSED OFF BOTH THE OBJECTIONS TO THE INCLUSION OF THIS COMPARABLE COMPANY AS TO THE FUNCTIONAL DISSIMILARI TY AS WELL AS A RELATED PARTY TRANSACTION TO THE EXTENT OF 15.51 % BY RETURNING CRYPTIC FINDING THAT, 'THE COMPARABLE COMPANIES IS ALSO OPE RATING IN THE AREA OF CONSULTANCY ONLY AND THE COMPANY HAVING LESS THA N 25 % RELATED PARTY TRANSACTIONS AND HAS TAKEN AS COMPARABLE'. HO WEVER, WHEN ADMITTEDLY, THE COMPARABLE COMPANY IS ENGAGED IN IN FRASTRUCTURE IN THE AREA OF SPECIAL ECONOMIC ZONE, WATER SEWERAGE, SOLID WASTE MANAGEMENT, URBAN INFRASTRUCTURE, AGRI-INFRASTRUCTU RE, SOCIAL INFRASTRUCTURE, PORTS AND HARBOR & OFFSHORE TERMINA L, HORTICULTURE, COAL ITA NO. 6816/DEL/2015 10 HANDLING, ETC., THE SAME CANNOT BE COMPARED WITH TH E ASSESSEE COMPANY WHICH IS INTO APPLICATION 'ENGINEERED SOFTW ARE DEVELOPMENT AND RELATED SERVICES'. THIS COMPARABLE HAS BEEN REJ ECTED BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS B ECHTEL INDIA (P.) LTD. (SUPRA) AND RESTORED THE FILE BACK TO THE TPO. LD. DR FOR THE REVENUE HAS NOT CONTROVERTED THE PROPOSITION MOOTED OUT BY THE ASSESSEE AS TO THE AFORESAID DECISION OF THE COORDINATE BENCH IN BECHT EL INDIA (P.) LTD. (SUPRA). 13. WE, THEREFORE, BY RESPECTFULLY FOLLOWING THE AF ORESAID ORDER DIRECT THE TPO NOT INCLUDE M/S. MOHINDRA CONSULTING INDIA LTD. WHILE WORKING OUT THE ARMS LENGTH PRICE ADJUSTMENT. AS REGARD M/S. MIT CON CONSULTANCY AND ENGG. SERVICES LTD. IT APPEARS THAT THE LD. DRP DIR ECTED THE TPO TO RECHECK AS TO WHETHER THE SAID COMPANY CLEARED THE SERVICE INC OME FILTER. THE RELEVANT OBSERVATIONS OF THE LD. DRP ARE AS UNDER :- THE ABOVE EXTRACT FROM THE AR OF THE COMPANY AND T HE ONES DONE BY THE TPO SHOWS THAT THE ASSESSEE CONTENTION IN RESPE CT OF LACK OF FUNCTIONAL COMPARABILITY IS WRONG. HOWEVER AS REGAR DS THE ASSESSEE CLAIM THAT THE COMPANY HAS FAILED THE SERVICE INCOM E FILTER AS REVENUE FROM SERVICE INCOME OF RS. 287,017,235 FORMS 60.02% OF THE TOTAL REVENUE OF RS. 478,196,289 THE PANEL DIRECTS THE TPO TO RE- CHECK WHETHER IT CLEARS THE SERVICE INCOME FILTER. 14. IN THE PRESENT CASE, IT APPEARS THAT THE S AID DIRECTION WAS NOT PROPERLY FOLLOWED, WE THEREFORE DIRECT THE TPO TO ADJUDICATE THE ISSUE AS TO WHETHER M/S. MITCON CONSULTANCY AND ENGG. SERVICES LTD. IS TO BE INCLUDED OR NOT AFTER GIVING A DUE AND PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE TPO IS ALSO DIRECTED TO CONSIDER THE CLAIM OF THE ASSES SEE THAT THIS COMPANY WAS FUNCTIONALLY DIFFERENT AND IT FAILED THE SERVICE R EVENUE FILTER. 15. THE CLAIM OF THE ASSESSEE WITH REGARD TO M /S. TATA CONSULTING ENGINEERS WAS THAT IT WAS HAVING DIFFERENT LINES OF SERVICES AND HAVING VERY HIGH TURNOVER ITA NO. 6816/DEL/2015 11 FILTER IN COMPARISON TO THE LOWER TURNOVER FILTER O F THE ASSESEE. THIS FACT SHOULD ALSO BE EXAMINED BY THE TPO. ACCORDINGLY THIS ISSUE IS SET ASIDE TO THE FILE OF THE TPO TO BE ADJUDICATED AS DIRECTED ABOVE. 16. ANOTHER ISSUE RAISED BY THE ASSESSEE VIDE GROUN D NO. 6 IS RELATING TO CHARGING OF INTEREST U/S 234D AND WITHDRAWING INTER EST U/S 244A. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT PROPER OPPORTU NITY OF BEING HEARD WAS NOT GIVEN BY THE AO. THEREFORE THIS ISSUE SHOULD BE DECIDED BY THE AO AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSE E, IN ACCORDANCE WITH LAW. 17. IN THE RESULT APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/2016. SD/- SD/- (KULDIP SINGH) (N.K. SAINI) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 13 /06/2016 VEENA VEENA VEENA VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI