9911796707
TMI Blog2011 (8) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the comparability - This approach has to be necessarily quashed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ued under section 92CA(3) of the Act, vide Para-4, held that only the case of L&T Sergeant Lundy Ltd. appears to be closely comparable to the assessee as the income to these parties is on account of engineering services fees. He took the operating profit of this concern, which is 52 per cent and suggested a total adjustment of ₹ 40,00,000. The TPO, in this year, rejected M/s. Vimta Labs, as not a comparable case on the ground that this company is engaged in providing clinical and pre-clinical contract research services and that it also offered clinical diagnostic services. The TPO has not given any comparable cases from her side. 5. The TPO for assessment year 2004-05, in his order dated 28th November 2006, passed under section 92CA(3) of the Act, rejected all the third party comparable identified by the assessee except M/s. Vimta Labs. In this year, the TPO rejected L&T Sergeant Lundy Ltd. as a comparable case by observing that the company is engaged in construction activities and also carries on business of providing engineering and associated services for Thermal, Hydro and combine cycle purchase. Hence, in terms of function performed, this company is not comparable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee to the A.E. and third parties are different in nature and there is a large variation in the margin earned from the services rendered to the A.E. (34.43 per cent and the third parties (5.53 per cent) and has further erred in observing that the Internal Transactional Net Margin Method adopted by the assessee is justified." 8. Learned Departmental Representative, Mr. Jitendra Yadav, submits that - (a) there is a difference in nature of service inasmuch as the services to A.E. are different from services rendered to the third party and this fact is admitted by the company in its transfer pricing study Page-54/Para-5.66, contained in assessee's paper book at Page-63(b). The Commissioner (Appeals), in his order at Page-2, has enumerated the nature of services and that a perusal of the same demonstrates that the assessee provided different types of services. If the services rendered to the A.E. are much costlier than the services rendered directly to the third party, no customer would approach the A.E., as it would be a bad business decision. Hence, the internal comparable is rightly rejected; (b) the billing is based on time sheet, a copy of which is avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine as to what is correct, instead of being swayed away by the fact that different TPOs have taken different views. He prayed that the correct position should be upheld. 11. Both the parties relied on different case laws. 12. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record, as well as the case laws cited before us, we hold as follows:- 13. The assessee supplies only two categories of machinery. The sale is done either directly to the third party or through its A.E. The income of the assessee company arises from - (i) marketing of machinery and (ii) fee for commissioning and installation and (iii) fee for after-sale-services. The undisputed fact is that the assessee charges technical services fee on the basis of per engineer per day. The rate for services in India as well as for services in Bangladesh and Sri Lanka, which are being done no behalf of the principal is ₹ 3,200 per engineer per day. In contrast for similar services rendered in other countries, the rate charged is ₹ 4,300 per engineer per day. The assessee also offers after-sales-service to the third party customer di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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