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TMI Blog2017 (9) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... ails that have a bearing on the disallowance u/s 40(a)(i) of the Act. We, therefore, set aside this aspect to the file of the AO. - ITA No.-532/Del/2016 - - - Dated:- 12-9-2017 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER For The Assessee : Sh. K.M. Gupta, Adv. For The Revenue : Sh. Amrender Kumar, CIT DR Kumar Pranav, Sr. DR ORDER PER K. N. CHARY, J.M. This is an appeal by the assessee challenging the assessment order dated 31.12.2015 in respect of AY 2011-12 pursuant to the directions of the Ld. Dispute Resolution Panel- 1, New Delhi by way of order dated 25.11.2015. 2. Briefly stated facts relevant for the disposal of this appeal are that the assessee was incorporated on 15.02.2015 in India as a wholly owned subsidiary of Granite Services International Inc., USA (Granite USA) and at relevant period of time it was primarily engaged in providing technical support to its associated enterprises (AEs). The technical support services provided by the assessee to its AEs relate to provision of erection, installation, commissioning, warranty administration, operation and maintenance, inspection, renovation and modernizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,32,85,369/- in respect of reimbursement of travel and conveyance expenses and a sum of ₹ 8,19,24,990/- in respect of payment of salary and allowances. 3. Challenging the same, the assessee preferred this appeal on the following grounds: 1. That in the facts and circumstances of the case and in law, the assessment order passed by the Assessing Officer (AO) pursuant to the directions of Hon ble Dispute Resolution Panel (DRP) is bad in law and invalid to the extent the additions made in the final assessment order. 2. That in the facts and circumstances of the case and in law, the Transfer Pricing Officer (TPO)/the AO/the DRP erred in not appreciating that none of the conditions set out in section 92C(3) of the Income Tax Act, 1961 ( Act ) are satisfied in the present case. 3. That the TPO/the AO/the DRP have erred on facts and in law in enhancing the income of the appellant by ₹ 2,99,41,266/-. 3.1 The TPO/the AO/the DRP erred on facts and in the circumstances of the case and in law in framing the order u/s 92CA of the Act on findings which are erroneous in law, contrary to the facts and based on mere conjectures and surmises. 3.2 The TPO/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act in the draft assessment order nor there is any objections of the appellant in this regard before the DRP. 4.1 That the DRP failed to appreciate that the insertion of explanation below sub section 8 of section 144C of the Act was to make an enhancement on the variation made in the draft assessment order and not to raise a fresh issue which is not the subject matter of draft assessment order nor any such issue raised by the appellant before the DRP. 4.2 That the AO erred in making a disallowance of ₹ 110,172,196 under section 40(a)(i) of the Act in final assessment order in pursuant to direction of DRP under 144C(8) of the Act which are illegal, without jurisdiction and bad in law. 5. That on the facts and circumstances of the case and in law, the AO and the DRP erred in disallowing Payroll Administration Services of ₹ 49,61,837, under section 40(a)(i) of the Act. 6.1 The AO and the DRP failed to appreciate that the appellant has duly complied with the provisions of Chapter XVII B and section 40(a)(i) of the Act in respect of the said Payroll Administration Services. 6. That on the facts and circumstances of the case and in law, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 234B of the Act. 11. That in the facts and circumstances of the case and in law, the AO erred in proposing to initiate the penalty proceedings under section 271(1)(c) of the Act. That the above grounds of appeal are mutually exclusive and without prejudice to each other. That the appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal. Any consequential relief to which the appellant may be entitled under law in pursuance of the aforesaid grounds of appeal, or otherwise may be granted. 4. Ld. AR submitted that grounds 1, 2, 9 10 are general in nature, grounds 3 and 4 are in respect of the transfer pricing adjustment, and grounds 5 6 are in respect of corporate tax issues. He further submitted that grounds 7 8 are academic in nature in view of grounds 5 6. 5. In so far as grounds 3 4 are concerned, Ld. AR submitted that they are confining their arguments to the challenge of four comparables selected by the TPO, namely, HSCC (India) Ltd., Mahindra Consulting Engineers Ltd., Mitcon Consultancy Engg. Services Ltd. and Rites Ltd. (Consultancy division), and two comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government undertakings. Many Government Undertakings even operate on losses in furtherance of the social obligations of the government. The second reason is that Engineers India Limited earned income from turnkey project by successfully completing the project of IOCL and other Public Sector Undertakings. In that sense of the matter, the related party transactions are much more than the filter of 25%. We, therefore, order for the exclusion of this case from the list of comparables. 6. On the basis of the above decision, he argued that the public sector undertakings have to be rejected to be comparables. Having regard to the OP/OC percentage of HSCC India Limited comparative to the ratio of the assessee company Ld. DR also submitted that HSCC India Limited cannot be a comparable. 7. Similarly, in respect of Mitcon Consultancy and Engineering Services Limited and Rites Ltd. it is submitted that both these companies have multi dimensional functionality and mostly serving the related parties, and apart from that the segmental data is not available. On this aspect also Ld. AR submits that these two companies cannot be good comparables. On facts, Ld. DR does not dispute the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of EDAC Engineering Company Services Ltd. with reference to the annual report and other record, if any, to be submitted by the assessee. 10. Now turning to grounds no. 5 6, it is the submission of the Ld. AR that the query relating to the tax deductible at source raised by the DRP and the consequential disallowance u/s 40(a)(i) of the Act does not emanate from the assessment order, as such, clearly the DRP stepped out of his jurisdiction in view of the provisions u/s 144C(8) of the Act. According to him the DRP has no jurisdiction to go beyond the issues arising from the assessment order in respect of explanation appended to Section 144C(8) by Finance Act, 2012 w.e.f. 1.4.2009. He submits that even this explanation also does not enlarge the jurisdiction of the DRP that was originally conferred by the provision. 11. As an example for his argument he submitted that in case three issues, namely issue A, issue B and issue C have arisen from an assessment order, and the assessee raises objection in respect of issue A and issue B, DRP exercising jurisdiction in respect of issues A B is obviously well within its powers in view of the provisions of Section 144C(8) of the Act. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed thereto reads as under: 144C (8) The Dispute Resolution Panel may confirm, reduce or exchange the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under subsection (5) fur further enquiry and passing of the assessment order. Explanation. For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. 24. The said explanation was introduced through the Finance Act of 2012. But, it was to take effect retrospectively from 01.04.2009. The Dispute Resolution Panel s directions were issued after the Explanation had come into operation. In any event, the Explanation is clarificatory. Reading the Explanation with sub section 144C(8), it is evident that the Dispute Resolution Panel could examine the issues arising out of the assessment proceedings even though such issues were not part of the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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