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TMI Blog2018 (11) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... e the revised adjustment as per directions of the DRP - ITA No. 806/DEL/2013 - - - Dated:- 22-10-2018 - Shri N.K. Billaiya, Accountant Member, And Ms. Suchitra Kamble, Judicial Member For the Assessee : Shri Anubhav Rastogi, Sr. Adv For the Revenue : Shri Sanjay I. Bara, CIT-DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER With this appeal, the assessee has challenged the correctness of the assessment order dated 22.10.2012 framed u/s 143(3) r.w.s 144C of the Income-tax Act, 1961 [hereinafter referred to as 'the Act]' pertaining to A.Y 2008-09. 2. The assessee has raised four substantive grounds of appeal with sub-grounds, but at the time of hearing, the ld. AR stated that he is inclined to press only Ground Nos. 2.7, 2.8, 2.9 and 3 and the same read as under: 2.7 including high-profit making companies in the final comparables set for benchmarking a normal risk bearing company such as the Appellant and not allowing the risk adjustment to the Appellant; 2.8 including certain companies that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed; 2.9 excluding certain companies on arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. HVAC 6. Mechanical Services 7. Fire fighting Security 8. Building Automation 9. External Works and Landscaping 3. INFORMATION TECHNOLOGY LORTS shall provide following services to LOR as per LOR requirement. 1. Enterprise Business Applications a. Client Server Application b. ERP c. SCM d. CRM 2. Web Applications a. Portals/ Vortals i. B2B ii. B2C b. Web site Design Development c. E-governance 3. Business Intelligence a. Data warehousing b. Data mining c. Document Management System d. Specific Product Development 4. Web hosting 5. Other Software Services a. Verification and validation b. Re-engineering i. Migration ii. Conversion iii. Porting c. Process Consulting 4. FINANCE ACCOUNTING 1. Invoice processing 2. Asset Entry processing 5. MEP Services L Quantity Surveying/ Take-off Services This includes quantification for all trades like Electrical, HVAC, CHW, HWS, CWS Piping, Plumbing, Sanitary, Rain Water etc., Material take-offs, Bill preparation, Procurement Packaging, Bill checking during construction and Trouble shooting. 2. 2D/3D/4D Modeling. Detailing Dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Computronics Fin 38 Average 36.77 6. The assessee raised objections to the proposed comparables and after considering the objections of the assessee, the TPO used the following comparables in the final list of comparables: Operating Income Operating Expense (Inclusive of FBT) FBT Net Operating Expenses PBIT PBIT/TC % 1 A B C D = B-C E = A-D F = E/D*100 Alphageo India) Ltd. 81,69,63,064 58,23,96,767 10,21,420 58,13,75,347 23,55,87,717 40.52 Stup Consultants Pvt. Ltd. 1,00,39,44,173 73,69,73,408 40,00,000 73,29,73,408 27,09,70,765 36.97 Semac Ltd. 31,73,24,214 21,20,39,625 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services in the areas of Special Economic Zones, Water Supply Sewerage, Solid Waste Management, Urban infrastructure, Agri infrastructure, Social infrastructure, Ports Harbour Offshore Terminal, Industrial infrastructure, etc. Your Company has received repeat orders from its existing clientele which affirms the goodwill of the Company. This would also serve as a base for the Company's sustained growth in the future. The Company has also worked on innovative projects like Centre of excellence for Horticulture, Dedicated Offshore terminal for Coal Handling and is augmenting its efforts to consolidate its position as a front-runner in innovative projects. Your Company continues to receive orders from prestigious clients in different sectors indicating its versatile capability of providing consultancy services for Multi-disciplinary projects. 13. The main objection of the ld. counsel for the assessee is that this company is engaged in diversified services and is also engaged in providing technical consultancy services to horticulture projects etc whereas the appellant provides services to typical engineering projects such as power plants, etc 14. In our consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion etc. Thus, we find that the assessee is engaged in providing only engineering design services whereas M/s Alphageo has provided many other engineering services. Further, the asset employed by M/s Alphageo is higher in terms of net fixed assets/sales ratio. In the case of the assessee, net fixed asset/sales ratio is 4.86%, whereas the same ratio in the case of M/s Alphageo is 220.55%. Thus, there is a very large difference in the asset intensity between the assessee and the comparable. Further, we also find that in view of the decision of the Tribunal in the case of Quark System Private Limited (supra), the assessee cannot be stopped from pointing out that M/s Alphageo had wrongly been taken as comparable. In view of above facts and circumstances, we are of the opinion that M/s Alphageo need to be excluded from the set of comparables being functionally dissimilar and difference in intensity of asset employed. Accordingly, we direct the Assessing Officer to exclude M/s Alphageo from the set of comparables chosen for computing arm's length of the international transaction and compute the transfer pricing adjustment accordingly. 21. The Tribunal apart from holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany showed a N.P. of 15.61% as against 6.93% in the immediately preceding F.Y. This increase in profit is attributed to the increased business and improved productivity. In our considered opinion, this company has undergone a thorough financial restructuring, which has to be considered as an extraordinary event and, therefore, the company needs to be excluded from the final set of comparables. We, accordingly, direct the Assessing Officer/TPO to exclude this company from the final list of comparables. 21. Coming to the inclusion of the comparables, we find that in so far as KITCO and M.M. Dastur Company (P) Ltd. are concerned, the functional profiles of these companies are similar to those of the appellant. The reasons given for exclusion of these comparables by the TPO are in contradiction to the reasons given for inclusion of Mahindra Consulting Engineers Limited and Stub Consultants Pvt Ltd. Since we have confirmed the inclusion of Mahindra Consulting Engineers Limited and Stub Consultants Pvt Ltd., for similar reasons, we direct the Assessing Officer/TPO to include KITCO and M.M. Dastur Company (P) Ltd. as good comparables in the final set of comparables. 22. In so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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