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TMI Blog2016 (6) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover filter of 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. Charging of interest u/s 234D and withdrawing interest u/s 244A - the assessee stated that proper opportunity 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 assessee, in accordance with law. X X X X Extracts X X X X X X X X Extracts X X X X ..... at are not comparable to the Assessee in terms of functions performed, assets employed and risks assumed; and excluding certain companies on arbitrary/ frivolous grounds even though they are comparable to the Assessee in terms of functions performed, assets employed and risks assumed; 4.7. by committing a number of factual/computational errors in selection/ rejection of proposed comparables and/ or in the operating profit mark-ups of the comparables; and 4.8. ignoring the business/ commercial reality that the Assessee undertakes minimal business risks as against comparable companies that are full-fledged risk taking entrepreneurs, and by not allowing a risk adjustment to the Assessee 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 proceedings u/s 271(1)(c) of the Act mechanically and without recording any adequate 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 interest u/s 244A of the Act mechanically and without recording any satisfactory reasons for the same." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO the AO framed draft assessment u/s 144(c)(i) of the Act and proposed to assess the total income of the assessee at ₹ 4,6377930/- as against returned income of ₹ 28386373/-. 7. Aggrieved with the draft assessment order the assesee filed the objection before the Ld. Dispute Resolution Panel (DRP) who issued the directions to the TPO to allow the benefit of working capital adjustment and also directed to re-compute service revenue filter of the comparable M/s. Mitcon Consultancey & Engg. Services Limited. The TPO provided the working capital adjustment. Accordingly arm's length margin was arrived at 20.52% as against earlier worked out at 22.89%, in the following 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% The TPO proposed an adjustment of ₹ 1,31,47,114/- as under :- Operating Revenue 204,406,844 Arm's Length Value of purchases at a margin of 20.52% 246,351,128 Purchase Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and drew our attention towards the observation of the Ld. Dispute Resolution Panel that M/s. Mitcon Consultancy and Engg. Services Ltd. failed on service filter and directed the TPO to recheck whether it clears 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) supported the orders of the authorities below and further submitted that the objections raised by the assesee were considered by the Ld. DRP and thereafter the directions were issued to the AO who framed the assessment by making the adjustment on account of arm's length price which may not be disturbed. 12. We have considered the submissions of both the parties and gone through the material available on record. In the present case it is noticed that the TPO while working out the average adjusted OP/TC margin of the comparable companies for the international transactions included M/s. Mahindra Consulting Engineers Ltd. which has been directed to be excluded by the ITAT vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dium 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 Services" to its group company which is diametrically dissimilar to the functional 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 dissimilarity as well as a related party transaction to the extent of 15.51 % by returning cryptic finding that, "the comparable companies is also operating in the area of consultancy only and the company having less than 25 % related party transactions and has taken as comparable". However, when admittedly, the comparable company is engaged in infrastructure in the area of special economic zone, water sewerage, solid waste management, urban infrastructure, agri-infrastructure, social infrastructure, ports and harbor & offshore terminal, horticulture, coal handling, etc., the same cannot be compared with the assessee company which is into application "Engineered S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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