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TMI Blog2019 (5) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... ted - As following the decision rendered by the coordinate Bench of the Tribunal in BG Exploration and Production India Ltd. [ 2017 (4) TMI 1145 - ITAT DELHI] we are of the considered view that the TPO has rightly retained the Mahindra as a comparable after examining the contentions raised by the assessee. However, we are of the considered view that in view of the settled principle of law, the assessee is entitled for benefit of working capital adjustment in order to benchmark its international transaction. Disallowance of misc. expenses like Diwali gifts and presents given - HELD THAT:- When undisputedly taxpayer has incurred these expenses allegedly on gifts and presents by way of cash, the same cannot be attributed to Diwali gifts and presents etc. which is also against the provisions contained u/s 40A(3). So, we hereby confirm the addition made by the AO and consequently, corporate grounds are decided against the taxpayer. X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DRP has erred in ignoring the contention that this Mitcon Consultancy & Engineering Services Ltd. is a government sponsored company as is evident from the Balance Sheet that it has received substantial grants from the government and is carrying out energy audit on behalf of the government. 7. On the facts and circumstances of the case, the Ld. DRP has erred in not excluding IBI Chematur (Engineering and Consultancy) Ltd. as a comparable as this company is engaged in the business of purchase and sale of engineering equipment and the main profit has been earned out of such activity as is evident from its financial statements. 8. On the facts and circumstances of the case, the Ld. DRP has erred in not excluding Mahindra Consulting Engineers Ltd. as a comparable ignoring the contention of the appellant company that this company operates mainly in the infrastructure sector and it recognizes its revenue following Accounting Standards 7 in respect of the construction contracts. 9. On the facts and circumstances of the case, the Ld. DRP has erred on both facts and in law, in ignoring the contention of the assessee that comparability criteria / filters have not been applied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the controversy at hand are : Steag Energy Services (India) Pvt. Ltd., the taxpayer was incorporated in India on January 29, 2001 to provide services in respect of engineering and technical solutions to power generating companies, which is wholly owned subsidiary of Steag Energy Services, Gmbh, Germany. During the year under assessment, the taxpayer entered into international transactions with its Associated Enterprises (AEs) as under : S. No. Nature of transaction Method selected Value of transactions 1 Service charges received TNMM 11,493,037 2 Commission income TNMM 19,164,580 3 Purchase of services TNMM 20,718,580 4 Purchase of fixed assets TNMM 21,167,863 5 Consultancy and professional fees TNMM 178,099,991 6 Reimbursement CUP 1,817,639 3. The taxpayer in order to benchmark its international transactions, in its TP study applied Transactional Net Margin Method (TNMM) with Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator (PLI) at 9.4% as against profit margin of single comparable company selected at 6.00% and held its international transactions at arm's length. 4. However, on the other hand, ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the taxpayer sought exclusion of three comparable companies retained by the ld. TPO/DRP, namely, (i) Mitcon Consultancy & Engg. Services Ltd.; (ii) IBI Chemature (Engineering and Consultancy) Ltd.; and (iii) Mahindra Consulting Engineers Ltd. 10. We would examine the suitability of the aforesaid three companies as comparable vis-à-vis the taxpayer one by one as under. MITCON CONSULTANCY & ENGG. SERVICES LTD. (MITCON) 11. Ld. AR for the taxpayer sought exclusion of Mitcon on grounds inter alia that it is functionally incomparable; that income earned by the taxpayer from consultancy fee during the year under assessment is ₹ 28,70,17,235/- out of total revenue of ₹ 47,81,96,289/- i.e. 60.02%; that this company fails the service revenue filter of 75%; that Mitcon received various grants from Government of India which has effected its profitability and relied upon the decisions rendered by the Hon'ble High Court and coordinate Bench of the Tribunal in case cited as Pr.CIT vs. WSP Consultants India (P.) Ltd. (2018) 253 taxman 58 and Granite Services International (P.) Ltd. vs. ACIT in ITA No.532/del/2016 dated 12.09.2017. 12. However, on the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility. 16. Hon'ble jurisdictional High Court in case cited as WSP Consultants India (P.) Ltd. (supra) having identical business profile as that of the taxpayer rejected Mitcon on the ground that it is deriving less than 75% revenue from the consultancy services. 17. So, we are of the consider view that Mitcon is not a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded. IBI CHEMATUR (ENGINEERING & CONSULTANCY) LTD. (IBI CHEMATUR) 18. The taxpayer sought to exclude "IBI Chematur" on the grounds inter alia that it fails 75% service revenue filter applied by the taxpayer and also accepted by the TPO; that it has various segments but no segmental financials are available; that IBI Chematur is not merely providing engineering services and relied upon the decisions of the coordinate Bench of the Tribunal in Bechtel India (P) Ltd. vs. DCIT in ITA No.1478/Del/2015 dated 21.12.2015 and BG Exploration & Production India Ltd. vs. JCIT in ITA Nos.1170 and 1581/del/2015 dated 24.04.2017. 19. When we examine annual report of IBI Chematur at page 747 of the paper book under the head "Review of Performance", it shows that its only business is of high end eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sewage, solid waste management, urban infrastructure, agri and horti infrastructure, social infrastructure, marine infrastructure, industrial infrastructure, renewable energy, sustainability studies, institutional strategies, industrial plants and systems etc.; that financial segmental are not available; that company recognizes its revenues on percentage completion method and relied upon the decisions of the coordinate Benches of the Tribunal in Alcatel- Lucent India Ltd. vs. ITO in ITA Nos.2154 & 2209/Del/2014 dated 06.04.2018; Alcatel-Lucent India Ltd. vs. DCIT in ITA No.6856/Del/2015 dated 06.11.2017; and Emerson Process Management Power & Water Solutions India (P.) Ltd. vs. ACIT in IA No.5343/Del/2012 dated 13.04.2016. 23. However, on the other hand, ld. DR for the Revenue relied upon the orders of the ld. TPO/DRP. 24. Perusal of para 13.3 of the TP order apparently shows that the TPO has extensively examined function of Mahindra which are comparable to the taxpayer. So far as consultancy services being provided by the taxpayer are concerned, comparability of Mahindra has been duly examined by the coordinate Bench of the Tribunal in BG Exploration and Production India L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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