9911796707
TMI Blog2019 (10) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... year under appeal] and the directions of the Additional CIT u/s 144 of the Act for A.Y 2015-16. Considering the orders of the co-ordinate bench and the assessment orders of subsequent years, we find that the Assessing Officer has been consistent in accepting the methodology of the assessee adopted consistently following AS 7. Considering the facts of the case in totality in light of the orders mentioned hereinabove, we do not find any merit in the appeal filed by the Revenue. We also do not find any merit in the methodology adopted by the DRP while dismissing the appeal of the revenue. We direct the Assessing Officer to delete the addition for Project Kanhan and project Demo Zone. Accordingly, Ground No 3 with all its sub grounds of the assessee s appeal is allowed and Ground No. 1 of the Revenue is dismissed. Transfer pricing adjustment - Comparable selection - assessee is engaged in the provision of consultancy and advisory services including project construction and execution thereof in the field of water management industry - HELD THAT:- APITCO LTD. - Considering the business profile of the assessee, we do not find Aptico Ltd as a good comparable and accordingly dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue are preferred against the order dated 29.10.2015 framed u/s 143(3) r.w.s 144C of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to assessment year 2011-12. Since both these appeals were heard together, these are being disposed of by this common order for the sake of convenience and brevity. 2. Grievance of the assessee is two-fold firstly, the assessee is aggrieved by the transfer pricing adjustment of ₹ 53,68,398/- and, secondly, the assessee is aggrieved by the addition towards contract revenue recognised under Accounting Standard [AS] 7. 3. Grievance of the Revenue relates to partial relief given by the Dispute Resolution Panel [DRP] against the addition towards contract revenue recognised under AS-7. 4. We will first address to the common grievance involved in both the appeals relating to addition towards contract revenue recognised under AS-7. 3. Briefly stated, the facts of the case are that the assessee s core activities are in the field of water supply, distribution, treatment, management, operation maintenance, etc. Its activities, inter-alia, involves construction, capacity augmentation, installation and commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the specific contract): Estimated Budgeted Contract Costs = Actual contract costs (both direct and other operating costs) incurred till the balance sheet date + estimated similar costs to complete the contract. The assessee has estimated the costs to complete having regard to factors such as activities already completed, activity remaining to be completed, time required to complete, past experience of costs already incurred, customer expectations, scope changes and other relevant factors. AO s Method (Indirect Method with reference to Gross Margin) Estimated Budgeted Contract Costs = Contract Revenue minus Gross Profit based on the Company s Gross Margin of 6.97% reported by the Tax Auditor. The Ld. AO has, therefore, estimated the budgeted costs in an indirect manner by adopting the Gross Margin of 6.97% respecting all activities of the company including all the contracts. DRP s Method (Hybrid method a variation of the AO s method w.r.t Gross Margin and by adding other operating expenses) Estimated Budgeted Contract Costs = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Contract Value 260,234,060 260,234,060 260,234,060 (3) Total Estimated i.e. Budgeted Cost 242,384,620 242,095,747 242,384,620 (4) Total Cost incurred till 31 March 2011 221,099,477 221,099,477 221,099,477 (5) Percentage of Completion (%) = (4)/(3) 91.22% 91.33% 91.22% (6) Cumulative Contract Revenue till 31 March 2011 = (2) x (5) 237,381,459 237,671,767 237,381,458 (7) Cumulative Contract Revenue till 31 March 2010 202,335,107 202,335,107 202,335,107 (8) Contract Revenue for the FY 2010-11 (AY 2011-12)= (6) - (7) 35,046,352 35,336,660 35,042,300 (9) Addition for Alleged Short Recognition of Contract Revenue 290,308 4,051 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of the assessment order for A.Y 2016-17 in which year also the Assessing Officer has considered the directions of the DRP for A.Y 2011-12 [year under appeal] and the directions of the Additional CIT u/s 144 of the Act for A.Y 2015-16. 18. Considering the orders of the co-ordinate bench and the assessment orders of subsequent years, we find that the Assessing Officer has been consistent in accepting the methodology of the assessee adopted consistently following AS 7. Considering the facts of the case in totality in light of the orders mentioned hereinabove, we do not find any merit in the appeal filed by the Revenue. We also do not find any merit in the methodology adopted by the DRP while dismissing the appeal of the revenue. We direct the Assessing Officer to delete the addition of ₹ 21,70,079/- for Project Kanhan and ₹ 4,051/- for project Demo Zone. Accordingly, Ground No 3 with all its sub grounds of the assessee s appeal is allowed and Ground No. 1 of the Revenue is dismissed. 19. Ground No. 2 in assessee s appeal with its sub grounds relates to transfer pricing adjustment. 20. Facts on record show that the assessee is engaged in the provision of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l indicator [PLI]. The PLI of the company was arrived at 10.90% on cost and when compared with PLI of the comparables at 8.55%, the assessee reported international transactions at arm s length. 23. The following companies were considered as comparables by the assessee: S. No. Name of the Company OP/OC Business profile of the comparables selected 1 Absotherm Facility Management Pvt. Ltd. 4.02% It is engaged in providing facility management and project consultancy services. 2 Coalition Development Systems (India) Pvt. Ltd. 9.52% It is engaged in providing business intelligence services including analytics and insight services. 3 Cyber Media Research Ltd. 10.24% It is engaged in providing market research, consultancy and advisory services. 5 I C R A Management Consulting Services Ltd. 15.61% It is engaged in providing management consultancy a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ICRA Management Consulting Services Ltd. 16.14 6 TSR Darashaw Ltd. 28.91 Average 16.94% Particulars Amount in INR Operating cost 8,88,92,319 Arm s Length Margin 16.94% Arm s Length Price (ALP) 103,950,677 Price shown in the international transactions 98,582,279 Shortfall being adjustment u/s 92CA 5,368,398 27. Before us, the ld. counsel for the assessee vehemently argued for exclusion of four comparables. We will address each such comparable. APITCO LTD. 28. The Annual Report of this company is placed at pages 471 to 505 of the paper book. We find that this company is a Technical Consultancy Organization which provide services to the Entrepreneurs and be a catalyst for the economic growth of the country. Services of this company include project report pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses are in the areas of Document Management, Medical Transcription, Data conversion and Registry Share Transfer. It provides solutions in Insurance, Banking, Healthcare, Telecom, Financial Accounting, Education and Media Publishing services. This company also provides services in customer care, transaction processing and data processing and also I.T enabled services. 33. A perusal of the business profile of this company shows that this company is involved in IT enabled services/BPO services and on this count itself, cannot be considered as a good comparable with the business profile of the assessee. In our understanding, ITES companies use Information Technology that enables the business by improving the quality of service which cannot be considered for comparing with the service provided by the assessee to its AEs. We, accordingly, direct the TPO to exclude the same from the final set of comparables. TSR DARASHAW LTD 34. The Annual Report of this company is placed at pages 544 to 573 of the paper book. We find that this company is one of India's leading Business Process Outsourcing (BPO) organization certified under the ISO 9001:2000 guidelines having a tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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