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TMI Blog2022 (2) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... d - What has been referred to is the extract from the website of this company that the company is engaged in the development of steel industry. In absence of any annual report, these services cannot be held to be similar to the services in which assessee has been engaged into. What is available only the functional statement but nowhere management discussion, director's report, etc. were available, hence it is difficult to analyse the FAR of the said company. On this ground alone, this company has rightly been excluded by the ld. CIT (A). Mitcon Consultancy Engg. Services Ltd. - This company is engaged in providing multiple services, such as, banking financial solution services, securitisation financial restructuring services, MITCO e-School and other services which are in the field of textiles, market research, infra consulting, wind power generation, decentralised power generation, projects, energy and carbon consultancy service etc.. This company is deriving revenue from (i) consultancy fees; (ii) vocational training; (iii) IT courses; and (iv) income from laboratories. No doubt, the consultancy fees can considered to be similar to the services rendered by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (in INR) Method Applied 1 Rendering of Technical Consultancy Services 15,40,69,765 Transactional Net Margin Method with OP/OC as the PLI 2 Availing of Technical Consultancy Services 9,32,05,201 Other Method 3 Reimbursement of Expenses 5,51,01,620 Other Method 4 Recovery of Expenses 1,66,05,576 Other Method 4. In order to benchmark the international transaction of receipt of technical consultancy services, the assessee had adopted TNMM as the most appropriate method. The assessee had taken a set of 8 companies with an average margin of 12.14% and had used multiple years data. The assessee's own margin was worked at 22.32% using segmental data and, therefore, it was assessee's contention that its international transaction was at Arm's Length. 5. During the transfer pricing assessment proceedings, the TPO rejected the segmental results ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er giving effect to the order of the CIT (A) dated 07/02/2019, can be highlighted in the following manner: S.No. Comparable OP/OC% as per the TPO s order OP/OC% as per the directions of the CIT(A) 1 Autoline Design Software Limited -7.78% -7.78% 2 HSCC (India) Limited 61.61% Excluded 3 IIDC Limited 12.31% 8.64% 4 Kicons Limited 22.25% Excluded 5 Korus Engineering Solution Pvt. Ltd. 21.24% Excluded 6 Kratos Energy Infrastructure Ltd. 3.77% 3.77% 7 Mitcon Consultancy Engg. Services Ltd. 24.98% Excluded 8 Tata Consulting Engineers Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which may not be exactly same, but the services are technical services, provided by the engineers. Hence both the assessee company and the comparable perform the services which are comparable. Learned DR relied heavily on para number 11 of the TPO wherein the TPO has mentioned the reasons for inclusion of this company as a good comparable. 12. On the contrary the Learned AR for the assessee referring to the synopsis filed by the assessee on October 29, 2021 through email, submitted as under: - a. Kicons Limited: - This company was selected by the TPO as a comparable and the assessee had objected to the inclusion of this company on the ground of functional comparability. While dealing with the objections of the assessee the TPO on Page number 19 of his order has mentioned that this company is involved in Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy. The TPO further mentioned that the company is not engaged in solar power projects and other civil activities; hence it is a suitable comparable. Ld. CIT(A) agreed with the assessee's contentions that this company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number 713 of the paper book, which is an extract from the website of this company, submitted that this company is engaged in development of the steel industry and that these services are different from the services in which the Assessee is engaged into. Further referring to Page number 614 of the paper book, the Ld. AR submitted that only the financial statements of the company were available, but management discussion, auditor's report, director's report, etc. were not available and thus, it was not possible to analyze the detailed functional profile of the company. c. Mitcon Consultancy Engg. Services Limited:- This company was selected by the TPO as a comparable and the assessee had objected to the inclusion of this company on the ground of functional comparability and for the reason that segmental accounts are not available. Rejecting the arguments of the assessee Ld. TPO mentioned that this company is engaged in providing technical engineering consultancy services to its clients and accordingly, considered the same in final set of comparables. On the contrary the Ld. CIT(A) agreed with the assessee's contention that this company is engaged in a number o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h independent customers for their respective projects and the Appellant only provides technical consultancy services to its overseas AEs based on their demand and need. Thus, the Appellant is not responsible for project execution. Appellant availing of technical consultancy services from overseas AEs - The Appellant contracts with independent customers for its projects and the overseas AEs only provide technical consultancy services to the Appellant based on its demand and need. Thus, the overseas A s are not responsible for project execution. b. Quality Control Appellant rendering of technical consultancy services to overseas AEs - The responsibility of ensuring the quality to independent customers lies with the contracting party (i.e. overseas AEs in this case). Thus, the Appellant is not responsible for ensuring quality to end customer as it lies with the overseas AEs. Appellant availing of technical consultancy services from overseas AEs - The responsibility of ensuring the quality to independent customers lies with the contracting party (i.e. Appellant in this case). Thus, the overseas AEs are not responsible for ensuring quality to end customer as it lies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or services under the terms of its contract), Service Liability Risk (associated with service failures, including non-compliance with generally accepted or regulatory standards). However, the Appellant bears Manpower Risk (since it is responsible for retaining skilled workforce to carry out its activities) and Foreign Exchange Risk (as it gets payment for its invoices from overseas A s in foreign currency and bears risk of any fluctuation of exchange rates between foreign currency and Indian Rupee). 15. In the TP study report, the assessee had stated that, firstly, it operates as low risk bearing technical consultancy service provider by providing technical services to its overseas AEs; and secondly, the overseas AEs operate as low risk bearing technical consultancy service providers by providing technical services to the assessee. In order to benchmark, the said international transaction of receipt of technical consultancy services, the assessee adopted TNMM as the MAM and after taking a set of 8 comparables, average margin of 12.14% was worked out and the assessee had shown PLI of 22.32% using segmental data and accordingly, it was reported that international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT (A), this company is engaged in development of steel industry and its annual report is not available in the public domain. What has been referred to is the extract from the website of this company that the company is engaged in the development of steel industry. In absence of any annual report, these services cannot be held to be similar to the services in which assessee has been engaged into. What is available only the functional statement but nowhere management discussion, director's report, etc. were available, hence it is difficult to analyse the FAR of the said company. On this ground alone, this company has rightly been excluded by the ld. CIT (A). 18. Lastly, in the case of Mitcon Consultancy Engg. Services Ltd., the TPO has included this comparable observing that this company is engaged in providing technical and engineering consultancy services to its clients. Whereas ld. CIT (A) has held that this company is engaged in a number of fields like textiles, banking financial services, energy carbon consultancy services and that the segmental accounts are not available. From the perusal of the annual report of this company, it is seen that it is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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