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TMI Blog2018 (6) TMI 1825X X X X Extracts X X X X X X X X Extracts X X X X ..... side this aspect to the file of the Assessing Officer. Respectfully following the order of the Tribunal in assessee s own case in the preceding assessment year we deem it proper to restore this issue to the file of the Assessing Officer/TPO for adjudication of the issue afresh. Delayed contribution made to Employees Provident Fund (EPF) - HELD THAT:- It is an admitted fact that the contributions to employee s provident fund though deposited beyond the prescribed date as per the PF act, however, the same has been deposited prior to the due date of filing of return of income. The coordinate Benches of the Tribunal are taking the consistent view that where the EPF is deposited prior to due date of filing of return of income, no disallowance u/s. 43B or 2 (24) (x) read with 36 (1) (va) can be made. Since admittedly the EPF has been deposited prior to due date of filing of return of income, therefore, we hold that no disallowance is called for in the instant case. We, therefore, direct the Assessing Officer to delete the disallowance. The ground raised by the assessee on this issue is accordingly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... (%) 32.45% Arm's Length Price 49,81,48,124 Price shown by assessee 44,36,13,016 Difference 5,45,35,108 International Transaction 32,34,57,096 % of International Transaction to Total Sales 72.91% Proposed Adjustment u/s 92CA 3,97,61,547 5. The Assessing Officer in the draft assessment order proposed the above adjustment. Aggrieved with the Draft Assessment Order passed u/s 144C r. w. s 143(3) by Assessing Officer, the assessee approached the DRP who vide its order dated 18.11.2016 directed the TPO to recalculate the transfer pricing adjustment. Following the direction of the DRP, the Transfer Pricings Officer passed an order giving effect to the direction of the DRP by considering the following comparables after working capital adjustment, the details of which are as under :- Sr. No Company Name OP/OC% 1 HSCC (India) Ltd. 39.90% 2 'Mahiindra Consulting Engineers Ltd. 27.12% 3 Mitcon Consultancy & Engg. Services Ltd. 33.36% 4 TCE Consulting Engineers Ltd. 19.98% 5 Mahindra Engineers Services Ltd. 27.63% Average 29.62% Arm's Length Price for software technical support services : Operating Cost 37,61,02,774 OP/OC% 29.62% Arm' s Length Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et for benchmarking the international transaction of the Appellant ; and 3.6. excluding certain companies on arbitrary / frivolous grounds even though they are comparable to the Appellant in terms of functions performed, assets employed and risks assumed and clears the filters as applied by the Ld. TPO. 4. That 011 the facts and circumstances of the case and in law', the Hon'ble I)RP/ Ld. TPO has erred in rejecting certain companies as comparable to the Appellant by citing that the annual reports of such companies are not available, in spite of the fact that the audited annual reports of the same for the relevant year were filed before the Hon'ble DRP/ Ld. TPO during the course of respective proceedings. 5. That on the facts and circumstances of the case and in law, the Hon'ble DRP erred in following their directions issued for AY 2011-12 and summarily rejecting Raunaq International Ltd., Sterling & Wilson Ltd. and Supreme Offshore Constructions & Technical Services Ltd. without undertaking and appreciating the functional analysis undertaken by the Appellant for the said year under consideration. 6. That on the facts and circumstances of the case and in law, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciating that the services provided by the employees seconded to Appellant company do not 'make available' any technical know-how, skills, etc., as provided under the DTAA between India and USA. 10. That in the facts and circumstances of the case and in law, the Ld. AO and the Hon'ble DRP erred in making disallowance of Employee's contribution to the Provident Fund (PF) to the extent of INR 517,463. 10.1. That the Ld. AO and the Hon'ble DRP erred in not appreciating that the said amount was duly deposited on or before the filing of return of income for the year under consideration and therefore is allowable in view of section 43B of the Act. 11. That in the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section 234B of the Act. 12. That in the facts and circumstances of the case and in law, the Ld. AO erred in proposing to initiate the penalty proceedings under section 27i(i)(c) of the Act. The above grounds are independent and without prejudice to each other." 7. Ground No. 1 and 2 of appeal being general in nature are dismissed. 8. In grounds of appeal No.3 to 7 of appeal, the assessee has basically challenged the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsultancy services 61,780,888 Reimbursement of expenses 1,007,003 Purchases 252,000 Professional charges 240,000 Total RPT 63,279,891 Sales 152,277,017 Total RPT / Sales (%) 41.56 10.1 He accordingly submitted that in view of the functional dissimilarities and significant RPT, this company should be excluded from the list of comparables. 11. So far as Mitcon Consultancy and Engineering services Limited is concerned he submitted that the above company provides services to banking division, entrepreneurship and vocational training division, Eschools and BT Pharma sector. Referring to page 109 of Form 35 A he submitted that the revenue earned by the above company from services other than consultancy is approx. 43% of the total revenue. Referring to page 257 of paper book he submitted that Mitcon owns fixed assets such as wind turbine generators and therefore, has a high fixed assets to sales ratio of 34.09%. 12. Referring to the order of the Tribunal in assessee's own case in A. Y. 2011-12 he submitted that this company was rejected on account of multi dimensional functionality and mostly serving the related parties apart from non availability of segmental data. He ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gas sector, and steel and cement sector. Referring to the decision of the Tribunal in assessee's own case for A. Y. 2011-12 he submitted that the Tribunal restored the issue to the file of the TPO to include the company in the list of comparables with certain directions. He accordingly submitted that EDSA Engineering Private Limited be included in the list of comparables. 16. The Ld. DR on the other hand heavily relied on the order of the Assessing Officer/ TPO/ DRP. He submitted that the assessee failed to establish that HSCC (India) Limited is functionally different from that of the assessee so as to render it unsuitable even in TNMM comparison. So far as Mahindra Consulting Engineers Limited is concerned he submitted that in assessment year 2011-12 this company was selected as comparable by the TPO which was upheld by the DRP. The assessee failed to show why this decision of DRP in the preceding year should not be followed. So far as Mahindra Engineering Services Ltd., is concerned, he submitted that TPO has given valid reasons for including this company as comparable. Similar is the case with Mitcon Consulting and Engineering services Limited. As regards the arguments of Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant material on record, we find from the Annual report of this company, a of which has been placed in the paper book, that it received contracts for various companies infrastructure sector including industrial plants & systems etc. The Ld. AR was fair enough to agree that this company was rendering end-to-end services. It was however claimed that the assessee was only providing technical Personnel and, hence, the same should be excluded. We are not agreeable with the Transfer Pricing study documentation and the TPO's order elaborately state that the assessee is engaged in providing endto-end services. While advocating the inclusion of M. N. DAstur & Co. Pvt. Ltd., which was one of the comparables taken note of by the assessee, the Ld. DR drew our attention to the fact that the company is rendering end-toend services, being similar activity as is done by the assessee. We have ordered for the inclusion of this company on the ground that the same is also rendering end-to-end services starting with feasibility studies and ending with project management inspection. Now the assessee cannot turn around for the instant comparable and contend that it is simply supplying personnel and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he TPO to find out whether RPT is more than the threshhold limit and whether segmental data is available or not and decide the issue in the light of the order of the Tribunal in assessee's own case for A. Y. 2011-12. Needless to say the Assessing Officer shall give one opportunity of being heard to the assessee and decide the issue as per law. 21. So far as Mahindra Engineering Services Ltd. is concerned it is the submission of Ld. AR that apart from RPT of 58.63% this company is also functionally dissimilar being engaged in providing design consulting services to automotive, aerospace, defence and manufacturing industries. It offers vehicle development services in various automotive segments that include two-wheeler, passenger car, commercial vehicle, off-highway, farm and construction, and aerospace equipment in body engineering chassis design, powertrain, interior trims, electronics, telematics and tool design domains. It is an admitted fact that this company was retained as a com-parable by the Tribunal in assessee's own case for A. Y. 2010-11 and 2011-12. It is not verifiable from the earlier orders of the Tribunal as to whether the RPT was more in those years. We, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the 2 preceding years, we direct the Assessing Officer / TPO to include this company as a comparable. 24. In so far as inclusion EDAC Engineering Limited as a comparable is concerned, we find the Tribunal in assessee's own case for A. Y. 2011-12 at para 9 of the order has restored the issue to the file of the TPO with the following observations :- "9. Now coming to the EDAC Engineering Limited, it is the observation of the TPO, vide paragraph no.8.1 (b) that on the analysis of the annual report of the company which was found that the company was having 100% RPT with AEs. Ld. AR submits that factually this finding is incorrect and invited our attention to paragraph no.4.121 & 4.122 at page No.4, wherein they have stated that the RPT of the EDAC Engineering is only 14.79 % basing on the following computation details : Particulars Amount (INR) Other 21,927,843 Sales 998,373,958 Sub contract 25,067,448 Total RPT 1,045,369,249 Total Sales 7,066,591,068 RPT/ Total Sales 14.79% This percentage of 14.79 is much below the 25% filter. Ld. Counsel drew our attention to page nos.51 to 53 of the annual report of the EDAC Engineering Limited for the financial year ended Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 195(1) of the Act he submitted that as per the said section any person responsible for paying to a non-resident, any sum which is chargeable to tax in India is required to deduct tax thereon at the rates in force. However, the liability to deduct tax at source under the aforesaid section arises only if the amount paid/ payable to the non-resident is chargeable to tax in India. 29. Referring to the decision of Hon'ble Supreme Court in the case of GE India Technology Centre (P) Ltd. [2010] 327 ITR 456 he submitted that the Hon'ble Supreme Court has held that the expression 'chargeable under the provisions of the Act' is to be understood as a liability to pay Income-tax under the Act and unless, there is a liability to pay incometax under the Act, it cannot be said that tax has to be deducted from the payment/remittances made by an Appellant in India to a non-resident. The Hon'ble Supreme Court has further observed that one cannot read section 195 of the Act to give rise to TDS obligation, the moment there is remittance to a non-resident. If such a view is adopted, then mere payment would give rise to income to accrue or arise in India and such interpretation would mean obliterati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Without prejudice to the aforesaid submission, he submitted that the reimbursement of Travel & Conveyance to Granite USA and its various branch offices do not fall within the purview of FTS as defined under section 9(i)(vii) of the Act. 35. Referring to paragraph 4 of Articles 12 of India - USA DTAA he submitted that Travel & Conveyance expense do not fit into the definition of 'Fees for Included Services' (FIS) as defined under India-USA tax treaty/Double Taxation Avoidance Agreement (DTAA). 36. He accordingly submitted that Travel & Conveyance expenses do not fit anywhere in the above two definitions. Accordingly, making a disallowance by treating them as FTS or FIS in nature for non deduction of tax would be complete injustice & uncalled for. 37. So far as reimbursement of Salaries and Allowances of Rs.6,64,77,837 is concerned he submitted that the said amount represents reimbursement of salaries and allowances of seconded employees to Granite USA. The salary and allowances of such seconded employees was paid overseas through Granite USA for the sake of administrative convenience and later, amount equivalent to the salary and allowances so paid was reimbursed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 5321/Del/2016 order dated 12.09.2017has restored the issue to the file of the TPO by observing as under :- "14. Ld. AR further argued that the DRP vide paragraph No.6.10(1) directed the AO to compute the disallowance u/s 40(a)(i) of the Act in accordance with the CBDT Circular no. 3/2015 dated 12.02.2015 and the AO was expected to verify the factual situation while computing the disallowance u/s 40(a)(i) of the Act. Ld. Counsel drew our attention to page nos. 547 to 558 of the Paper Book, containing the submissions made by the assessee before the Ld. DRP and submitted that no sufficient time was granted for submitting the response o: the assessee on this aspect, and the AO also did not do any exercise pursuant to the directions of the Ld. DRP but proceeded to compute the disallowance. Ld. AR submits that while computing the disallowance u/s 40(a)(i) of the Act the AC should have considered the factual situation that has a bearing on the computation of disallowance u/s. 40 (a) (i) of the Act. From a reading of the assessment order, we find that the Assessing Officer did not consider any further facts while complying with the directions of the DRP, as such, this fact needs v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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