9911796707
TMI Blog2023 (12) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... AT:- As assessee had maintained segmental accounts, and accounts vis-a-vis salary expenditure were maintained project-wise, the employees deployed with regard to the transactions entered with AEs were identifiable. The conclusion arrived at by the DRP that common employees were allocated was a finding that did not emerge from the record. The Tribunal evidently was of the view that the employees deployed with AEs and non-AEs were identifiable as the accounts were maintained project-wise.The view taken by the DRP that hourly worksheets of employees were not maintained was unsustainable, as there was no such requirement in law. This conclusion was reached by the Tribunal also for the reason that salaries to employees were not paid on an hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order dated 24.03.2023 passed by the Income Tax Appellate Tribunal [in short, Tribunal ]. 4. To adjudicate the instant appeal, the following facts must be noticed. 5. The respondent/assessee filed its Return of Income (ROI) for the AY in issue, i.e., AY 2012-13, on 30.11.2012. The ROI declared a loss amounting to Rs. 5,58,25,905/-. 6. The record shows that the respondent/assessee s case was referred to the Transfer Pricing Officer (TPO) under Section 92CA of the Income Tax Act, 1961 [in short, the Act ]. The TPO, via order dated 27.01.2016, proposed an upward adjustment amounting to Rs. 4,76,89,336/- concerning international transactions pertaining to building design services. 7. The TPO s order impelled the respondent/asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning AEs and non-AEs. 11.1 Mr Rai, thus, submitted that the method adopted by the TPO, whereby costs of salaries were allocated based on turnover was the correct approach. 12. As regards the rejection of the comparable, it is Mr Rai s contention that adequate information was available and that Korus could have been used to benchmark the subject international transaction, contrary to what has been held by the Tribunal. 13. Mr Ajay Vohra, learned senior counsel, who appears on behalf of the respondent/assessee, on the other hand, submitted that the expenses incurred on account of the deployment of employees were available project-wise. 13.1 It is also Mr Vohra s contention that the accounts were available segment-wise and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., 9.23%. Based on this, the respondent/assessee had stated that the transaction with the AEs was at arm's length. 17. Concededly, what bothered the TPO was the computation of the operating cost, though he was also concerned with some of the comparables furnished by the respondent/assessee. 18. As indicated above, the TPO s view was that there was opaqueness with regard to allocation of operating expenses concerning salaries paid to employees who worked in the AE and non-AE segment. It is on account of this view that the TPO concluded that expenses incurred on salaries which are part of the operating expenses had to be allocated based on the turnover of the AE and non-AE segments. 19. The Tribunal, however, disagreed with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from its own, accepted Korus as a comparable without doing a deep-dive. 21.2 The respondent/assessee had emphasised that Korus was in the business of providing engineering services to steel industry, right from the stage of conceptualization to commissioning. Furthermore, the respondent/assessee had said that Korus also provided engineering consultancy for greenfield steel plants, technology upgradation and expansion projects. The DRP, while dealing with the assertions made by the respondent/assessee simply stated the following: functionally comparable should therefore be retained. 22. According to us, the DRP made no attempt to establish as to how Korus was functionally comparable with the respondent/assessee. It is for this reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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