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2019 (10) TMI 1261 - AT - Income TaxTP Adjustment - addition towards contract revenue recognised under Accounting Standard [AS] – 7 - Recognition of contract revenue - non-acceptance by the AO of the budgeted contract costs considered by the assessee for the purposes of computing the percentage of completion of contract activity at the balance sheet date and the contract revenue to be recognized as income under the percentage completion method in compliance with AS - 7 - Assessee’s Method (Project Specific Method based on costs incurred in the specific contract) v/s AO’s Method (Indirect Method with reference to Gross Margin) v/s DRP’s Method (Hybrid method – a variation of the AO’s method w.r.t Gross Margin and by adding other operating expenses) - HELD THAT:- As considered the assessment order for A.Y 2015-16 which has been framed pursuant to the directions of the Additional CIT u/s 144 of the Act. We have also the benefit 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. 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 direct the TPO to exclude the same from the final set of comparables. CAMEO CORPORATE SERVICES LTD - 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 - TPO has himself observed that this company is involved in BPO services. Therefore, we fail to understand why this company was selected in the final set of comparables. Considering the business profile of the assessee, vis a vis with that of TSR Darashaw, we do not find this company as a good comparable and, accordingly, direct the TPO to exclude the same from the final set of comparables. KILLICK AGENCIES & MARKETING LTD company is involved in exports of micro switches, engineering items, acoustics items & head sets. The Annual Report of this company suggests that this company boasts of its role in promotion of the Dredgers and Dredging equipment by leading manufacturers. There is no doubt that this company is engaged in marketing services and on this count alone, cannot be considered as a good comparable vis a vis the assessee. We, accordingly, direct the TPO to exclude the same from the final set of comparables. Comparables should be on same platform as that of the business activities of the assessee and any deviation therefrom, will make the comparable a bad comparable. Considering the facts of the case in totality, qua the comparables, we direct the TPO to exclude the comparables as mentioned hereinabove from the final list of comparables. Thus, Ground No. 2 with all its sub grounds raised by the assessee is allowed.
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