TMI Blog2010 (11) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... Rahul Mitra and Tarun Arora for the Appellant Ashok Pandey for the Respondent ORDER C.L. Sethi, Judicial Member:- 1. This is a direct appeal to the Tribunal, filed by the assessee, against the assessment order dt. 8th April, 2010 passed by the AO under s. 143(3) r/w s. 144C of the IT Act, 1961 ('the Act'), for the asst. yr. 2006-07. 2. Various grounds of appeal raised by the assessee revolve around the AO's action in making adjustment to the total income of the assessee by Rs. 5,29,19,406 on the ground that the international transactions effected by the assessee with its associate enterprises did not satisfy the arm's length principle envisaged under the provisions of s. 92C(3) of the Act for the asst. yr. 2006-07. 3. Relevant facts giving rise to the issue involved in this appeal may be stated, in brief, as under:- The assessee company was incorporated in 1994 under the initial approval of Foreign Investment Promotion Board dt. 22nd Dec., 1993 provided to Bechtel Corporation, USA to establish a wholly-owned design, engineering and procurement subsidiary in India for providing export services to Bechtel Group's wordwide projects. The assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the TPO under s. 92CA(3), the AO required the assessee to explain as to why an addition of Rs. 5,29,19,406 should not be made to the business income of the assessee as per the order of the TPO dt. 12th Oct., 2009. In response thereto, the assessee filed a detailed submission vide letter dt. 9th Nov., 2009. The submissions made by the assessee were not accepted by the AO in view of the detailed discussion and reasons given by the TPO in his order. Therefore, in view of the findings of the TPO vide his order dt. 12th Oct., 2009 and as per provisions of s. 92CA(4) of the Act, an amount of Rs. 5,29,19,406 was added to the business income of the assessee company by the AO and a draft assessment was made on 20th Nov., 2009 as per provisions contained in s. 144C(1) of the Act. A copy of the draft assessment order was served upon the assessee personally through the assessee's Authorized Representative on 23rd Nov., 2009. The assessee then filed objections against the draft assessment order before the DRP on 22nd Dec., 2009. DRP vide order dt. 30th March, 2010 confirmed the order of the TPO/draft assessment order of the AO. For the ready reference, the order of the DRP is reproduced be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the AO to grant the said deduction to the assessee.' In view of the above, the assessee reiterates that it is a company engaged in export of 'customized electronic data' in the nature of engineering designs, drawings, calculations and other relevant data-sheet relating to project engineering and commercial solutions for power plant, refinery, petrochemical plant etc. For carrying out such work, the assessee employs technical personnel. Instead of preparing the engineering designs, drawings, calculations and other relevant data-sheet etc. manually, the assessee utilizes computer systems/software, but that does not change the character/nature of engineering design, drawings etc. nor is the characterization of the assessee's function altered by the form of output engineering designs, drawings, calculations and other relevant data transmitted to AEs in the form of 'customized electronic data'. TPO has chosen proper companies for benchmarking and has given opportunities to assessee. In these proceedings also, director of the company and chartered accountants were heard at length. The issues were discussed in detail benchmarking of TPO is held to be in order. These direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the assessee company is not comparable to companies engaged in software development. In support of this contention advanced by the learned counsel for the assessee, he has produced before us the specimen of work of designs, drawings, calculations and certain data-sheets undertaken and executed by the assessee during the relevant year. In this connection, the learned counsel for the assessee has invited our attention to the order dt. 2nd June, 2005 of the Tribunal, Delhi Bench 'B', New Delhi in the assessee's own case pertaining to the asst. yr. 2000-01, where in the context of assessee's claim of deduction under s. 80HHE, the Tribunal has observed that one of the services notified in the Board's Notification dt. 26th Sept., 2000 is that of engineering and design, and it was the case where the assessee was engaged in engineering and design which is customized is transmitted electronically. He therefore, submitted that the Tribunal has admitted the fact that the assessee was engaged in the engineering and design business which was customized and was transmitted electronically and since these services were notified for the purpose of s. 10A, s. 10B and s. 10HHE, the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the various designs and drawings and invoices containing 232 pages furnished by the assessee in the course of hearing before us. On perusal of order under s. 144C of the IT Act, 1961, passed by the DRP, we find that the assessee has objected to the action of the TPO in selecting the comparables having no similar analysis with that of the assessee and contended before the DRP that the assessee was engaged in export of customized electronic data in the nature of engineering designs, drawings, calculations and other relevant data-sheet relating to project engineering and commercial solutions for power plant, refinery, paper chemical plant etc. and for carrying out such work, the assessee employs technical personnel. It was further clarified before the DRP that instead of preparing the engineering designs, drawings, calculations and other relevant data-sheet etc. manually, the assessee utilized computer systems/software and hence that does not change the character/nature of activities undertaken by the assessee, which continue to remain in the nature of engineering design/drawings etc., nor is the characterization of the assessee's function altered by the form of output i.e., engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set and risk assumed analysis and to understand the nature of international transaction carried out by assessee with its AEs and the nature of transaction carried out by selected comparables. In the present case, the TPO has carried out his own search of companies treating the assessee companies to be engaged in the business of software development though the assessee selected the comparables by considering the assessee to be engaged in the business of rendering support in respect of engineering designs and drawings. 13. In the present case various designs, drawings and invoices produced before us, had not been examined into by the authorities below. It is claim of the assessee that the assessee has only utilized computer system and software for the purpose of preparing engineering designs, drawings, calculations and other relevant data-sheet instead of doing them manually. Therefore, unless the functional profiles of the assessee company are examined minutely and in detail, it is very difficult to say that the assessee is engaged in the business of software development. All these exercises had not been properly done by the TPO or DRP. We therefore, restore the matter back to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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