TMI Blog2015 (11) TMI 1563X X X X Extracts X X X X X X X X Extracts X X X X ..... ving been mechanically disposed off without returning the specific findings as to how and under what circumstances, the data brought on record is not reliable or robust. TPO/DRP has neither declared the data brought on record by the taxpayer as unreliable nor they have injected fresh data to assess the capital utilization adjustment and risk adjustment as claimed by the taxpayer. A perusal of the discussion made by DRP regarding disallowance of utilization adjustment and risk adjustment in para 8.2.6 further goes to prove that merely academic reasons have been given to disallow the same. Case law relied upon by the DRP is not applicable to the facts and circumstances of the case when examined in the light of data brought on record by the taxpayer to decide the issue in controversy. So, findings of DRP/TPO on this issue are liable to be reversed. Consequently, Ground No.2 read with Ground No.1.6 are determined in favour of the appellant for statistical purposes and the file is ordered to be restored to the TPO to decide the matter afresh by passing speaking order after providing opportunity of being heard to the parties. - I.T.A. No.1476 /Del/2015 - - - Dated:- 20-11-2015 - SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment as per following details were made Total cost 465139145 OPITC of comparables 9.43% Operating profit 43853318 Operating Loss as per books 25467851 Difference 69321169 6. The cumulative adjustments med in this case are tabulated below: S.N. Nature of international transaction ALP determined by assessee(INR) ALP determined by this office (INR) Adjustment u/s 92CA (lNR) 1. Provision of technical consultancy service 439671294 57640710 13,67,89,416 2. Receivable Nil 9,31,52,225 9,31,52,225 Total 22,99,41,641 The Assessing Officer will accordingly enhance the income of the assessee by ₹ 22,99,41, 641/-. This shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng services Rs.43.46 cores ii Reimbursement of expenses (paid) Rs.0.16 crores iii Reimbursement of expenses (received) Rs.5.53 crores 8. To assess the international transaction referred at Sl. No.1 above, the taxpayer had selected 9 comparables in the TP study out of which TPO rejected 8 comparables on account of use of certain filters and TPO complying with the direction of ITAT by conducting fresh search, selected 7 new comparables (providing engineering designs and drawings consultancy) and as such, out of the total 8 comparables, considered by the TPO, one comparable from taxpayer set of 7 new companies noted down whose average margin was 32.47% as against taxpayer (-6.77%). Hence, the A.O./TPO made an addition of ₹ 13,67,89,416/-. 9. TPO also found that the payments from AEs were not received a per the terms of service agreement and a such held that the taxpayer had provided benefit to its AEs by way of advancing interest free loans in the garb of delay of receipt of receivables. There was international transaction u/s 92B(1) r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32.47 Foreign exchange fluctuation has been considered to be nonoperating expenses for the detailed reasons given above. As per submissions dated 03.08.2006, the foreign exchange fluctuation loss amounts to ₹ 2,99,75,931/- which is considered as non operating in nature. The operating cost as submitted by the taxpayers vide its letter dated 30.08.2006 is ₹ 46,51,39,145/-. This is reduced by foreign exchange loss ofRs.2,99,75,931/-. The operating cost therefore works out to ₹ 43,51,63,214/-. 4.10 Computation of arm s length Operating cost 435163214 Arms Length Margin (%) 32.47% Arms Length Price (ALP) 576460710 Price received 439671294 Shortfall being adjustment u/s 92CA 136789416 14. TPO made the final TP adjustment as under: S.No. Nature of international transaction Appellant s margin (OP/total cost) refer page 152 of paper book Arm s Length margin determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final order Appellant s contentions Remarks IL FS Transportation Networks Ltd. The company is involved in surface transport business. It acts as developer, operator and facilitator of surface transport infrastructure project from conceptualization to operation. It is also involved in operation and maintenance of tolls and collection of tolls The appellant is involved in engineering designs and drawings for various overseas AEs to support the overseas offices turnkey projects execution. The business of the comparable is significantly different from the business of the appellant. 18. The taxpayer filed detailed objections to the different orders against inclusion of aforesaid company as comparable, the crux of the same is lying at pages 67-72 of the appeal set. IL FS Transportation Networks Ltd. is engaged in the surface transport business, working as developer, operator and facilitator of surface transport infrastructure project from conceptualization to operation. It is also involved in operation and maintenance of tolls and collection of tolls, whereas appellant company is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for TP by following the law laid down by Hon'ble Jurisdictional High Court in M/s. Avaya India Pvt. Ltd. and M/s. Thyussen Krupp Industries India Pvt. Ltd. (supra). The Government undertakings can even operate on losses in furtherance of social objectives of the Government. By relying on the judgement supra as well as on functional disparity between aforesaid comparable company and the appellant company, this company is ordered to be excluded from the list of comparables. 22. Regarding ground No.1 read with ground Nos. 1.1, 1.2, 1.3, 1.4, 1.5 and ground No.2, Ld. A.R. contended that the TPO/ DRP has arbitrarily rejected the functionally comparable companies namely Steewards Lloyed India Ltd. for TP. TPO s comments for rejection of aforesaid companies are lying at pages 47-48 of the appeal set. TPO has rejected the companies on the sole ground that these companies fall in service filter and has service income to sales income ratio of less than 75% whereas a bare perusal of the audited financial statement of the company for the year ending 31.03.2004 lying at page 48 of appeal set goes to prove that this company has service income to sale is more than 75% i.e. 93.82%; hence ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the availability of an explanation of any adjustments performed the reasons for the adjustments being considered appropriate how they were calculated how they changed the results for each comparable and how the adjustment improves comparability. Issues regarding documentation of comparability adjustments are discussed in Chapter V. Even the various judicial decisions on the issue of adjustments and even OECD guidelines, impresses upon time and again that the adjustment should be reasonable accurate adjustment . From the above guidelines, it can be seen that unless it is shown that how the risk adjustment would change the result of each comparable and how the same would improve the comparability and unless adequate reasons are given for such adjustments, no adjustment can be allowed to the taxpayer. In the present case, except pointing out various risks, the taxpayer has not shown with evidence as to whether each of the risk was actually undertaken or not by the comparables and if so how these risks affected each of them and whether such adjustment would improve the comparability. Further in respect of comparables no data is 'made available to show at what capacity they ..... X X X X Extracts X X X X X X X X Extracts X X X X
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