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2015 (11) TMI 1562

teel detailing etc. having plant and machinery as part of its fixed assets and inventory in its books, it has also large portion of cost as sub-contracting and profile of Holtec is diametrically opposed to the assessee company which is engaged in engineering design and drawing for various overseas AEs to support overseas offices turnkey project execution. The assessee company has neither any plant and machinery as part of its fixed assets and inventory in its books nor has large portion of its cost as sub-contracting cost. So, it cannot be taken as a comparable in any case. - RITES Ltd is functionally distinctive having been engaged in the area of engineering consultancy, traffic studies, export of locomotives and maintenance of the locomotives, construction and project management for railway track, electrification together with traffic and software consultancy assignments as against, the appellant company which is engaged in engineering design and drawing for various overseas AEs to support overseas offices on turnkey project execution basis. - Webcam Consultancy Service Indi Ltd - perusal of the P & L account statement for the year ended 31.03.2005, which has otherwise no .....

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the ALP afresh by treating the company to be involved in the business of engineering design and drawing. In compliance to the order dated 22.12.2012 passed by the Tribunal and in consonance with the directions made by TPO/DRP, A.O. made an addition of ₹ 8,63,90,740/- on account of transfer pricing adjustment. 2. Feeling aggrieved, the assessee has again come up before the Tribunal and sought to set aside the impugned order dated 31.01.2015 passed by the A.O. u/s 254/143(3) read with Section 144C of the Act on the grounds inter alia that: 1. That on facts and circumstances of the case and in law, the Ld. AO 1 Ld. Transfer Pricing Officer ("TPO") / Ld. Dispute Resolution Panel ("DRP") erred in making an addition of INR 9,22,55,795/- to the returned income of the Appellant by re-computing the arm's length price of the international transactions under section 92 of the Act. Thus, in passing the order, the Ld. AO / Ld. TPO / Ld. DRP erred in: 1.1 Rejecting the comparable companies adopted by the Appellant in its transfer pricing documentation on the basis of additional/modified quantitative filters which lacked valid and sufficient reasoning. 1.2 Accepting .....

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appellant has opted multiplier data in accordance with Rule 10B(iv) of Rule of OECD guidelines while benchmarking the international transaction. However Ld. TPO and A.O. differed with the assessee in adopting comparables for transfer pricing (TP). The TPO excluded comparables adopted by the assessee for selecting proper comparables functionally similar to that of the assessee company by following filters with criteria inter alia that companies whose data is not available for the financial year 2004-05; that companies whose engineering design and drawing consultancy service is less than ₹ 5 crores; that companies whose revenue and engineering design and drawing is less than 75% of total operating revenue; that companies having more than 25% related parties transaction of income, have been excluded and companies having different financial year ending (i.e. March 31st, 2004) and data of the company does not fall 12 months period i.e. 01.04.2003 to 31.03.2004, that the companies which are functionally different from the taxpayer and that the companies which are having peculiar economic circumstances, have also been excluded. 4. The TPO offered on the basis of aforesaid filters/cr .....

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ansfer pricing by adding an amount of ₹ 9,22,55,795/-. 7. We have heard Ld. authorized representatives of both the parties and have gone through the material placed on record in the light of the facts and circumstances of the present case. 8. At the very outset, Ld. A.R. contended that except ground No.1 read with gourds 1.1, 1.2, 1.3 , 1.4 and 2, rest of the grounds are of academic nature and as such need no adjudication. 9. In consonance with the directions passed by Ld. TPO/DRP, A.O. has adopted the following final comparables: S.No. Company Name Working capital adjusted (OP/Total Cost) 1 Holtec Consulting Pvt. Ltd. 37.71% 2 Rites Ltd. 32,63% 3 TCE Consulting Engineers Ltd. 21,96% 4 UB Engineering Ltd 1.95% 5 Tata Projects Ltd 6.88% Mean 20.23% 10. Ld. A.R. for the assessee contended that TPO/DRP have arbitrarily selected the comparables which are functionally different for transfer pricing and at the same time, they have arbitrarily rejected the comparables adopted by the assessee without passing any speaking order and as such, the order under appeal is liable to be set aside. 11. The TPO in his order dated 27.01.2008, selected M/s. Holtek Consulting Pvt. Ltd. as comparab .....

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traffic studies, exports of locomotives and maintenance of the locomotives, construction and project management for railway track, electrification together with traffic and software consultancy assignments. More so, its income from non consultancy services is less than 75% and this filter is applied by the TPO himself. 15. On other hand, the appellant company is engaged in engineering design and drawing for various overseas AEs to support overseas offices on turnkey project execution basis. Similarly, the cost of export sales and supply services constitutes merely 35.86% of the total cost. So keeping in view the fact that comparable company i.e. RITES Ltd. taken by TPO is functionally distinctive having been engaged in the area of engineering consultancy, traffic studies, export of locomotives and maintenance of the locomotives, construction and project management for railway track, electrification together with traffic and software consultancy assignments as against, the appellant company which is engaged in engineering design and drawing for various overseas AEs to support overseas offices on turnkey project execution basis. 16. Webcam Consultancy Service Indi Ltd:- TPO rejected .....

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(supra) and contended that the Government companies cannot be taken as comparables 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. 19. 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 th .....

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