TMI Blog2017 (12) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition on account of transfer pricing adjustment amounting to ₹ 4,01,72,876/-. 3. Briefly stated, the facts of the case are that the assessee company was incorporated in India in 2007 and is a wholly owned subsidiary of SHI Korea. It provides engineering, design and related services for the offshore floaters/platform business of SHI Korea. The assessee has a pool of qualified manpower. It employs engineers having a background and experience in lay out design, electrical design, instrumentation design, piping design and mechanical design, etc. The assessee filed return and reported two international transactions in Form No.3CEB. The dispute in the present appeal is on the first international transaction of Provision of engineering, design and related services with transacted value of ₹ 27,11,16,647/-. The AO made reference to the Transfer Pricing Officer (TPO) for determining the arm s length price (ALP) of the international transactions. The assessee applied Transactional Net Margin Method (TNMM) with Profit level indicator of Operating Profit/Total Cost (OP/TC). The assessee computed its own PLI at 15.16%. Nine companies were chosen by the assessee as compara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application of TNMM as the most appropriate method with the PLI of OP/OC. 7. Before proceeding to discuss the comparability or otherwise of the companies assailed before us, it is necessary to have a look at the nature of functions carried out by the assessee under this segment. The nomenclature of the international transaction, being, Provision of engineering, design and related services , indicates that the assessee was rendering engineering and design services. It is manifest from the show cause notice, whose relevant part is reproduced on page 5 of the TPO s order, that the assessee provided gamut of services to its AE ranging from feasible study, pre-design services, basic design, front end engineering design, lay out design, detailed engineering and commissioning assistance etc. The assessee claimed that its services are mainly in the nature of I.T. enabled engineering services and Knowledge process outsourcing. The TPO on page 8 of his order did not accept the assessee s contention of providing engineering support services. He came to hold that: the assessee is rendering services to its AE which can be classified as IT enabled services for the reasons given in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such order has been placed on record. ( i) Accentia Technologies Ltd. 11. The TPO treated this company as comparable in the same way it was done in the preceding year. The Tribunal in its order for the immediately preceding assessment year has discussed the comparability or otherwise of this company on page 21 onwards of its order. After relying on certain decisions, the Tribunal directed to exclude it from the list of comparables on account of functional dissimilarity and outsourcing of substantial amount of work. We have gone through a copy of the Annual report of this company for the year under consideration, whose copy has been placed on pages 500 onwards of the paper book. The Profit Loss Account of this company is available at page 542 from which it can be seen that there is income from Sales and services to the tune of ₹ 108.31 crore. Schedule 8 gives a brief description of such Income as including Medical transcription, Billing and collections, Income from coding, Interest on FD and Income from exchange fluctuation. Thus, income has arisen in India not only from Services , but from sales as well. Page 552 of the paper book indicates that: thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inter alia , on account of difference in functional profile. 15. We have gone through the principal activities done by this company in the year in question which have been set out on page 88 of its Annual report as under:- 1. Background and principal activities TCS e-serve Limited is engaged in the business of providing Information Technology-Enabled Services (ITES)/Business Process Outsourcing (BPO) services, primarily to Citigroup entities globally. The Company s operations broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving the processing, collections, customer care and payments in relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities. 16. The assessee has also made available Annual report of this company for the immediately preceding assessment year. The principal activities of the company have been set out at page 105 of the Annual report for the preceding year, which are identi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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