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Samsung Heavy Industries India Pvt. Ltd. Versus DCIT, Circle-3, Noida

2017 (12) TMI 345 - ITAT DELHI

TPA - selection of comparable - Held that:- Assessee 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., thus companies functionally dissimilar with that of assessee is to be excluded from final comparability list. - ITA No.436/Del/2016 .....

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e only issue raised in this appeal is against the 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 experien .....

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l 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 comparable. On the basis of their PLI, the assessee claimed that its international transaction was at ALP. 4. As against nine companies chosen by the assessee as comparable, the TPO introduced new seven companies in the final tally of eight comparables. After retai .....

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% viii. Acropetal Technologies Ltd. (Seg.) 14.35% 9.61% Average 34.28% 31.73% 5. By applying such adjusted OP/OC of comparables at 31.73%, the TPO worked out transfer pricing adjustment amounting to ₹ 4,01,72,876/-. The assessee remained unsuccessful before the Dispute Resolution Panel (DRP). That is how, the Assessing Officer made an addition of ₹ 4.01 crore in his final order on account of transfer pricing adjustment in the international transaction of Provision of engineering, des .....

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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 pro .....

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rvices to its AE which can be classified as IT enabled services for the reasons given in the order. That is how, the TPO proceeded with the assessee s nature of activity as that of providing IT enabled services . The companies so chosen by the TPO are by and large rendering services in the broader spectrum of I.T. enabled services. 8. At this stage, we consider it expedient to note the contention of the ld. DR that the assessee was not rendering only I.T. enabled services , but Engineering servi .....

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essee s services as IT enabled services. Once the TPO has treated the nature of services rendered by the assessee as I.T. enabled and the assessee has not objected to the same in the appeal before the Tribunal, the ld. DR cannot be allowed to set up a new case contrary to what was done by the TPO by claiming that the nature of services should be altered at this stage for evaluation of comparable companies in dispute. We will, therefore, confine ourselves in considering the comparability or other .....

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ated 1st February, 2009. Thus, it is ostensible that the nature of services rendered by the assessee during the year are similar to those rendered in the preceding assessment year i.e. 2010-11. The TPO in the preceding year, proceeded in almost the same manner, and considered all the four companies currently under challenge before us, as comparable. The matter travelled to the Tribunal and the same has been decided vide order dated 13.07.2017 in ITA No.576/Del/2015. A copy of such order has been .....

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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 In .....

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to bifurcate income from IT enabled services from the common pool of Products and services, so as to make comparison with the assessee s income. Respectfully following the Tribunal order passed for the immediately preceding year, we order for the exclusion of this company from the list of comparables. (ii) Eclerx Services Ltd. 12. The TPO included this company in the list of comparables on the same basis as was done for the preceding year. The Tribunal order for the immediately preceding assessm .....

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vices has been clubbed. Such services include Trade processing support, Reference data maintenance, Contract risk review, Reconciliation and controls, Margin and exposure management, Metrics and reporting, Expenses management, Accounting and finance, Consulting services, Online operations & Web analytics, CRM & business intelligence, Data management & Reporting, Competitor benchmarking & Pricing, Quality & compliance and Business process consulting. This company has a single .....

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ear. The Tribunal directed to exclude this company, 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 glo .....

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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 identical to those for the instant year. Since the Tribunal, for the immediately preceding year, has held this company to be functionally different from that of the assessee, respectfully following the precedent, we direct the exclusion of this company on account of functional dissimila .....

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