TMI Blog2022 (10) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence. As assessee is operating in a very limited sphere of providing ecologically engineer wastewater treatment solutions the companies having diversified areas of interest and with nominal interest in wastewater treatment solutions cannot be said to passing the functionally test. Thus, the AO/ TPO are directed to remove Mitcon consultancy and engineering services, Aakar Abhinav Consultants Pvt. Ltd., Feedback Infra Pvt. Ltd. and Mahindra Consulting Engineers Limited from the comparables and make a fresh adjustments. Accordingly, the ground is decided in favour of the assessee. - ITA No. 577/Del/2022 - - - Dated:- 4-10-2022 - DR. B. R. R. KUMAR , ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA , JUDICIAL MEMBER Assessee by : Sh. S. P. Singh , AR and Sh. Ankit Arora , CA Revenue by : Shri Mahesh Shah , CIT ( DR ) ORDER Per Anubhav Sharma , JM ; The assessee has come to this Tribunal challenging the orders of Ld. Tax Authorities in the form of assessment order dated 02.03.2022 u/s 143(3) r.w.s. 144C(13) read with section 144B of the Income Tax Act (hereinafter referred to as the Act ) passed by National Faceless Assessment Centre, Delhi (hereinafter ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has AE and Non-AE transactions, and that TP is to be applied only on the AE transactions, and he did not accept segmental level profitability provided by the Assessee and instead calculated margins on entity level basis wherein, the Ld. TPO included margin arising out of non-AE transactions as well. The Ld. TPO further computed proportionate adjustment on the basis of revenue. The Ld. AO passed the draft assessment order dated 1st April 2021 enhancing the income of the Assessee on account of the adjustments made by the Ld. TPO by Rs. 3,14,00,113. Aggrieved by the approach adopted by the Ld. AO / the Ld. TPO, the Assessee approached the Ld. Dispute Resolution Panel (Ld. DRP ). Vide their Directions dated 10th January 2022 the Ld. DRP upheld the actions by the Ld: TPO. Their observations, inter alia, held as follows: 1. Regarding the comparable companies, out of the comparable companies selected by the LD. TPO, some were retained, and. some were rejected. Resulting in further enhancement of adjustment. 2. Regarding the issue of segmental accounts, they observed as follows: The TPO has stated that the AEs have contributed more than 98% of the operating revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in considering revenue as the basis for calculation of proportionate transfer pricing adjustment. 7. The Ld. AO/ Ld. TPO/ Ld. DRP erred in law and in facts in accepting companies which were not comparable to the Appellant in terms of Functions, Assets and Risk profile. That the above grounds are independent and without prejudice to each other. 4. Heard and perused the record. 5. Primarily the Ld. Counsel for the assessee restricted arguments on ground no. 5 to 7 and the remaining grounds 1 to 4 being not pressed with any substantial arguments. 6. Ground no. 5 and 6; In regard to these grounds it was submitted by Ld AR that Ld. Tax Authorities below i.e. Ld. Assessing Officer , TPO and DRP failed to take into notice the fact that while providing services to AEs and non AEs there was great difference in past years and present AY as the non-AE business which contributed 54.94% and 74.23% in F.Y. 2014-15 and 2015-16 respectively had declined to nearly 1.58% in the present F.Y. 2016-17. However, the assessee did not scale down its operation in terms of employees size or other over heads as it was optimistic of getting non-AE business in future. It was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tata Consulting Engineers Ltd. To be excluded. FAR not similar. To be excluded 3. Ridings Consulting Engineers India Limited. To be excluded. FAR not similar. To be excluded. 4. L T Technology Services Ltd. To be excluded. FAR not similar. To be excluded. 5. Aakar Abhinav Consultants Pvt. Ltd. To be excluded. FAR similar. To be included. 6. Feedback Infra Pvt. Ltd. To be excluded. FAR similar. To be included. 7. Mahindra Consulting Engineers Limited. To be excluded. FAR similar. To be included. 8. Holtec consulting Pvt. Ltd. To be excluded. FAR not similar. To be excluded. 9. DRA Consultants Limited. To be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices and consulting competency of Mahindra Consulting Engineers Limited is very vast and cannot be confined to a single business description. Services provided by company includes construction and project management, market demand assessments and strategy and evaluation studies. 5. DRA Consultants Limited. Project Management Consultancy Services for Water Supply and Sewerage Improvement Works including SCADA otherworks for Indore Municipal Corporation under Amrut Yojana Consultancy expenses in the nature of Sub-contracting charges. 10. Ld. DR, however, defended the finding of Ld. Tax Authorities. He submitted that in fact DRA Consultants Limited was included by assessee itself as comparable. 11. It can be observed that assessee is dealing exclusively in domain of wastewater treatment facilities while companies included except DRA Consultants Ltd. have varied business interests. Since the assessee has the claim on segmental accounts the functionality test is a vital consequence. As assessee is operating in a very limited sphere of providing ecologically engineer wastewater treatment solutions the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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