Tca/763/2017 Of The Commissioner Of Income Tax v. M/S Saipem India Projects Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMand THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case No.763 of 2017 The Commissioner of Income Tax,Chennai. ...Appellant-vs- M/s.Saipem India Projects Ltd.,[formerly known as Saipem IndiaProject Services Ltd.,]Yarigadda Towers, 4, Fourth Lane,Off Nungambakkam High Road,Chennai – 600 034....Respondent Tax Case Appeal under Section 260-A of the Income Tax Act,1961, is directed against the orders passed by the Income TaxAppellate Tribunal “D” Bench, Madras in I.T.A No.1596/Mds/2012dated 31.08.2016 for the assessment year 2008-09 O/o theAssistant Commissioner of Income Tax Company Circle VI(1)Mahatma Gandhi Road, Aayarkar Bhavan, New Block, Chennai 34 madein GIR. No. PAN.AAAC17915F with Assessment year 2008-2009 dated06.07.2012 and against the Income Tax Department, Nungambakkam,Chennai 34 made in PAN.AAAC17915 with assessment year 2008-2009dated 04.06.2012. JUDGEMENT[Judgement of the Court was made by T.S.Sivagnanam, J.] This Tax Case Appeal by the Revenue filed under Section260-A of the Income Tax Act, 1961, ('the Act' for brevity) isdirected against the orders passed by the Income Tax AppellateTribunal “D” Bench, Madras in I.T.A No.1596/Mds/2012 dated31.08.2016 for the assessment year 2008-09. https://hcservices.ecourts.gov.in/hcservices/ in directing the Assessing Officer to excludeM/s.Engineers India Ltd., in the transfer pricingstudy on the ground of functional dissimilaritywhile retaining M/s.Tele Communication ConsultantsIndia Ltd., when both the comparables are engagedin turnkey projects and whether such decision isin violation of provisions of 92C of the IncomeTax Act?” 3.We have heard Mr.T.R.Senthil Kumar, learned SeniorStanding Counsel assisted by Mrs.K.G.Usha Rani for theappellant/Revenue and Mr.Sandeep Bagmar, learned counsel for therespondent/assessee. 4. Firstly, we will have to consider as to whether anysubstantial question of law arises for consideration, only then,we will have to go into the arguments raised by the learnedcounsel for the Revenue. The assessment for the year underconsideration namely 2008-09 was completed by an order passedunder Section 92CA of the Act by the Joint Commissioner ofIncome Tax vide an order dated 30.09.2011. 5. The issue is whether M/s. Engineers India Limited couldhave been included in the list of comparables. The TransferPricing Officer (TPO) in his order dated 30.09.2011 referred tothe assessee's case for the assessment year 2007-08 in whichM/s. Engineers India Limited was included as one of thecomparables, therefore, rejected the contention. 6. When the matter was carried to the Disputes ResolutionPanel (DRP), the assessee raised three contentions namely thatM/s. Engineers India Limited has a revenue of about Rs.607Crore, when compared to the assessee whose revenue per year wasRs.72.45 Crores. Further, it was submitted that M/s. EngineersIndia Limited is a Government of India Enterprise engaged inturnkey projects and several of the clients to whom they caterare primarily Public Sector Undertakings. Apart from this, theassessee raised two other contentions, as to how M/s. EngineersIndia Limited should not be taken as a comparable. It wascontended that since the said company was engaged in turnkeyprojects, which has not been done by the assessee, engineeringservices which are implemented by the assessee may be one of thekeys and therefore there is no justification to include M/s.Engineers India Limited as one of the comparables. 7. Further, it was contended that so far as the inclusionof M/s. Tele Communication Consultant India Limited as one ofthe comparables is justified because they have taken only theoperating margin cost of 0.56% which relates to engineeringservices and not the whole of the operating cost. The DRP did https://hcservices.ecourts.gov.in/hcservices/ 7. Further, it was contended that so far as the inclusionof M/s. Tele Communication Consultant India Limited as one ofthe comparables is justified because they have taken only theoperating margin cost of 0.56% which relates to engineeringservices and not the whole of the operating cost. The DRP did https://hcservices.ecourts.gov.in/hcservices/ not considered two of the issues raised by the assessee but heldthat the M/s. Engineers India Limited has been awardingcontracts on competitive basis and they are not Governmentcompanies but are private companies and rejected the contentionraised by the assessee. 8. The assessee preferred an appeal before the Tribunaland demonstrated as to how the DRP committed an error. TheTribunal after examining the factual aspect has recorded aspecific factual finding that the assessee is not engaged inturnkey projects and therefore, there is no functionalsimilarity between the assessee's company and M/s. EngineersIndia Limited and hence it has to be in excluded. This factualfinding has not been disputed in the memorandum of grounds ofappeal nor in the course of arguments by producing any material.The only ground canvassed is that the Tribunal ought to haveappreciated that comparable company M/s.Tele CommunicationsConsultants India Ltd., is engaged in turnkey projects. However,as pointed out by Mr.Sandeep Bagmar, learned counsel for theassessee, that what has been taken is 0.56% of the operatingmargin cost and not the entire operating margin cost. 9. This aspect of the matter has not been dealt with bythe Revenue nor been contested before us. So far as, the findingrendered by the TPO in his order dated 30.09.2011, pertaining tothe assessment year 2007-08 to justify the inclusion of M/s.Engineers India Limited as one of the comparables, is no longersustainable in the light of the speculation order dated31.10.2016 passed by the TPO, pursuant to a remand order passedby the Tribunal in I.T.A.No.1809/ Mds/2011, dated 11.12.2015. Ona reading of this order, it is clear that M/s. Engineers Indiahas not been included as one of the comparables for theassessment years 2007-08. 10. In our considered view, the factual exercise done bythe Tribunal cannot be faulted in the absence of any materialplaced by the Revenue either before the Tribunal or before usdisputing the correctness of the factual finding. 11. For the above reasons, there is no substantialquestion of law arising for consideration. Accordingly, theappeal fails and stands dismissed. No costs. s/d- Assistant Registrar(CS V) True Copy Sub-Assistant Registrar To 1.The Income Tax Appellate Tribunal “D” Bench, Madras 2.The Assistant Commissioner of Income Tax, Company CircleVI(1)Chennai 34.Chennai 34. 3.The Income Tax Department, Dispute Resolution Panel, Chennai34.34. +1 CC to Mr.T.R.Senthil Kumar, Advocate sr 45755. Tax Case No.763 of 2017 RR(CO)SP(30/07/2019)