KNR CONSTRUCTIONS LIMITED,HYDERABAD vs. ACIT, CENTRAL CIRCLE-2(2), HYDERABAD
ITA No 500 OF 2022 KNR Constructions Ltd
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आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘ DB-A ‘ Bench, Hyderabad
ŵी रिवश सूद,Ɋाियक सद˟ एवं ŵी मधुसूदन साविड़या लेखा सद˟ समƗ |
Before Shri Ravish Sood, Judicial Member
A N D
Shri Madhusudan Sawdia, Accountant Member
आ.अपी.सं /ITA No.500/Hyd/2022
(िनधाŊरण वषŊ/Assessment Year: 2018-19)
M/s KNR Constructions Ltd
Hyderabad
PAN:AAACK8316L
Vs.
ACIT
Central Circle 2(2)
Hyderabad
(Appellant)
(Respondent)
िनधाŊįरती Ȫारा/Assessee by:
Shri A.V.Raghuram, Advocate
राज̾ व Ȫारा/Revenue by::
Smt. U Mini Chandran, CIT(DR)
सुनवाई की तारीख/Date of hearing:
29/10/2025
घोषणा की तारीख/Pronouncement: 19/11/2025
आदेश/ORDER
Per Madhusudan Sawdia, A.M.:
This appeal is filed by KNR Constructions Ltd (“the assessee”), feeling aggrieved by the order passed by the Learned
Assessing Officer (“Ld. AO”) under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (“the Act”) dated 29.07.2022 for the A.Y. 2018-19. 2. The assessee has raised the following grounds of appeal:
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The brief facts of the case are that the assessee is a company engaged in the business of infrastructure projects. The assessee had claimed deduction under section 80-IA of the Income Tax Act, 1961 (“the Act”) in respect of some of its projects. The assessee filed its return of income for the Assessment Year 2018– 19 on 29.11.2018 declaring total income of Rs.57,99,54,680/-. The case of the assessee was selected for scrutiny, and ITA No 500 OF 2022 KNR Constructions Ltd Page 3 of 18
accordingly, notice under section 143(2) of the Act was issued by the Ld. AO on 22.09.2019. During the year, the assessee had entered into specified domestic transactions with its Associated
Enterprises (“AEs”), and therefore, the matter was referred to the Learned Transfer Pricing Officer (“Ld. TPO”) for determination of the Arm’s Length Price (“ALP”).
3.1
The Ld. TPO, vide order passed under section 92CA(3) of the Act dated 31.07.2021, proposed an upward adjustment of Rs.121,50,70,645/-. Based on the said order, the Ld. AO passed a draft assessment order under section 144C of the Act on 08.09.2021. Against the draft order of Ld. AO, the assessee filed objections before the Learned Dispute Resolution Panel (“Ld.
DRP”). The Ld. DRP, vide directions under section 144C(5) of the Act dated 29.06.2022, issued certain modifications. The Ld. DRP also passed a corrigendum on 26.07.2022. In pursuance of the direction of the Ld. DRP, the Ld. TPO passed a consequential order on 26.07.2022 determining an upward adjustment of Rs.36,77,04,171/-. Subsequently, the Ld. AO passed the final assessment order under section 143(3) read with section 144C(13) of the Act on 29.07.2022, making an addition of Rs.36,77,04,171/-, thereby determining the total assessed income of the assessee at Rs.94,76,61,851/-.
4. Aggrieved with the order of the Ld. AO, the assessee is in appeal before this Tribunal. At the outset, the Learned
Authorized Representative (“Ld. AR”) submitted that the solitary issue involved in the present appeal pertains to the Transfer
Pricing adjustment of Rs.36,77,04,171/- made on account of specified domestic transactions relating to the assessee’s infrastructure projects. It was submitted that during the year, the ITA No 500 OF 2022 KNR Constructions Ltd
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assessee had undertaken 23 projects eligible for deduction under section 80-IA of the Act and 15 projects not eligible for deduction under section 80-IA of the Act. The 23 projects eligible for deduction under section 80-IA of the Act were broadly classified as Highway projects (19 in number) and Irrigation projects (4 in number). Out of these 19 highway projects, 17 were through non-
AEs and 2 were through AEs, while out of these 4 irrigation projects, 2 were through AEs and 2 were through non-AEs. The Ld. AR invited our attention to para no. 5 of the consequential order of the Ld. TPO dated 26.07.2022 and submitted that the Ld.
TPO, in accordance with the directions of the Ld. DRP, computed separate Profit Level Indicators (“PLIs”) for highway and irrigation projects, taking non-AE transactions as the internal comparables.
He further demonstrated that, the Ld. TPO computed the PLI of highway projects through non-AEs at 15.34%, and that of irrigation projects through non-AEs at 4.96%. It was further submitted that since the PLI of the assessee’s all AE highway projects and one AE irrigation project were lower than the PLI of comparable non-AE projects, no adjustment was made by the Ld.
TPO in respect of those projects. However, for one irrigation project through AE (“the Yedula Project”), the Ld. TPO observed the assessee’s PLI was at 17.34%, and compared the same with 4.96% being the PLI of irrigation projects through non-AEs, resulting in the impugned adjustment of Rs.36,77,04,171/-. In this regard, the Ld. AR submitted that this comparison is fundamentally flawed since the Yedula irrigation project was an independent contract undertaken by the assessee, whereas the irrigation projects undertaken through non-AEs were sub-contract projects, executed under entirely different contractual obligations
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and risk profiles (on back-to-back basis). The Ld. AR placed reliance on the copies of contracts for all such projects, placed before us and contended that the nature, scope, and risk allocations are materially different. Accordingly, the Ld. AR pleaded that the internal comparables adopted by the Ld. TPO are not appropriate, and that an external CUP or alternative benchmarking should be adopted for the Yedula Project.
5. Per contra, the Learned Departmental Representative
(“Ld. DR”) relied on the orders of the Ld. AO/TPO and submitted that the assessee itself, in its TP study, had taken these irrigation projects with non-AEs as comparables. Hence, it cannot now retract from its own benchmarking analysis. The Ld. DR contended that the Ld. DRP/TPO have correctly adopted the internal comparables for computing ALP.
6. In rejoinder, the Ld. AR clarified that the TP study originally undertaken by the assessee had adopted an aggregate
PLI, which was later rejected by the Ld. DRP, who proceeded on a project-specific approach.
Hence, once the method of comparability itself was altered by the Ld. DRP, the question of estoppel on the assessee does not arise. Therefore, it was contended that the comparability of the Yedula Project with irrigation sub-contract projects requires factual verification.
Accordingly, the Ld. AR prayed before the Bench for remand of the issue to the file of the Ld.AO/TPO to adopt an external CUP or alternative benchmarking for the Yedula Project.
7. We have heard the rival submissions and perused the material placed on record. The core dispute before us is pertains to the correctness of the internal comparables adopted by the Ld.
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TPO for benchmarking the Yedula irrigation project. In this regard, we have gone through the weighted average of PLI calculated by the Ld. TPO for highway projects and irrigation projects through non-AE, which has been placed at para no.5 of the consequential order of the Ld. TPO dated 26.07.2022, which is to the following effect:
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We have also gone through the benchmarking undertaken by the Ld. TPO with regard to the AE projects, which has been placed at para no.6 of the consequential order of the Ld. TPO dated 26.07.2022, which is to the following effect:
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On perusal of the above, we observe that the Ld. TPO computed separate PLIs for highway and irrigation projects, taking non-AE projects as the internal comparables for the purpose of benchmarking the AE projects. We found that the Ld. TPO computed the PLI of highway projects through non-AEs at 15.34% and that of irrigation projects through non-AEs at 4.96%. We also observe that since the PLI of the assessee’s all AE highway projects and one AE irrigation project was lower than the PLI of non-AE projects, no adjustment was made by the Ld. TPO in respect of those projects. However, for the Yedula Project, the Ld. TPO observed the assessee’s PLI was at 17.34% and the PLI of irrigation projects through non-AEs was at 4.96%, he made an addition of Rs.36,77,04,171/- on account of Yedula Project. In this regard, the Ld. AR submitted that the comparison made by the Ld. TPO is fundamentally flawed since the Yedula irrigation project was an independent contract (not on back to back basis) undertaken by the assessee, whereas the irrigation projects undertaken through non-AEs were sub-contract projects, executed under entirely different contractual obligations and risk profiles. The Ld. AR placed reliance on the copies of contracts for ITA No 500 OF 2022 KNR Constructions Ltd Page 10 of 18
all such projects, placed before us and contended that the nature, scope, and risk allocations are materially different and therefore, they are not functionally comparable. Accordingly, the Ld. AR pleaded that the internal comparables adopted by the Ld. TPO are not appropriate, and that an external CUP or alternative benchmarking should be adopted for the Yedula Project. In this regard, we have carefully perused the copies of agreements relied on by the assessee. The projects relevant for our consideration are the irrigation projects undertaken by the assessee through non-
AEs, namely “Medak DLRB-High Level” and “Medak DLRB-Low
Level”, and the irrigation project undertaken, namely the Yedula
Project contended to be undertaken by the assessee. There is no dispute that all the said three projects were awarded to the assessee by Government authorities and all of them pertain to irrigation projects. With respect to the Medak DLRB-High Level
Project, which has been undertaken through non-AE, the assessee has placed on record copies of sub-letting work orders issued to Mr. Junoothula Abhishek and Yuvashakthi Enterprises. The copy of first page of both the work orders is reproduced as under:
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On perusal of above, we find merit in the submission of the Ld. AR that the project was subcontracted by the assessee to the said parties on a back-to-back basis. Similarly, in respect of the Medak DLRB-Low Level Project, the assessee has filed copies of sub-letting work orders issued to K.R.R. Constructions and Yuvashakthi Enterprises, placed at page nos. 42 to 47 of the paper book. The copy of first page of both the work orders are reproduced as under:
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On perusal of the above, we again find that the arrangements were executed on a back-to-back subcontract basis. Now coming to the Yedula Project, though the Ld. AR contended that this project was not subcontracted on a back-to-back basis, the assessee has filed a copy of the agreement executed with AE for Yedula project (page nos. 17 to 24 of the paper book). The copy of relevant portion of the said agreement placed at page nos.17 and 18 of the paper book are reproduced as under:
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On perusal of above, we find that the title of the agreement clearly described the agreement as a “Sub-Contractor Agreement.” Further, from para no. 3 on page no. 18 of the paper book, it is evident that the work was allotted to the AE on a back- to-back basis. Thus, the factual position confirms that even the Yedula Project was also a back-to-back subcontract arrangement. Hence, the contention of the Ld.AR that the Yedula Project has been undertaken by the assessee, is factually incorrect. Accordingly, we reject the contention of the assessee. 13. From the above analysis, it emerges that (a) all projects were obtained by the assessee from Government authorities; (b) all projects pertain to irrigation works and (c) all projects—whether executed through non-AEs or the AE were subcontracted on a back-to-back basis. Therefore, we find no infirmity in the ITA No 500 OF 2022 KNR Constructions Ltd Page 17 of 18
approach of the Ld. AO / Ld. TPO in benchmarking the irrigation project executed through the AE on the basis of PLI of the irrigation projects executed through non-AEs. In the present case, the works are identical in nature, terms, scope, risk allocation and contractual structure. Therefore, we find that the comparison drawn by the Ld.AO/TPO is proper and deserves acceptance.
Hence, we reject the contention of the Ld. AR that the irrigation projects executed through non-AE are not comparable with the Yedula project. Accordingly, we uphold the addition made by the Ld. AO/TPO on account of Transfer Pricing Adjustments of the Yedula Project.
14. As we have already adjudicated the issue in favour of the Revenue, we do not propose to examine or adjudicate upon the further objection raised by the Revenue that the assessee, in its own transfer pricing study, had itself adopted the very same comparables.
15. In the result, appeal filed by the assessee is dismissed.
Order pronounced in the Open Court on 19th November, 2025. (RAVISH SOOD)
JUDICIAL MEMBER
Hyderabad, dated 19th November, 2025
Vinodan/sps
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Copy to:
S.No Addresses
1
KNR Constructions Ltd, KNR House, Plot Nos 113 & 114, Phase-
I Kavuri Hills, Hyderabad 500033
2
ACIT Central Circle 2(2) Hyderabad
3
Pr. CIT – Central, Hyderabad
4
DR, ITAT Hyderabad Benches
5
Guard File
By Order