BECHTEL INDIA PVT. LTD.,,NEW DELHI vs. ADDL.CIT,SPECIAL RANGE-2, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘I-1’, NEW DELHI

BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER

ITA No.7234/Del./2017 Assessment Year: 2013-14

M/s. Bechtel India Pvt. Vs. Addl. CIT, Ltd., Special Range-2, 418, Naurang House, 21 New Delhi K.G. Marg, New Delhi PAN :AAACB0298A (Appellant) (Respondent)

Appellant by Shri Nishant Saini, AR Respondent by Shri Surender Pal, CIT(DR)

Date of hearing 02.12.2020 Date of pronouncement 18.12.2020

ORDER PER O.P. KANT, AM:

This appeal by the assessee is directed against final assessment order passed by the Ld. Additional Commissioner of Income-tax, Special Range-2, New Delhi [in short ‘the Ld. Assessing Officer] for assessment year 2013-14, pursuant to the direction of the Ld. Dispute Resolution Panel (DRP). The grounds raised in the appeal are reproduced as under: 1. That on facts and circumstances of the case and in law, the Ld. AO / Ld. Transfer Pricing Officer (“TPO”) / Ld. Dispute Resolution Panel (“DRP”) erred in making an addition of INR 27,32,88,151 to the returned income of the Appellant by re-computing the arm’s

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length price of the international transaction pertaining to engineering design and related services segment of the Appellant, under section 92 of the Act. In passing the order, the Ld. AO / Ld. TPO / Ld. DRP erred in: 1.1. Rejecting comparable companies selected by the Appellant in its transfer pricing documentation on the basis of additional/modified quantitative filters which lacked valid and sufficient reasoning; 1.2. Accepting companies which are functionally not comparable; 1.3. Including enterprises owned or affiliated by government and having significant reliance on government projects; 1.4. Completely ignoring the orders passed by Hon’ble High Court, Hon’ble Income Tax Appellate Tribunal and Ld. DRP in the Appellant’s own case for previous years, by accepting comparables directed to be excluded for benchmarking the engineering design service rendered by the Appellant; 1.5. Not appreciating the fact that the Revenue Authorities have accepted the exclusion of certain comparables by not appealing at higher forum; and 1.6. Erroneously relying on the orders of Ld. DRP for prior years in respect of functions performed by the Appellant in the impugned segment. 2. That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO erred in not following the binding directions of the Ld. DRP for the subject year. In doing so, the Ld. AO/ Ld. TPO erred in: 2.1. Including comparables namely Certification Engineering International Limited and Holtec Counselting Private Limited in the final set of comparable companies; 2.2. Not correcting the margins of comparable companies; 2.3. Not computing the margins of comparables and the Appellant by considering foreign exchange gain/ loss as operating in nature; and 2.4. Denying working capital adjustment in arriving at the arm’s length margin. 3. That the Ld. AO/ Ld. TPO/Ld. DRP grossly erred in rejecting the segmental accounts furnished by the Appellant in its TP Documentation. In doing so, Ld. AO/ Ld. TPO/Ld. DRP has erred in disregarding the allocation undertaken by the Appellant in the respective segments and allocating the same based on an inappropriate allocation key (revenue base). 4. That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/Ld. DRP erred in selecting the current year (i.e. financial year 2012-13) data for comparability despite the fact that at the time of preparation of transfer pricing documentation by the Appellant, the complete data for financial year 2012-13 was not available within the public domain.

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Income-tax Act, 1961 (in short ‘the Act’) were issued and complied with. In view of the international transactions entered into by the assessee with its Associated Enterprises, the matter of determination of arm’s-length price of those international transactions was referred to the Ld. Transfer Pricing Officer (TPO). The Ld. TPO proposed transfer pricing adjustment of ₹ 28,63,66,332/- in his order dated 30/08/2016. Consequently, the Ld. Assessing Officer issued draft assessment order on 29/11/2016 proposing the transfer pricing adjustment. Aggrieved, the assessee filed objections before the Ld. DRP, who issued certain directions to the Assessing Officer. Pursuant to the direction of Ld. DRP, the Assessing Officer passed this impugned final assessment order, against which the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Before us, the Ld. Counsel of the assessee filed paper-books and other documents electronically. Both the parties appeared before us through videoconferencing facility. 4. All the grounds raised are in relation to two transfer pricing adjustments. The grounds nos. 1 to 4 are related to adjustment made to international transaction of ‘Engineering Design’ and related ‘Services’. The ground no 5 relates to international transaction of ‘interest on outstanding receivables’. 5. Brief facts qua the issue in dispute are that during the year the assessee has provided services to its associated enterprises under the following three segments: (a) Engineering design and related services (b) Financial and accounting support services (c) Information technology infrastructure support services

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5.1 The summary of the economic analysis of the international transaction undertaken by the assessee during the year under consideration with its AEs is summarised below: Margin Updated Value Most Profit Level of Nature of international BIPL’s Margins of (in 1NR Appropriate Indicator comparable transactions Margin Comparable Crores) Method (‘PLI’) s in TP s study Transaction Operating Provision of engineering al Net profit / design and related 241.96 Margin operating 14.00% 13.87% 10.02% services Method cost (‘TNMM’) (‘OP/OC’) Provision of financial and accounting support 8.94 TNMM OP/OC 17.7% 12.03% 12.59% services Provision of information technology 27.44 TNMM OP/OC 18.8% 11.88% -2.26% infrastructure support services Reimbursement of 4.21 TNMM OP/OC Not applicable (‘NA’) expenses (paid)1 Comparable Reimbursement of Uncontrolle 20.55 NA NA expenses (received) d Price Method

5.2 The functions, assets and risk (FAR) analysis of the assessee has been reproduced by the Learned TPO in para 2.2 of his order. According to the FAR analysis, after awarding the contract to the Associated Enterprises by their customers, work of various engineering designs and drawings required for the project, are assigned to the assessee. The assessee employs engineers having qualification and experience in the field of plant layout design, electrical design, instrumentation design, piping design, civil design and mechanical designs etc. The assessee has wide area (WAN) leased IT cable infrastructure, which connects assessee’s computers and servers to AEs computers and servers. The engineering designs and drawings are developed using

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computers/computing devices/software and are transmitted to AEs using the WAN links. Various divisions of the assessee like Design and Piping division, Civil structure division, Electrical division, Control system division, Mechanical division, Process division etc. work in integrated manner for the projects assigned by the AEs. The assessee also provided procurement support and construction support services to the AEs. 5.3 The arm’s-length price of the international transaction of ‘Engineering design and related services’ was determined by the assessee applying Transactional Net Margin Method (TNMM) taking operating profit to total cost (OP/TC) ratio as Profit Level Indicator (PLI). The PLI of the assessee company was worked out at 14% whereas the average PLI of the 7 comparables was arrived at 13.87 % . 5.4 While working out the PLI, the assessee did not route the reimbursement of expenses amounting to ₹ 20,55,04,985/- through the profit and loss account. The Ld. TPO was of the view that reimbursement of expenses should be treated as part of profit and loss account and therefore he re-computed the PLI of the assessee at 11.45%. The Learned TPO applied various filters for selection of the comparables and finally selected 11 comparables with the average PLI of 25.09%. The Learned TPO accordingly computed adjustment of ₹ 27,32,88,151/- to the international transaction of ‘Engineering and related services’. 5.5 The learned DRP directed the Learned AO/TPO to exclude the company ‘Holtec Consulting Private Limited’ as comparable relying on the order of the Tribunal in the case of the assessee for assessment year 2005-06. The learned DRP also directed for

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granting working capital adjustment, considering foreign exchange gain/loss as operating in nature and considering correct margin computation for selected comparable companies. Based on the direction of the Learned DRP, the final set of the comparable companies and their working capital adjusted PLI as worked out by the Learned TPO in rectification order dated 20/12/2017 is reproduced as under: Submitted Working by Introduced capital S. No. Name of comparable Appellant by Ld. TPO adjusted (TP Study) OP/OC IOT Design and Engineering  1. --- -5.87% Limited Korus Engineering  2. --- -3.49% Solutions Limited Cades Digitech Private  3. --- 6.02% Limited  4. Simon India Limited --- 8.62%  5. Allcargo Logistics Limited --- 11.45%  6. Neilsoft Limited --- 15.03% Mitcon Consultancy &  7. Engineering Services --- 37.37% Limited Certification Engineering  8. --- 35.44% International Limited  Acropetal Technologies '9. --- 37.79% Limited (EDS Segment)  10. HSCC (India) Limited --- 52.32% Mean 19.47%

5.6 The Learned TPO recomputed the adjustment for provisioning of Engineering design and related services to ₹ 15,23,01,077/-. 5.7 Before us, the Ld. Counsel of the assessee submitted that if three comparables namely ‘CEIL’, ‘HSCC India Ltd.’ and ‘Mitcoin Consultancy’ are excluded from the set of the comparables, the

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assessee’s margin would be at par with the average margin of the comparables and no adjustment would be required in the case of the assessee. 6. We have heard rival submission of the parties on the issue in dispute and perused the material on record. The issue of exclusion/retaining of three comparables argued by the parties is adjudicated as under:

7.1 Before the Learned TPO the assessee submitted that CEIL is functionally dissimilar in view of the activities of certification, re- certification, safety audit, HSE management system for offshore and onshore oil and gas facilities, third-party inspection of equipment and installation in hydrocarbon and other sectors. The assessee also submitted that company was rejected by the Tribunal as comparable in the case of the assessee for assessment year 2009-10 and assessment year 2011-12. The Learned Counsel of the assessee submitted before us that the learned DRP though rejected the company as suitable comparable, however while giving the final direction, retained the company as comparable. The learned Counsel before us submitted that company being government company, also cannot be compared with the assessee. 7.2 The Learned DR on the other hand relied on the observation of the learned DRP. 7.3 We have heard submission of the parties. In profit and loss account for the year under consideration, available on page 462

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of the paper-book, we find that company has shown revenue of ₹ 28,43,13,270/- from operations. On perusal of page 12 of the Annual Report, available on page 444 of the paper-book, we find that operations mainly include certification activities, third-party inspection activities, safety audit and ERDMP audits. The relevant part of management discussion and analysis is reproduced as under: During the financial year company was able to maintain a healthy order book and secured business worth around Rs. 27.00 Crores. In the Certification activities the company was able to secure four major orders during the year. The company is striving hard for further improving order book position of Certification contracts in the current year 2013-14. In the Third Party Inspection activities, the company secured major orders from Vadodara Municipal Corporation, Gujarat State Petronet Ltd., ONGC for Mumbai High Assets and other esteemed clients, besides securing sizeable business from various State Government Organizations etc. The Company has made inroads into the HSE area for External Safety Audit and ERDMP Audit.”

7.4 In view of the above observations, the company cannot be compared functionally with the assessee and therefore rejected as functionally dissimilar. We may like to mention that company has been rejected by the Tribunal (ITA No.882/Del./2014) in assessment year 2009-10 also on the ground of functional dissimilarity. The relevant finding of the Tribunal is reproduced as under: “32. On the basis of foregoing discussion, we have no hesitation to hold that the functions of assessee Bechtel India are quite dissimilar with CIEL which was wrongly taken by the TPO as a suitable comparable for benchmarking of impugned international transaction undertaken by the assessee during the relevant financial period. The functional dissimilarity as well as distinction in the geographical

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market in the light of foreign exchange fluctuation risk of the assessee company coupled with below 25% RPT undertaken by the CIEL, we, therefore, decline to agree with the conclusion of the AO/DRP/TPO that the CIEL is a suitable comparable for the purpose of proposed TP adjustment made by the authorities below. Functional dissimilarity and other aspects cannot be ignored and these factors clearly demonstrate that CIEL should not have been included in the final set of comparables for making transfer pricing adjustment pertaining to the impugned international transactions of the assessee company and we order to exclude the same from the final set of comparables. It is ordered accordingly.”

7.5 Further, it is undisputed that company is a wholly-owned subsidiary of government-owned enterprises namely “Engineers India Ltd”. The contention of the assessee that government-owned enterprise substantially rely on government projects and, therefore, being transaction in the nature of related party, same need to be excluded. In the case of the assessee for assessment year 2009-10, 2010-11 and 2011-12, the Tribunal has rejected government-owned enterprises as comparable. The relevant part of the decision of the Tribunal in ITA No. 882/Del/2014 for assessment year 2009-10 is reproduced as under: “17. In view of proposition laid down by the ITAT, Mumbai, we observe that in that case, Engineers India Ltd., earned income from turkey projects by successfully completing the project of IOCL and other public sector undertaking and the related party transaction were much more than the filter of 25%, therefore, the order for exclusion of Engineers India Ltd. was passed by the Tribunal. In the present case, the NTPCES was sheltered by its holding company NTPCES and government companies and departments awarded/entrusted various projects/contracts for rural electrification, distribution of power and project management consultancy, therefore, NTPCES loses the tag of comparability with the assessee Bechtell India. We also find it appropriate to mention that it cannot be ignored that the NTPCES is also enjoying settlement of all employees from the holding company NTPCS at cost and the benefits received from the holding company and related party transactions (RPT) are not monetised in the annual report and in

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absence of specific data in this regard, NTPCES cannot be held as comparable with the assessee company. Therefore, AO/TPO was not justified in including NTPCES in the final set of comparables for benchmarking impugned international transaction of the assessee company and they are directed to delete the same. We order accordingly.”

7.6 Similarly, Tribunal in assessment year 2010-11 and 2011- 12 has rejected company namely “Kitco Ltd” on the ground of rendering services to government undertakings. Respectfully, following the finding of the Tribunal, the company is also rejected on the ground of being a government controlled enterprise. Accordingly, we direct the Ld. AO/TPO to exclude the company from the set of the final comparables.

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Tribunal in the case of the assessee for assessment year 2009-10, 2010-11 and 2011-12. 8.3 The Learned DR, on the other hand, relied on the order of the lower authorities. 8.4 We have heard rival submission of the parties on the issue in dispute. As far as argument of functional dissimilarity is concerned, on perusal of profit and loss statement for the year under consideration, available on page 414 of the paper-book, we find that main revenue of ₹ 33.79 crores has been shown from consultancy fee. Under the head directors report, on page 400 of the paper-book, the consultancy income has been shown from designing and engineering, project management and procurement of medical equipments, drugs and pharmaceutical etc. The activity of providing consultancy cannot be held as functionally similar to the activity of preparing engineering design and drawings. Therefore, the company is not comparable being functionally dissimilar with the assessee. We note that company has been rejected on the grounds of the functional dissimilarity by the Learned DRP in assessment year 2009-10. The company is also a government undertaking and earns revenue from government contracts, which is evident from page 418 of the paper-book. We have already excluded government-controlled enterprises as comparable with the assessee in para 7.6 of this order. Accordingly to have consistency in our decision, this company is also rejectable on the ground of being government- owned enterprise. Accordingly, we direct the Learned AO/TPO to exclude this company from the set of the final comparables.

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6779/Del./2015, order dated 20.08.2018, has rejected the company as comparable observing as under: “31. The profile of this company suggests that it provides technical consultancy in various areas such as power division, energy and carbon service division, banking and finance division. This company also renders vocation trainings, IT trainings and laboratory services from which it earns 40% (approx.) of its revenue. From a screen shot of its profile, which is also at page 113 of appeal set, shows that the Ministry of Environment and Forest, Government of India extended its accreditation to the laboratory of this company. It is further seen that this company has also exclusively completed QCI-NABET accreditation process mandatory for EIA consultants. The company has also executed environment monitoring assignments for TACO group, Volkswagon, Kirloskar Brothers. This company is also engaged in the banking and finance, entrepreneurship and vocational training. In our considered opinion, the functional profile of this company is not at all comparable with the function performed by the appellant company. Therefore, this company cannot be a good comparable. We, accordingly, direct for exclusion of Mitcon Consultancy and Engineering Services from the final set of comparables.”

9.4 In view of the above, we direct the Learned AO/TPO to exclude the company from the final set of the comparables. 10. In view of the above finding, the ground No. 1 to 4 of the appeal is allowed for statistical purposes. 11. The ground No. 5 of the appeal relates to transfer pricing adjustment for interest on receivables. 11.1 The facts qua the issue in dispute are that in view of payments against invoices raised by the assessee to associated enterprises were received with the delay more than industry standard. The Learned TPO proposed a separate transfer pricing adjustment re-characterizing the outstanding receivables as unsecured loans. He applied CUP method for benchmarking the transaction of interest on receivables and using SBI prime lending rate, computed adjustment for interest on receivables amounting to ₹ 1,30,78,181/-. On the objections of the assessee, the Learned

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DRP noted that in assessment year 2010-11, the Tribunal following the decision of the Tribunal in the case of Kusum Healthcare Private Limited (reported in TS-129-ITAT- 2015(Del)-TP) held that no separate adjustment for interest on receivable was warranted when working capital adjustment was already granted to the assessee. The Learned DRP further noted that Hon’ble Delhi High Court in the assessee own case (ITA No. 379/2016) for assessment year 2010-11 vide order dated 21/07/2016 upheld the order of the Tribunal holding that the assessee is a debt free company and the question of receiving any interest on receivable did not arise. The Learned DRP thereafter noted that the Tribunal in assessment year 2012-13 in order dated 16/05/2017 relying on the decision of the Tribunal in the case of ‘Ameriprise India P Ltd.’, 2015-TII-347-ITAT-Del-TP held that when the export proceeds are realized within the year, but beyond the stipulated period of the agreement, then same will not come within the working capital adjustment and rejected the contention of the assessee that interest on delayed payment of receivable get subsumed in the working capital adjustment allowed to the assessee. The Tribunal in AY 2012-13 held that interest on delayed realization of receivables is a separate international transaction and therefore require benchmarking. The Tribunal applying interest rate of six months LIBOR +400 basis point on receivables, upheld the transfer pricing adjustment of interest on receivables accordingly. In view of the finding of the Tribunal in assessment year 2012-13, the Learned DRP in the year under consideration directed the Learned TPO to compute

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the adjustment using the interest rate of six month of LIBOR +400 basis point. 11.2 Before us, the Learned Counsel of the assessee has repeated the historical background of the issue in dispute and submitted that special leave petition filed by the Revenue against the order of the Hon’ble High Court for assessment year 2010-11 has been rejected by the Hon’ble Supreme Court on 21/07/2017, which is after the order of the Tribunal for AY 2012-13 dated 16/05/2017 and therefore decision of the Tribunal in assessment year 2012-13 need not be followed. 11.3 The Learned DR, on the other hand, submitted that the Tribunal in assessment year 2012-13 noted the decision of the Hon’ble High Court in assessment year 2010-11 and after taking into consideration the Explanation inserted by way of the Finance Act, 2012 to section 92B with retrospective effect from 01/04/2002, held that any delay in realization of debt arising during the course of the business is liable to be visited with TP adjustment on account of interest income short charged or uncharged. In view of the learned DR, the Learned DRP is justified in following the order of the Tribunal in assessment year 2012-13. 11.4 We have heard rival submission of the parties on the issue in dispute and relevant material on record including the decisions cited by the Learned Counsel of the assessee as well as by the Learned DR. In the instant case, the Learned DRP has noted the decisions of the Tribunal and High Court in the earlier years. In assessment year 2010-11 the Tribunal in ITA No.1478/Del/2015 placed reliance on the decision of the Tribunal in the case of

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Kusum Healthcare Private Limited (supra) and held that impact of credit period was duly factored in working capital adjustment allowed while determining the arm’s-length price and, therefore, no separate adjustment for interest on receivables was warranted in the hands of the tested party. The relevant extract of the decision of the Tribunal is reproduced as under: “15.1 It is brought to our notice that the assessee is a debt free company. In such circumstances it is not justifiable to presume that, borrowed funds have been utilized to pass on the facility to its AE’s. The revenue has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments. 16. In lieu of the discussions and the ratio laid down in the case of Kusum Healthcare Pvt. Ltd., we direct that no separate adjustment for interest on receivables are warranted in the hands of the assessee. Grounds no. 3 of the assessee’s appeal is there by allowed.”

11.5 On appeal by the Revenue, against the above order of the Tribunal, the Hon’ble Delhi High Court (ITA No. 379/2016) in order dated 21/07/2016 dismissed the appeal observing as under:

“4. As far as question (B) concerning the adjustment for interst no receivables, the Court finds that the ITAT has returned a detailed finding of fact that the Assessee is a debt free company and the question of receiving any interest on receivables did not arise. Consequently, no substantial question of law arises for consideration as far as this issue is concerned.”

11.6 The assessee brought the decision of the Hon’ble High Court in assessment year 2010-11, before the Tribunal in assessment year 2012-13 by way of raising ground No. 1.5 of the appeal, however, the Tribunal after considering the amendment brought into Act by way of Finance Act, 2012 and other decisions

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held that interest on delayed realization of receivable is a separate international transaction, which requires separate benchmarking. The finding of the Tribunal in assessment year 2012-13 is reproduced as under:

“17. We have considered the submissions of both the parties and perused the record of the case. The assessee's grievance is two-fold. Firstly, when working capital adjustment has been made, then, no separate adjustment is required to be made in respect of accounts receivables because the same gets subsumed in the working capital adjustment. The second plea of the assessee is that since its funds are entirely debt free, therefore, no adjustment is warranted in regard to late realisation of proceedings from receivables. The assessee's reliance as noted earlier, is on the decisions in its own cases for assessment year 2010-11 and 2011-12. The issue has been elaborately considered in the case of Ameriprise India Pvt. Ltd. (supra) and, again, in the case of Mckinsey Knwledge Centre Pvt. Ltd. (supra). In the case of Techbooks India International Pvt. Ltd. vs. DCIT (supra), taking note of the Explanation inserted by the Finance Act, 2012 to Section 92B, it was observed that there remained no doubt that apart from any short-term or long-term borrowing, etc., or even advance payments or deferred payments, 'any other debt arising during the course of business' had also been expressly recognized as an international transaction. In the said decision, the decision of the Hon'ble Bombay High Court in the case of CIT vs. Patni Computer Systems was also considered, wherein Hon'ble Bombay High Court set aside the view taken by the Tribunal in view of amendment to section 92B. The decision in the case of Kusum Healthcare Pvt. Ltd. was duly considered in the case of Ameriprise India Pvt. Ltd. and it was observed from para 20 to 23 as under:-

The ld. AR supported the impugned order by relying on a Tribunal order dated 31.3.2015 passed in Kusum Healthcare Pvt. Ltd. vs. ACIT (ITA No.6814/Del/2014) in which it has been held that no additional imputation of interest on the outstanding receivables is warranted if the pricing/profitability is more than the working capital adjusted margin of the comparables. In the opposition, the ld. DR relied on a later order dated 6.7.2015 passed by the Tribunal in the case of Techbooks International Pvt. Ltd. (supra), in which the transfer pricing adjustment on account of the delayed realization of invoices from AEs has been upheld. The ld. DR contended that the order in the case of Kusum Healthcare Pvt. Ltd. (supra), has been passed without considering the amendment to section 92B carried out by the Finance Act, 2012 with retrospective effect from 1.4.2002,

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which has been duly taken into account by the Tribunal in its later order in Techbooks International Pvt. Ltd. (supra).

` Explanation.--For the removal of doubts, it is hereby clarified that--

(i) the expression "international transaction" shall include--

(a) ............

(b) ...........

(c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;”

11.7 But before us the Learned Counsel of the assessee has referred to the decision of the Hon’ble Supreme Court dated 21/07/2017, which is after the decision of the Tribunal in assessment year 2012-13. The Hon’ble Supreme Court has held as under: “Delay condoned.

We are in agreement with the High Court that as far as Question-B concerning adjustment for interest on receivables is concerned the Tribunal has returned a finding of fact. Consequently, no substantial question of law therefore, rises, on the facts of this case.

The special leave petition is dismissed.”

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11.8 In view of the order of the Hon’ble Supreme Court, which is subsequent to the order of the Tribunal in assessment year 2012- 13, we direct the Ld. AO/TPO to delete the transfer pricing adjustment on account of the interest receivables. The ground No. 5 of the appeal of the assessee is accordingly allowed. 12. Before us the Learned Counsel of the assessee referred to ground No. 3 and submitted that segmental accounts of the assessee might be redrawan. He submitted that the assessee had submitted basis of cost allocation for the segmental profit and loss account on various allocation keys like total hours spent by the personal, payroll cost, head count, numbers of hours, however without taking due cognizance of the reasonableness of the basis, the Learned TPO allocated the expenses on revenue ratio. He submitted that in assessment year 2010-11 also the assessee prepared segmental profit and loss account using above allocation keys, which have been accepted by the Learned TPO, therefore in the year under consideration also he should accept the segmental profit and loss account prepared using above allocation keys. The contention of the assessee that if above allocation keys are applied then margin from rendering engineering design and related services would be 14%. 12.1 On the other hand, the Learned DR submitted that it will not be proper to disturb the margin of the other segments, which have been accepted at arm’s-length by the Learned TPO and no adjustment has been made to those segments. 12.2 We have heard rival submission of the parties on the issue in dispute. Before us the Learned Counsel of the assessee submitted that if three comparables, namely, ‘Mitcoin’, ‘CEIL’ and

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‘HSCC’ are excluded, then it’s margin would be higher than the mean margin of the comparables and no adjustment would be required. The Learned Counsel in its synopsis has computed mean margin of comparables after excluding above three comparables at 9.94%, whereas the Learned TPO has computed the margin of the assessee after allocating cost of expenses on revenue basis at 12.40%. Thus it is evident that no adjustment would be required, even if the cost allocation key as applied by the TPO is maintained. In such circumstances, the arguments of the assessee are rendered merely academic, and therefore we are not adjudicating upon the same. The ground No. 3 of the appeal of the assessee is accordingly dismissed as infructuous. 13. In the result, the appeal of the assessee is allowed partly for the statistical purposes Order pronounced in the open court on 18th December, 2020.

Sd/- Sd/- (SUCHITRA KAMBLE) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 18th December, 2020. RK/-(D.T.D.S.) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi