IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KULDIP SINGH : JUDICIAL MEMBER ITA no. 344/Del/2016 Asstt. Yr. 2011-12 WSP Consultants India Pvt. Ltd., Vs. DCIT Circle 27(2), FC-24, Sector 16A, New Delhi. Distt. Gautam Budh Nagar, Noida. PAN: AAACW 5220 F (Appellant ) ( Respondent) Appellant by : Shri Atul Jain CA & Ms. Suchita Kanodia CA Respondent by : Shri Manish Kumar CIT(DR) Date of hearing : 11/08/2016. Date of order : 15/09/2016. ORDER PER S.V. MEHROTRA, A.M: This appeal, preferred by assessee, is directed against assessment order dated 30.11.2015, passed by Assessing Officer u/s 143(3) read with section 144C(5), pursuant to directions of ld. DRP. 2. Brief facts of case are that assessee company, incorporated on 18.3.2004, as subsidiary of WSP GR Cyprus Holding Ltd., Nicosia Cyprus, global business provider, in assessment year under consideration, was 2 providing design engineering, management consultancy services across built and nature environment worldwide. company provided services to transform built environment and restore natural environment and its expertise ranged from environmental remediation to urban planning from engineering iconic buildings to designing sustainable transport networks and from developing energy sources of future to enabling new ways to extracting essential resources. 3. During year under consideration assessee had entered into following international transactions:- No. Nature of transaction Method Value of transaction 1 Purchase of software TNMM 1,83,125 2 Engineering consultancy TNMM 8,49,15,100 services 3 IT support services/ TNMM 3,35,10,245 design support services 4 Reimbursement of - 17,38,165 expenses incurred by AE on behalf of company 5 Reimbursement of - 19,31,512 expenses incurred by company on behalf of AE 4. assessee had justified ALP of its international transactions in regard to engineering consultancy services and IT support services provided to AEs by applying transactional net margin method (TNMM). operating profit to total cost (OP/TC) was taken as PLI in TNMM 3 analysis. PLI of company was arrived at 1.31% on cost whereas average PLI of comparable was arrived at 1.01% as per analysis in TP report. assessee had selected following comparables in engineering consultancy services and IT support service in its TP study report:- No. Name of company FY 2010-11 FY 2009-10 FY 2008 Weighted 09 average 1 Indo Asian Projects Ltd. 0.71 1.43 - 0.21 3.07 2 ITD Cementation NA 2.74 2.09 2.43 India Ltd. 3 SRS Real 1.17 0.54 - 0.39 Infrastructure Ltd. 3.43 5. Ld. TPO issued detailed show cause notice in which he, inter alia, pointed out that finances charges amounting to Rs. 31,610/- was taken as operating expenses and provision for losses written back of Rs. 7093239/- was taken as operating income, which were to be considered as non- operating. 6. He, accordingly, show caused as to why PLI of assessee be not taken as -2.43%. Ld. TPO further pointed out that since nature of services provided were technical in nature, hence, comparables providing technical services were to be used for bench mark transactions relating to engineering/ consultancy/ designing support services. Ld. TPO after 4 deciding filters to be applied proposed following comparables for bench marking international transactions: No Company Name OP/OC (%) 1 Ashok Leyland Project Services Ltd. 24.70% 2 Bengal SREI Infrastructure Devp. Ltd./ 42.14% 3 Certification Engineers International Ltd. 78.45% 4 Global Procurement Consultants Ltd. 30.85% 5 HSCC (India) Ltd. 21.04% 6 Indus Technical & Financial Consultants Ltd. 14.78% 7 Kitco Ltd. 27.48% 8 Mahindra Consulting Engineers Ltd. 30.92% 9 Mitcon Consultancy & Engg. Services Ltd. 40.19% 10 Pallavan Transport Consultancy Services Ltd. 25.59% 11 TCE Consulting Engineers Ltd. 29.29% 12 Usha Hydro Dynamics Ltd. 29.45% 13 Gujarat Industrial & Technical Consultancy 7.89% Org Ltd. 14 IBI Chematur (Engineering & Consultancy) 25.96% Ltd. 15 Rites Ltd. 58.27% 16 NTPC Electric Supply Company Ltd. 18.01% Average 31.56% 7. Ld. TPO also considered working capital adjustment claimed by assessee and pointed out that working capital adjustment may be worked out considering trade payables and receivables only of taxpayer vis vis those of comparable companies. 8. assessee in its reply to show cause notice took following contentions, as noticed by ld. TPO:- 5 3.2.1 assessee has stated that TPO has not considered segmental operating profit of company, assessee has submitted details of domestic transaction and transaction with AEs. 3.2.2. Assessee has argued that services provided by it are in nature of business support services in relation to engineering disciplines. 3.2.3. Assessee has objected against use of current year data. 3.2.4. Objection against finance charges and provision of losses written back considered as non-operating by TPO. 3.2.5. Objection against filters applied by TPO. 3.2.6. Assessee has objected on rejection of comparables selected by it. 3.2.7. Assessee has objected against additional comparables proposed by TPO. 9. As regards assessee s contention regarding segmental profitability submitted before TPO, he pointed out that assessee had never submitted segmental profitability before show cause notice. Ld. TPO has reproduced segmental profitability submitted by assessee, which was as under: Particulars Domestic Transaction Total transaction with AEs amount as per P&L Income from 98289291 85981307 184270 consultancy fee Other income 7093239 - 7093239 6 Total 105385530 85981307 191363837 Operating expenses Personnel 50752252 64088120 114840372 expenses Operating & 56488436 9058951 65547387 Admin expenses Depreciation 4490454 3982100 8472554 and amortization Finance 31610 - 31610 charges Profit before (6380222) 8852137 2471914 prior period adjustment and tax OP/OC -5.71% 11.48% 1.31% 10. With reference to aforementioned table, ld. TPO pointed out that assessee had not submitted basis of allocation of expenses. He further pointed out that nowhere in audit report such segmental was mentioned. He, accordingly, rejected contention of assessee in this regard. 11. After considering other objections raised by assessee, ld. TPO finally selected following comparables for benchmarking international transactions: No Company Name OP/OC (%) 1 Ashok Leyland Project Services Ltd. 24.70% 2 Bengal SREI Infrastructure Devp. Ltd./ 42.14% 3 Certification Engineers International Ltd. 78.45% 4 Global Procurement Consultants Ltd. 30.85% 7 5 Indus Technical & Financial Consultants Ltd. 14.78% 6 Kitco Ltd. 27.48% 7 Mahindra Consulting Engineers Ltd. 30.92% 8 Mitcon Consultancy & Engg. Services Ltd. 40.19% 9 Pallavan Transport Consultancy Services Ltd. 25.59% 10 TCE Consulting Engineers Ltd. 29.29% 11 Usha Hydro Dynamics Ltd. 29.45% 12 Gujarat Industrial & Technical Consultancy 7.89% Org Ltd. 13 IBI Chematur (Engineering & Consultancy) 25.96% Ltd. 14 Rites Ltd. 58.27% 15 NTPC Electric Supply Company Ltd. 18.01% Average 32.27% 12. Ld. TPO determined ALP of international transaction relating to engineering services as under: Operating cost 18,88,60,313 OP/OC% 32.27% Arm s Length Price (ALP) 24,98,05,536 Price shown in international transactions 18,42,70,598 Shortfall being adjustment u/s 92CA 6,65,34,938 13. Ld. DRP after considering assessee s objections directed TPO to exclude and include certain companies as comparable in calculating ALP. Accordingly, after giving effect to ld. DRP s directions, adjustment of Rs. 38754545/- was made by AO. 14. Being aggrieved, assessee is in appeal before us against final assessment order passed by AO and has taken following grounds of appeal: 8 1. On facts, circumstances of case and in law, Learned Deputy Commissioner of Income Tax, Circle -27(2) ("Ld. AO") erred in completing assessment under section 143(3) read with section 144C(4) of Income-tax Act, 1961 ( Act") by making adjustment of INR 38,754,545 under section 92CA(4) of Act, on account of arm's length price of international transaction pertaining to provision of back end support in respect of engineering and designing services rendered by its AEs. 2. On facts and in law, Learned Dispute Resolution Panel- 2, New Delhi. ("Hon'ble DRP"), Ld. AO and Deputy Commissioner of Income Tax, Transfer Pricing Officer - III(1)(1) ("Ld. TPO") erred in disregarding Appellant's use of multiple year/ prior years' data in contravention of provision of section 92C of Act read with Rule l0B and Rule 10D(4) of Income Tax Rules, 1962 ("the Rules") thereby erred in disregarding doctrine of impossibility of performance in contravening Section 92D of Act. 3. On facts and in law, Ld. AO/ Ld. TPO erred in not following directions issued by Hon ble DRP to re- compute and restrict Transfer Pricing ("TP") adjustment, on proportionate basis, to value of international transactions only. 4. On facts and in law, Ld. AO/ Ld. TPO erred in not following directions issued by Hon'ble DRP to correctly compute operating profit margins of finally selected companies, thereby ignored correct computation provided by Appellant during course of proceedings 5. On facts and in law, Hon'ble DRP erred in upholding Ld. AO/ Ld. TPO's rejection of comparability analysis undertaken by Appellant in its TP Documentation; and conducting fresh comparability analysis based on application of additional! revised filters in determining ALP of international transactions. 9 6. On facts and in law, Hon'ble DRP and Ld. AO/ Ld. TPO erred in including certain new companies that are not comparable to Appellant in terms of functions performed, assets employed and risks assumed, thereby contravening provisions of Rule 10B(2) of Income Tax Rules, 1962 ("the Rules"). 7. On facts and in law, Hon'ble DRP and Ld. AO/ Ld. TPO erred in incorrectly computing Appellant's margin by using following approach; 1. Using entity level margin of Appellant instead of segmental margin provided for Appellant's international transactions with thereby contravening provisions of Rule 10B(l) of Rules; and Annexure AO 2. Considering Provision for unforeseen losses written back as non-operating in nature. 8. On facts and in law, Hon'ble DRP and Ld. AO/ Ld. TPO erred in not allowing risk adjustment under Rule lOB(l)(e) for determination of ALP to account for difference in risk profile of Appellant and of comparable companies. " 9. On facts, circumstances of case and in law, Ld. AO has erred in computing interest. 10. On facts and in law, Ld. AO/ Ld. TPO erred in initiating penalty proceedings under Section 271(1)(c) of Act when facts of case and provision of law do not warrant such initiation of penalty proceedings. 15. Ld. counsel for assessee submitted that assessee is back end support service provider and was providing architectural consultancy services to its AE. Ld. counsel pointed out that assessee was also engaged in provision of end to end structural engineering and consultancy services to 10 third parties in India under direct contract and as full-fledged entrepreneur engaged in negotiation of prices, conclusion of contracts, sub-contracting of work based on further negotiations where required, assuming project risk, capacity utilization risks etc. He pointed out that 47% of revenue was derived from AE and 53% revenue was derived from independent third parties. As regards service rendered to AE, ld. counsel pointed out that assessee operated as limited risk service provider with respect to provision of back end support services wherein AEs were engaged in front ending design and engineering business with third parties. These constituted only 47% of total revenue. 16. Ld. counsel pointed out that assessee had presented segmental P&L A/c before TPO, which was rejected without assigning any basis and only reason was that they were not audited. Ld. counsel pointed out that while DRP did not accept segmental analysis provided by assessee, it did provide relief by providing proportional adjustment to assessee vis- a- vis entity wise adjustment proposed by TPO i.e. limiting amount of expenses to % of revenue from AEs i.e. 47%. Ld. counsel referred to page 15 to 17 of PB, wherein order u/s 154/143(3) read with section 144C(4) dated 16.2.2016 is contained in which proposed adjustment 11 u/s 92CA was determined at Rs. 1,88,49,387/-. assessee has given in synopsis its working as under: Particulars Reference TPO s computation Operating Cost of (A) 142,555,679 appellant Add: Design Consultancy (B) 46,304,634 Expenses (relates to independent third party transactions) Total operating costs of =(A)+(B) 188,860,313 appellant (including design consultancy expenses) Operating Costs (D)= *47% 88,764,347 pertaining to AE transactions Arm s length price at (E)=(D)+18.10%(D) 104,830,693 margin of 18.10% International Transaction (F) 85,981,307 of Receipt on account of consultancy services Proposed adjustment u/s (G)=(e)-(F) 18,849,387 92CA 17. Ld. counsel pointed out that designing and consultancy expenses related to independent third party transactions and, therefore, could not form part of operating cost of assessee. 18. Ld. counsel further pointed out that if D&E expenses incurred solely for independent third party transactions are excluded then ALP of international transaction on account of consultancy services would be Rs. 12 79,128,381 as against amount received at Rs. 85,981,307, thus requiring no adjustment. Ld. counsel has submitted following details in this regard: Particulars Reference Assessee s computation Operating cost of (A) 142,555,679 appellant Operating cost pertaining (B)-(A)*47% 67,001,169 to AE transactions Arm s length price at =(B)+18.10%(B) 79,128,381 margin of 18.10% International Transaction (D) 85,981,307 of receipt on account of consultancy services Proposed adjustment u/s (G)=(D)-(E) No adjustment 92CA 19. Ld. counsel has filed additional evidence in PB in support of its contention that segmental margin of assessee is to be considered. Ld. counsel submitted certain documents before us, which, inter alia, includes details in relation to design and consultancy expenses which were solely incurred for independent third party business. Ld. counsel pointed out that for purpose of executing such independent third party contracts, assessee in turn availed services of sub-contractors and consultants and incurred D&C expenses which showed that 100% of such amount was sub-contracted to others. In paper book assessee has submitted following documents: 13 Back-up documentation such as back-to-back trail of contracts undertaken by Appellant with third parties and sub- contracted to others parties has been submitted; Invoices raised by sub-contractors and consultants on WSP CIPL; tabulation providing details to establish that such D&C expenses related to third party projects; and certificate issued by Statutory Auditors of WSP CIPL (for FY 10-11) providing total amount incurred on "Design Consultancy" expenses and break-up thereof has been submitted. 20. Ld. counsel further referred to page 350 of PB wherein reply of assessee before ld. TPO is contained in which segmental operating profitability of company was submitted before him. Ld. counsel further referred to page 371 of PB, wherein details of domestic non AE and AE cost is summarized. 21. Ld. counsel, therefore, submitted that entire adjustment should be recalculated after excluding non AE cost. He submitted that matter may be restored back to file of AO/ TPO to examine additional evidence. 22. Ld. DR submitted that AE s business cost cannot be segregated from nonAE s business cost. He pointed out that comparables were also rendering similar services. He pointed out that ld. DRP has granted sufficient relief to 14 assessee and issue of exclusion of sub-contracting expenses was not taken before DRP. 23. Ld. counsel for assessee submitted that Rule 10 deals with determination of income in case of non-resident. Ld. counsel referred to Rule 10B(1)(e) which deals with TNM method for determining ALP. He pointed out that net profit margin realized by enterprise is to be computed for international transactions and, therefore, expenses which do not pertain to AE cannot be taken into consideration. He further pointed out that none of comparables entered into transaction with AE. 24. Ld. counsel for assessee has advanced arguments in regard to various comparables included/ excluded by ld. TPO which we will consider after deciding issue regarding additional evidence furnished by assessee. 25. As is evident from ld. DRP s direction, it has accepted assessee s contention regarding limiting expenses to percentage of revenue from AE i.e. 47%. Thus, though ld. DRP did not accept segmental analysis submitted by assessee but in principle agreed that adjustment proposed by ld. TPO is to be limited to amount of expenses to percentage of revenue from AE. Therefore, if certain expenses were not at all incurred with reference to earning of AE s revenue, then those expenses had to be excluded for correct computation of 47% of expenses 15 attributable to AE. This exercise has not been carried out by ld. TPO because no such plea was taken before him. However, entire data is available on record and, therefore, in order to arrive at correct computation assessee s plea regarding sub-contracting expenses 100% attributable to non AE business has to be examined. assessee has filed additional evidence in support of its contention and, therefore, it would be in interest of justice that additional evidence is admitted for arriving at proper computation of ALP. We, accordingly, admit additional evidence and restore matter back to file of Ld. TPO to examine assessee s plea in this regard. In case it is found that D&E expenses were attributable 100% to independent third party transaction then same has to be excluded for computing operating cost of assessee because operating cost pertaining to AE only has to be considered. 26. In result assessee s petition under Rule 29 of Income Tax (Appellate Tribunal) rules, 1963 for admission of additional evidence is allowed and matter restored to file of ld. TPO/AO for consideration. 27. Before we examine contention of assessee in regard to various comparables, it would be proper to first consider functional profile of assessee to which we have referred to earlier also, in order to find out 16 whether assessee is merely imparting back office services or imparting services which require expertise of high technical nature. 28. Ld. TPO in para 2.2 has noted that assessee provided services to transform built environment and restore natural environment and its expertise ranged from environmental remediation to urban planning from developing engineering iconic buildings to designing sustainable transport networks and from developing energy source of future to enabling new ways to extracting essential resources. This clearly shows that assessee is imparting services of very high technical nature and, therefore, comparables which are imparting technical consultancy services were right comparables selected by ld. TPO. In backdrop of these observations now we proceed to examine various comparables disputed by assessee. Ashok Leyland Project Services Ltd. : 29. Ld. counsel for assessee submitted that this comparable has wrongly been included because it is functionally not comparable to assessee. Further, there were peculiar economic circumstances during year inasmuch as ALPSL merged with Ashok Leyland Wind Energy Ltd. He further pointed out that there were other income aggregating to Rs. 66,84,745/-. Ld. counsel further pointed out that this company has earned revenue mainly from wind energy segment and there was loss in project 17 service division. Ld. counsel relied on decision of Hon ble Delhi High Court in case of ChrysCapital Investment Advisors (India) Pvt. Ltd. in ITA no. 417/2014 dated 27.4.2015 and Techbooks International Pvt. Ltd. in ITA no. 240/2015 for AY 2010-11. 30. Ld. CIT(DR) submitted that wind energy segment is only one part of whole business. However, this was also providing power block communication and service transport infrastructure services etc. 31. We have considered submissions of both parties. Since major part of revenue was derived from wind energy segment, therefore, this comparable could not be said to be mainly in technical consultancy business and, hence, this was not functionally comparable to assessee. Moreover, during year there was extraordinary event being merger of ALPSL with Ashok Leyland Wind Project Services Ltd. due to which there was clear possibility of differential advantage in respect of profitability of this comparable. We, therefore, direct for exclusion of this comparable from list of comparables. Global Procurement Consultants Ltd. ( GPCL ): 32. Ld. counsel for assessee pointed out that this company was promoted by EXIM Bank of India and provides procurement related services and inter-allied activities for projects in India and abroad. It dealt in 18 industries like power, hydro, transportation infrastructure etc. Further acted as client s representative in taking on total responsibility of procurement activities, by providing comprehensive range of procurement related advisory services and inter allied activities for projects in India and abroad. Ld. counsel submitted that this comparable has government connection and, therefore, should be excluded. He pointed out that ld. DRP excluded on this count only seven comparables. He relied on order dated of ITAT dated 15.2.2016 in case of Marubeni Itochu Steel India Pvt. Ltd. Vs. DCIT in ITA no. 1716/Del/2014, wherein majority revenue was derived from government enterprises and World Bank. Ld. counsel relied on decision of Hon ble Delhi High Court in case of Thyssen Krupp Industries India Pvt. Ltd. in ITA no. 2218/2013 dated 28.3.2016 and also on order of ITAT in case of Adidas Technical Services P. Ltd. Vs. DCIT in ITA no. 1233/Del/2015. 33. Ld. DR submitted that government companies cannot be excluded particularly when they were making profits. As regards reliance placed by ld. counsel for assessee on decision of Marubeni Itochu Steel India Pvt. Ltd. (supra), ld. DR submitted that said company was involved in steel business so was not comparable to Global Procurement Consultants Ltd. However, this company is comparable to tested party. 19 34. We have considered submissions of both parties and have perused record of case. In case of Marubeni Itochu Steel India Pvt. Ltd. (supra) in para 11.1 Tribunal has noticed assessee s objection raised before ld. TPO that this company was engaged in providing consultancy services and review of procurement processes for various projects funded by World Bank. In para 11.2 Tribunal has noticed that as per annual report, this company was promoted by Export-Import Bank of India in association with leading Indian Public Sector and Private Sector consultancy organizations on basis of public-private partnership model that offers collective Indian experience and expertise through provision of range of advisory services with particular focus on procurement. From this it is evident that this was not government company and, therefore, decision relied upon by ld. counsel for assessee are of little help to it. Further we find that this comparable was imparting primarily consultancy services in regard to procurement management which was technical in nature. assessee is also rendering consultancy services which are highly technical in nature and, therefore, we are not inclined to accept contention of ld. counsel for assessee for exclusion of this comparable from list of comparable. Accordingly, we uphold order of lower revenue authorities in regard to this comparable. 20 Kitco Limited: 35. Ld. counsel for assessee pointed out that Kitco is held by Small Industries Development Bank of India (SIDBI) with 49% shares of company and, thus, it is government connection company and, therefore, in view of decision of Hon ble High Court in case of Thyssen Krupp Industries India Pvt. Ltd. (ITA no. 2218/2013), it should be excluded. He further pointed out that major service offered by Kitco were project consultancy, detailed engineering & project execution, technical services, environmental engineering and HRD consultancy. Further, assessee was expanding its business activities by introducing more verticals like sea ports, urban planning and financial services etc. Further, Kitco was also engaged in infrastructure activities. He submitted that there was no segmental information available in annual report. Ld. counsel relied on order of ITAT in case of Bechtel India Pvt. Ltd. Vs. DCIT dated 21.12.2015 in ITA no. 1478/Del/2015, wherein after taking note of fact that Kitco was 100% government owned undertaking, rendering services primarily to Central/ State government undertaking and PSUs and majority revenue and profitability of company came from government (state or centre) run projects and that company derived benefit out of its parental relation with Government in getting contract, excluded this comparable 21 following order of ITAT in case of M/s ThyssenKrupp Industries India Pvt. Ltd. ITA no. 6460/Mum/2012. 36. We have considered submissions of both parties and have perused record of case. In case of Bechtel India Pvt. Ltd. (supra), in para 12.2 Tribunal has noticed assessee s submission that Kitco was 100% government owned undertaking. However, ld. counsel has pointed out that only 49% shares are held by SIDBI and, therefore, this cannot be held to be government company. Ld. DR has very rightly pointed out that it is government connection company and not government company. However, advantage of getting government projects has influence on its profitability. Therefore, since major revenue was derived from government run projects, therefore, in view of decision in M/s ThyssenKrupp Industries India Pvt. Ltd. (supra), we direct for exclusion of this comparable from list of comparables. Mahindra Consulting Engineering Ltd. ( MCEL ): 37. Ld. TPO included this comparable on ground that this company was engaged in various engineering and infrastructure activities, which were in nature of technical services, as rendered by assessee also. He, therefore, treated this company as comparable to assessee. 38. Ld. DRP confirmed TPO s action. 22 39. Ld. counsel for assessee submitted that this company is functionally different and renders diversified activities. He pointed out that this company provided consultancy services in wide area of water, engineering, urban mobility, transportation and logistics industrial plants and systems, agriculture, food and rural infrastructure. He further submitted that peculiar economic circumstances existed inasmuch as strategic partnership with SAFEGE of France to achieve exponential growth and enhance its market share was entered into and in process SAFEGE along with M&M and MCET purchased shares of company. Further, sub-consultancy cost to total personnel cost was 10.9-% and technical know-how to total fixed assets was 30.08%. He relied on decision of ITAT dated 13.6.2016 in case of Emerson Process Management Power & Water Solutions India Pvt. Ltd. Vs. ACIT, rendered in 6816/Del/2015, wherein this comparable was excluded. 40. We have considered submissions of both parties and have perused record of case. As far as reliance placed on decision of Emerson Process Management Power & Water Solutions India Pvt. Ltd. (supra) is concerned, we are of opinion that said decision is of little assistance to assessee as in that case assessee was engaged in providing application engineering, software development and related services for 23 aviation control systems. However, in present case assessee is primarily engaged in providing highly technical consultancy services and, therefore, this comparable was rightly selected by ld. TPO. Ld. counsel has referred to certain peculiar economic circumstances noticed in his argument but effect on profitability of these circumstances has not been demonstrated and, therefore, merely because shares of assessee was acquired by same organization will not be of any significance. We, therefore, reject assessee s contention on this count. Mitcon Consultancy & Engineering Services Ltd.: 41. Ld. TPO noticed in annual report for AY 2010-11 that this company was engaged in providing engineering services which were in nature of technical services. He reproduced extracts from annual report in his order. He, therefore, included this company as good comparable. 42. Ld. DRP confirmed TPO s action in view of similar FAR. 43. Ld. counsel for assessee pointed out that this company provides technical services in diversified fields. Moreover, it earned 37.87% revenue from diversified activities, namely, vocational trainings, IT trainings and laboratories. Further, various capital grants were received from govt. of India. He, therefore, submitted that this cannot be considered as good comparable. 24 44. We have considered submissions of both parties and have perused record of case. Since this comparable is deriving less than 75% of revenue from consultancy services, therefore, this cannot be considered as good comparable with assessee, which is primarily deriving almost entire revenue from consultancy services. We, therefore, direct for exclusion of this comparable from list of comparables. TCE Consulting Engineers Ltd.: 45. Ld. TPO noted from website of this company that it was engaged in various project engineering services which were in nature of technical services and, therefore, it was good comparable to taxpayer. He has reproduced contents from website in his order. 46. Ld. DRP confirmed action of TPO, observing that it was good comparable in view of similar FAR. 47. Ld. counsel for assessee pointed out that other income derived by this company was 104.34 lacs which included misc. receipts to extent of Rs. 103.44 lacs and recoveries of bad debts written off Rs. .90 lacs. Further provision for bad and doubtful debts and advances and other provision aggregated to Rs. 588.42 lacs. He pointed out that turnover was Rs. 416.02 crores which is 22 times more than assessee s turnover of Rs. 18.42 crores. Ld. counsel relied on various decisions where this comparable has been excluded. 25 48. We have considered submissions of both parties and have perused record of case and find that primarily assessee is pleading for its exclusion on ground of financial results. Moreover, his contention is also that this company is functionally different as it was primarily providing commissioning services. We do not find much substance in this plea of assessee considering functional profile of assessee, because this company was also providing highly technical services primarily for commissioning of project. 49. As far as ld. counsel s submission regarding turnover is concerned, same cannot be accepted because that does not affect profit margin derived by company. We, therefore, confirm order of ld. TPO as confirmed by ld. DRP. IBI Chematur (Engineering and consultancy) Ltd.: 50. Ld. TPO has observed that assessee objected to this comparable on ground of non-comparable functions as company provided range of services-detailed engineering, intelligent 3D plant modeling, 2D conversion services, smart plant instrumentation, smart plant electrical, piping stress analysis, procurement assistance, process simulation, process equipment design, inspection services, project planning and management and erection supervision. He rejected plea of assessee in view of his finding in 26 general discussion, wherein after considering assessee s functional profile, companies which were providing technical services with similar employee profile (engineers and technical people) as that of taxpayer, irrespective of their size and range of services were included, inter alia, observing that finding company s rendering exactly similar services as that of taxpayer was very difficult and impossible exercise. 51. Ld. DRP confirmed TPO s action observing that this was good comparable in view of similar FAR. 52. Ld. counsel for assessee pointed out that this company was engaged in diversified activities since apart from detailed engineering, company also provided project planning and management services. Further, he pointed out that this company was engaged in significant R&D activities and no segmental information was available. 53. Having heard both parties, we do not find any reason to interfere with orders of lower revenue authorities in regard to this comparable because this company was also providing primarily highly technical consultancy in various fields. contention of ld. counsel that only those comparables should have been taken into consideration, which were performing almost similar technical consultancy services as assessee, is difficult to accept because ide-ntical replica of assessee could not be found. 27 Under TNMM it is broad comparability of comparables which has to be taken into consideration. It is quite impossible that two companies will be rendering same services. Accordingly, action of ld. TPO on this count is upheld. 54. Before parting we may point out that we have considered in detail comparables also as both parties had advanced arguments on these aspects, but first ld. TPO has to examine additional evidence admitted by us and if assessee is able to substantiate its claim, then as per submissions of assessee, no addition would be called for. After carrying out this exercise only comparables should be considered for determining ALP. 52. In result, assessee s appeal is partly allowed for statistical purposes. Order pronouncement in open court on 16/09/2016. Sd/- Sd/- (KULDIP SINGH) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15/09/2016. MP Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi. WSP Consultants India Pvt. Ltd. v. DCIT Circle 27(2), New Delhi