Revenue cannot challenge TPO-accepted comparable using segmental data for first time before Tribunal in appeal against CIT(A) order, as scope under section 253(2) limited to CIT(A) findings, not prior determinations.

ORDER

PER C.N. PRASAD, JM,

This is an appeal arising out of the order passed by the Ld. CIT(A)-38, dated 18.05.2017 for the A.Y.2009-10.

2. This appeal was earlier disposed of by the Tribunal by order dated 03.03.2023 against which an appeal was preferred by the assessee before the Hon’ble High Court and the Hon’ble High Court by order dated 01.09.2023 passed the following order :-

2. We are inclined to admit the appeal. Accordingly, the following question of law is framed for consideration:

(i) Whether the Income Tax Appellate Tribunal [in short, “Tribunal”] has misdirected itself on facts and in law in excluding the comparable Onward Technologies Limited [in short, “OTL”] while benchmarking the engineering, technical and inspection segment, in the course of exercising its powers under Section 254 of the Income Tax Act, 1961 [in short, “Act”]?”

3. With the consent of the counsel for the parties, the appeal is taken up for final hearing and disposal, at this stage itself.

4. Briefly, the record shows that the Transfer Pricing Officer (TPO) had accepted OTL as a comparable, which was embedded in the appellant/assessee’s transfer pricing study report.

4.1 The record also shows that the appellant/assessee had carried the matter in appeal before the Commissioner of Income Tax (Appeals) on other grounds, not connected with the exclusion of OTL as a comparable.

4.2 The CIT(A), via order dated 18.05.2017, excluded two comparables, i.e., M/s L&T Ramboll Engineering Consulting Services [in short, “L&T”] and Mitcon Consultancy Services [in short, “Mitcon”].

4.3 This resulted in both the appellant/assessee as well as the respondent/revenue preferring appeals with the Tribunal.

5. The Tribunal, via the impugned order dated 03.03.2023, passed the following operative directions:

“13. In a nutshell, we hold that the following comparables are directed to be excluded:-

 Mitcon Consultancy Services

 L&T Ramboll Consulting Engineers Ltd

 Onward Technologies Ltd

 HCCA Business Services Pvt. Ltd

 Killick Agencies & Mktg. Limited

 Cyber Media India Online Limited

 Times Innovative Media Limited

 Global Procurement Consultants Limited

 Indiacom Limited”

6. The record shows that in the course of the proceedings conducted by the Tribunal, the following additional grounds were entertained by the Tribunal, at the behest of the respondent/ revenue :

(i) The Ld. CIT(A) has erred in directing to exclude the comparable namely, M/s Mitcon Consultancy Services by holding that functional profile & economic activities of the assessee are very different from this comparable. The Id. CIT(A) has also erred in ignoring that fact that the assessee had admitted that this comparable is broadly engaged in the similar business of technical consultancy and engineering services deriving revenue worth 57% from the consultancy segment.

(ii) The Ld. CIT(A) has erred in concluding that the comparable namely. M/s L&T Rambo// Consulting Engineers Ltd. is fact that the revenue of this comparable for F.Y. 2008-09 is from Engineering Services Consultancy only, as per the available financials and the annual report of this comparable.

(iii) The Ld. CIT(A) should have also removed the comparable namely M/s. Onward Technology Ltd as this comparable can also be considered to be functionally different since, it is predominantly in automobile engineering segment. If the assessee is allowed to remove M/s Mitcon Consultancy Services and M/s L&T Rambol Consulting Engineers Ltd. on the grounds of functional dissimilarity, then, on the same analogy, M/s Onward Technologies Ltd. should also have been removed.”

7. Against this backdrop, arguments on behalf of the appellant/assessee have been advanced by Mr Deepak Chopra, while on behalf of the respondent/revenue, submissions have bee