Bechtel India India Pvt. Ltd. Vs ACIT (ITAT Delhi)
The ITAT Delhi partly allowed the assessee’s appeal relating to transfer pricing adjustments for Assessment Year 2013-14. The dispute concerned two transfer pricing adjustments—one relating to the international transaction of engineering design and related services and the other relating to interest on outstanding receivables from associated enterprises. The assessee challenged the selection of comparable companies, allocation of segmental costs, treatment of foreign exchange gains and losses, working capital adjustment, and the adjustment for delayed realization of receivables.
With respect to the transfer pricing adjustment for engineering design and related services, the Tribunal examined the inclusion of Certification Engineering International Ltd. (CEIL), HSCC (India) Ltd., and Mitcon Consultancy & Engineering Services Ltd. as comparable companies. It found that CEIL was engaged in certification, third-party inspection, safety audits, and related activities, making it functionally dissimilar to the assessee’s engineering design services. The Tribunal also noted that CEIL was a government-controlled enterprise whose operations substantially depended on government projects and followed its own earlier decisions excluding similar government-controlled entities from the set of comparables. Accordingly, CEIL was directed to be excluded.
The Tribunal similarly held that HSCC (India) Ltd. was functionally different, as its principal activities consisted of consultancy services relating to healthcare facilities, procurement of medical equipment, pharmaceuticals, and project management rather than engineering design and drawing services. It also observed that HSCC was a government-owned enterprise deriving revenue from government contracts and directed its exclusion from the final set of comparables.
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