DGS Technical Services Private Limited Vs DCIT (ITAT Hyderabad)
Summary: The Hyderabad Bench of the Income Tax Appellate Tribunal considered the appeal of DGS Technical Services Private Limited against the final assessment order dated 18.09.2024 passed under sections 143(3) read with 144C(13) and 144B of the Income-tax Act, 1961, pursuant to the Dispute Resolution Panel’s directions dated 28.08.2024. The appeal concerned Assessment Year 2021-22.
The assessee was engaged in structural steel engineering and detailing services for its Associated Enterprise, DGS INC. It provided detailed plans, drawings and related documents for steel structures based on drawings/designs supplied by the AE or its customers. The assessee used Tekla software and employed, among others, diploma holders for providing the detailing services. It reported international transactions of Rs. 51,16,93,970/- and used the Transactional Net Margin Method (TNMM), arriving at an OP/OC of (-)0.02%.
The Transfer Pricing Officer rejected the assessee’s transfer pricing documentation, recharacterised the services from Information Technology Enabled Services (ITeS) to Knowledge Process Outsourcing (KPO), conducted a fresh search and selected comparables. The TPO ultimately arrived at a weighted average OP/OC of 17.90% and computed a transfer pricing adjustment of Rs. 24,08,05,786/-. Interest on delayed receivables of Rs. 46,03,763/- was also computed after allowing a 60-day credit period and applying the SBI short-term deposit rate. The DRP substantially upheld the TPO’s approach, resulting in a final adjustment of Rs. 24,54,09,549/- and assessed total income of Rs. 17,34,22,310/-.
