ITAT Excludes Government and Diversified Entities as TP Comparables, Grants Relief

Fieldcore Service Solutions International India Pvt. Ltd., a US-based subsidiary providing technical and payroll support, faced a transfer pricing dispute for AY 2012–13. After an initial Tribunal intervention, a proposed adjustment was reduced to Rs. 1.78 crore. The dispute in this second round centered on the inclusion of HSCC India Ltd. and Mitcon Consultancy and Engineering Services Ltd. as comparable entities. While the assessee argued these companies were functionally dissimilar and lacked proper segmental data, the CIT(A) upheld the TPO’s decision, leading to this appeal.

Issue Raised: Whether HSCC India Ltd. and Mitcon Consultancy and Engineering Services Ltd. can be considered valid benchmarks for the assessee’s international transactions given their different operational profiles.

Tribunal Held: The ITAT Delhi allowed the appeal, directing the exclusion of both companies. The Tribunal noted that HSCC India Ltd., a government-owned entity, operates in a unique risk environment with preferential access to state projects, making it incomparable to a private subsidiary. Furthermore, HSCC’s focus on large-scale infrastructure projects differs significantly from the assessee’s limited service profile.

Regarding Mitcon Consultancy, the Tribunal found it engaged in diverse segments including wind power and IT services without providing granular, segment-wise financial data. In the absence of reliable segmental reporting, the company could not serve as a valid comparable. Consequently, the Tribunal ordered a recomputation of the transfer pricing adjustment after excluding these two entities.

To Read Full Order, Download PDF Given Below