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2015 (9) TMI 1405 - AT - Income TaxTransfer Pricing Adjustment relating to international transaction of provision of non binding advisory and support services - whether the MOIAPL is a good comparable and whether it passed the functional test? - Held that - The said company MOIAPL has undertaken 23 assignments successfully in the year under consideration. Major portion of the income is earned by MOIAPL out of cross border activity services and related financial services. The capital market business is one of the source3s of the advisory fees earned by the assessee. Assessee has also earned fees out of assessee‟s capability of the structured finance teams, financial markets, ie both equity and credit market, is another source of income for the assessee MOIAPL is into merchant banking, and therefore, is functionally different to that of the assessee which is engaged in the business of non-binding advisory services. Therefore, in our opinion, the assessee is engaged in the function of non-binding advisory services whereas MOIAPL is into the merchant banking, capital markets, finance markets etc. Therefore, we find the MOIAPL is functionally dissimilar and therefore, the same should be excluded for benchmarking the international transactions. Accordingly, AO / TPO is directed to exclude the same. - Decided in favour of the assessee.
Issues involved:
1. Transfer Pricing Adjustment for international transaction of provision of non-binding advisory and support services. 2. Short grant of credit for Tax Deducted at Source (TDS). 3. Levy of interest under section 234A of the Act. 4. Levy of excess interest under section 234B of the Act. 5. Levy of excess interest under section 234D of the Act. 6. Initiation of Penalty Proceedings under section 271(1)(c). Issue 1: Transfer Pricing Adjustment The appeal was filed against the order of the Dispute Resolution Panel regarding the transfer pricing adjustment for international transactions of non-binding advisory and support services. The appellant contested the addition made by the Transfer Pricing Officer (TPO) based on Chapter X of the Income-tax Act, 1961. The appellant argued that the TPO erred in rejecting benchmarking analysis and comparable companies selected, using non-contemporaneous data, and including a company functionally dissimilar to the appellant. The Tribunal analyzed the functions of the comparable company, Motilal Oswal Investment Advisors Private Limited (MOIAPL), and found it functionally different from the appellant, thus directing its exclusion for benchmarking, ultimately allowing the appeal. Issue 2: Short grant of TDS credit The appellant challenged the grant of Tax Deducted at Source (TDS) credit by the Assessing Officer (AO) and sought correction of the granted amount. However, the specific details and arguments presented regarding this issue were not elaborated in the judgment. Issue 3: Levy of interest under section 234A Consequent to preceding issues, the appellant requested the deletion of interest levied under section 234A of the Act. The grounds for challenging this levy were not explicitly detailed in the judgment. Issue 4: Levy of excess interest under section 234B Similarly, the appellant sought the deletion of interest levied under section 234B of the Act due to the issues raised in the appeal. However, the specific arguments or circumstances leading to this levy were not extensively discussed in the judgment. Issue 5: Levy of excess interest under section 234D The appellant also contested the interest levied under section 234D of the Act and requested its deletion based on the issues raised in the appeal. However, the judgment did not provide detailed insights into the specific reasons for this levy. Issue 6: Initiation of Penalty Proceedings The appellant challenged the initiation of penalty proceedings under section 271(1)(c) of the Act by the Assessing Officer. The grounds for contesting these penalty proceedings were not explicitly discussed in the judgment, and the outcome of this issue was not clearly stated. In conclusion, the judgment primarily focused on the transfer pricing adjustment issue related to non-binding advisory services, where the Tribunal directed the exclusion of a functionally dissimilar comparable company for benchmarking, ultimately allowing the appeal. The other issues raised by the appellant regarding TDS credit, interest levies, and penalty proceedings were briefly mentioned without detailed analysis or outcomes provided in the judgment.
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