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2018 (2) TMI 1950 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT - Assessee was engaged in providing investment advisory services of non-binding in nature, thus companies functionally dissimilar with that of assessee need to be deselected. We find that if the two comparables selected by the assessee and upheld by us in paragraph 4.2 are included and the comparable namely Ladderup selected by the revenue is excluded, the assessee s adjusted margin of 14.76% as computed by the revenue well exceeds the margin of the comparables on the basis of single year data. The stated fact, in itself, makes the other contentions raised by assessee, merely academic in nature and therefore, we do not find any necessity to delve into the same. Therefore, the matter is restored back to the file of Ld. AO to compare the margins / PLI of the assessee vis- -vis margins / PLI of the two comparables and re-compute the total income of the assessee
Issues:
Assessment Year 2011-2012 - Transfer Pricing Adjustment - Selection of Comparables - Arm's Length Price Determination - Appeal by Assessee Analysis: 1. The appeal by the assessee for Assessment Year 2011-2012 challenges the final assessment order primarily concerning the transfer pricing adjustment made by the lower authorities. The assessee, a resident corporate entity providing investment advisory services, was assessed at ?783.36 Lacs after a transfer pricing adjustment of ?527.54 Lacs, as opposed to the returned income of ?255.81 Lacs. The Transfer Pricing Officer (TPO) proposed an upward TP adjustment of ?736.40 Lacs, leading to a final TP adjustment of ?527.54 Lacs in the assessment completed on 05/01/2016. The assessee contested this adjustment, leading to the appeal. 2. The international transaction involved the provision of investment advisory services to Associated Enterprises (AE) with benchmarking using the Transactional Net Margin Method (TNMM). The TPO rejected the assessee's comparables and suggested new ones, ultimately resulting in an upward TP adjustment. The Dispute Resolution Panel (DRP) upheld the adjustment, reducing it to ?527.54 Lacs. The assessee appealed against this decision, while the revenue accepted the DRP's verdict. 3. The Authorized Representative for Assessee argued that the assessee's comparables were functionally similar and appropriate, citing judicial precedents. On the other hand, the Departmental Representative supported the final comparable selected by the TPO, claiming functional similarity based on a tribunal order. 4. The Tribunal analyzed the comparables selected by both parties. It excluded the comparable selected by the revenue, Ladderup, as it was not functionally comparable to the assessee. The Tribunal directed the inclusion of two comparables selected by the assessee, ICRA Management Consulting Ltd. and IDC Ltd., based on their functional similarity. The Tribunal rejected the inclusion of ICRA online Ltd. due to a lack of evidence supporting functional similarity. The matter was remanded to the Assessing Officer for income re-computation based on the revised comparables. 5. Consequently, the assessee's appeal was allowed, and the order was pronounced on 09th February 2018.
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