2020 (12) TMI 1360 - AT - Income Tax

TP Adjustment - Comparable selection - HELD THAT - Companies functionally dissimilar with that of assessee AND companies did not passing 25% threshold of RPT filters need to be deselected.

Summary

Issues:
Exclusion of Keynote Corporate Service Ltd and Motilal Oswal Investment Advisors Pvt. Ltd as comparables for Assessment Year 2009-10.

Analysis:
1. The appeals were restored by the High Court for reconsideration of the exclusion of Keynote Corporate Service Ltd and Motilal Oswal Investment Advisors Pvt. Ltd as comparables. The High Court directed the Tribunal to reexamine the functional similarity and dissimilarity of these comparables.

2. The issue of exclusion of Keynote Corporate Service Ltd and Motilal Oswal Investment Advisors Pvt. Ltd was contested before the High Court in separate appeals. The High Court remanded the matter back to the coordinate bench for fresh examination in both cases.

3. The arguments presented by the appellant's representative focused on the related party transaction (RPT) filter for Motilal Oswal Investment Advisors Pvt. Ltd, emphasizing that it did not meet the 25% threshold of related party transactions. The representative also highlighted the functional dissimilarity of Keynote Corporate Service Ltd due to restructuring and its role as a leading merchant banker.

4. The respondent's representative supported the decision of the transfer pricing officer, stating that Motilal Oswal Investment Advisors Pvt. Ltd passed all filters and should not be excluded based solely on related party expenses. The representative argued that the exclusion of Keynote Corporate Service Ltd in other cases does not impact its functional comparability in this case.

5. The Tribunal carefully considered the contentions and directed the exclusion of Keynote Corporate Service Ltd due to functional dissimilarity with the appellant. However, Motilal Oswal Investment Advisors Pvt. Ltd was not excluded as it crossed the RPT filter and was deemed functionally similar to the appellant.

6. The Tribunal upheld the order of the CIT-A to exclude Keynote Corporate Service Ltd, emphasizing the functional differences between the company and the appellant. In the case of Motilal Oswal Investment Advisors Pvt. Ltd, the Tribunal found no functional dissimilarity and upheld its inclusion as a comparable.

7. Both appeals were disposed of with the directions to exclude Keynote Corporate Service Ltd and retain Motilal Oswal Investment Advisors Pvt. Ltd as a comparable for Assessment Year 2009-10.