2019 (4) TMI 1391 - HC - Income Tax

TP Adjustment - include ICRA Management Consultancy Services Ltd., Kinetic Trust Limited in the set of comparable companies - HELD THAT - Perusal of the impugned judgment would show that in addition to giving independent reasons, the Tribunal had also heavily relied on the decision in case of the very assessee for the earlier assessment years 2008-09 and 2009-10 in which both these comparable were included despite the opposition by the Department. Revenue brought to our notice an order dated 17.11.2016 passed in the Revenue s Income Tax Appeal 2016 (11) TMI 1510 - BOMBAY HIGH COURT in which such an issue had been raised but not entertained by the Court. In that view of the matter, Question No. (a) is not entertained. Striking down the additional markup margin of 3% to the average PLI of the comparable companies selected by the TPO - HELD THAT - Assessee, in addition to investment advisory services had also rendered portfolio management services. However, the Tribunal, in the impugned judgment held that there was no evidence of the assessee had rendered any such additional services. This question also, therefore, is not entertained.

Summary

Issues:
1. Inclusion of specific comparables in transfer pricing adjustment
2. Validity of additional markup margin in transfer pricing adjustment

Issue 1: Inclusion of specific comparables in transfer pricing adjustment
The appeal challenged the judgment of the Income Tax Appellate Tribunal (the Tribunal) regarding the inclusion of ICRA Management Consultancy Services Ltd. and Kinetic Trust Limited as comparables in the transfer pricing adjustment. The Tribunal had relied on the decision for earlier assessment years where these comparables were included despite opposition by the Department. The Revenue objected to this inclusion, citing a previous order where a similar issue was raised but not entertained by the Court. Consequently, the Court did not entertain this objection and upheld the Tribunal's decision.

Issue 2: Validity of additional markup margin in transfer pricing adjustment
The second question raised in the appeal concerned the additional markup margin of 3% applied by the Transfer Pricing Officer (TPO) to the average Profit Level Indicator (PLI) of the selected comparable companies. The TPO justified this markup based on the assessee's provision of portfolio management services in addition to investment advisory services. However, the Tribunal found no evidence to support the provision of such additional services by the assessee. As a result, the Court did not entertain this question either and dismissed the Income Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision, dismissing the Income Tax Appeal and maintaining the inclusion of specific comparables in the transfer pricing adjustment while rejecting the validity of the additional markup margin applied by the TPO.