2020 (3) TMI 604 - AT - Income Tax

TP Adjustment - selection/rejection of certain comparable - HELD THAT - ICRA MANAGEMENT CONSULTING SERVICES LTD. company being a good comparable has to be retained as the service provided by this company is akin to the service provided by an investment advisory service provider. INFORMED TECHNOLOGIES LTD. company appears to be functionally similar to the assessee. In fact, in various decisions cited before us, some of which relate to the impugned assessment year, the Tribunal as well as the Hon'ble Jurisdictional High Court has held that this company is functionally similar to an investment advisory service provider. Therefore, following the consistent view expressed in relation to this company in the judicial precedents referred to above, we direct the Assessing Officer to include this company as a comparable. INTEGRATED CAPITAL SERVICES LTD. company cannot be treated as a comparable to investment advisory service provider. In view of the aforesaid, we direct the Assessing Officer to exclude this company. As submitted by the assessee that with the inclusion of the ICRA Management Consultancy Services Pvt. Ltd., and Information Technologies Pvt. Ltd. and exclusion of Integrated Technologies Ltd., assessee s margin would be within the 5% range of the raised of the comparable requiring no further adjustment. In view of the aforesaid, we do not intend to deal with any other issue raised in the present appeal, save and except, the issue relating to the comparables dealt by us herein before.

Summary

Issues:
Challenge to transfer pricing adjustment based on selection/rejection of comparables.

Analysis:
The appeal challenges an order regarding the assessment year 2009-10, specifically contesting a transfer pricing adjustment of ?77,09,785. The dispute primarily revolves around the selection/rejection of certain comparables. The assessee, a resident company providing investment sub advisory services to its Associated Enterprises, benchmarked its transaction with the AE using the Transactional Net Margin Method. The Transfer Pricing Officer rejected most comparables selected by the assessee and made an upward adjustment to the arm's length price of the service provided. The Commissioner (Appeals) upheld this adjustment.

ICRA MANAGEMENT CONSULTING SERVICES LTD.:
The assessee argued for the inclusion of this company as a comparable, emphasizing its functional similarity to the assessee. The Tribunal found that the service provided by this company aligns with that of an investment advisory service provider, making it a suitable comparable. Previous decisions supported this view, leading to the retention of this company as a comparable.

INFORMED TECHNOLOGIES LTD.:
The assessee contested the rejection of this company as a comparable, highlighting its services related to data analysis in the financial sector. The Tribunal noted the functional similarity of this company to the assessee, supported by previous judicial precedents. Consequently, the Assessing Officer was directed to include this company as a comparable.

INTEGRATED CAPITAL SERVICES LTD.:
The rejection of this company as a comparable was objected to by the assessee, citing lack of proper information and functional dissimilarity. Despite the assessee's initial selection, subsequent findings and judicial precedents indicated that this company was not functionally similar to an investment advisory service provider. Therefore, the Assessing Officer was directed to exclude this company as a comparable.

The Tribunal, after considering the submissions and relevant precedents, found in favor of the assessee regarding the comparables issue. With the inclusion of specific comparables and exclusion of others, the margin adjustment fell within an acceptable range, leading to a partial allowance of the appeal.