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2020 (3) TMI 1235 - AT - Income TaxTP Adjustment - arm s length price of the services provided to the Associated Enterprises (AE) - comparable selection - Assessee is intoproviding non binding investment advisory services - HELD THAT - MOTILAL OSWAL INVESTMENT ADVISORIES PVT. LTD. company is engaged in the business of investment banking, merchant banking, merger and acquisition, private equity, syndication, etc. Whereas, the assessee has only one segment of providing non binding investment advisory services to the AE. Looking at the functional profile of this company, not only different benches of the Tribunal, but even different High Courts including Hon'ble Jurisdictional High Court have consistently held that this company cannot be a comparable to a non binding investment advisory service provider. ICRA ONLINE LIMITED - as relying on AGM INDIA ADVISORS PRIVATE LIMITED 2016 (5) TMI 1335 - ITAT MUMBAI ICRA company cannot be a comparable to an investment advisory service provider. In fact, while considering the comparability of this company in assessee s own case for the assessment year 2012 13, the Transfer Pricing Officer himself has categorically stated that none of the segments of ICRA Online Ltd. are comparable to investment advisory services rendered by the assessee and accordingly rejected it as a comparable. In our considered opinion, facts are not different in the impugned assessment year as well. That being the case, we hold that this company cannot be treated as comparable to the assessee. Hence, should be excluded. As submitted exclusion of these two companies, arithmetic mean of the rest of the comparables would work out to 26.57% and assessee s margin shown at 23.16% would be within the acceptable range, requiring no further adjustment. Keeping in view the aforesaid submission, we do not intend to deliberate further on any other comparable at this stage and leave the issues relating to the comparability of the other comparables open for adjudication if they arise in assessee s case in any other assessment year in future.
Issues:
1. Challenge to assessment order under Income Tax Act, 1961. 2. Dispute over transfer pricing adjustment for services provided to Associated Enterprises. 3. Selection and exclusion of comparables for determining arm's length price. Analysis: 1. The appeal challenges the assessment order under the Income Tax Act, 1961, for the assessment year 2010-11, following directions from the Dispute Resolution Panel-1, Mumbai. 2. The main dispute revolves around the addition of ?3,23,85,404 as a transfer pricing adjustment to the arm's length price of services provided to Associated Enterprises. 3. The assessee, a resident company, a subsidiary of Khazanah National Berhad (KNB), Malaysia, earned revenue for providing investment advisory services to KNB. The Transfer Pricing Officer accepted TNMM as the most appropriate method but disputed most comparables selected by the assessee. 4. The Transfer Pricing Officer independently selected comparables, resulting in a transfer pricing adjustment of ?3,05,07,486. The Assessing Officer framed the draft assessment order based on this adjustment, upheld by the Dispute Resolution Panel. 5. The assessee disputed the comparability of Motilal Oswal Investment Advisories Pvt. Ltd. and ICRA Online Ltd., arguing that excluding these would bring the margin within an acceptable range. 6. The Tribunal excluded Motilal Oswal Investment Advisories Pvt. Ltd. as it was functionally dissimilar to the assessee's services, consistent with previous decisions and the functional profile of the company. 7. ICRA Online Ltd. was also excluded as its segments were not comparable to the assessee's services, supported by the Transfer Pricing Officer's rejection of the company as a comparable in a previous assessment year. 8. With the exclusion of these two companies, the Tribunal found the margin within an acceptable range, requiring no further adjustment to the arm's length price. The Assessing Officer was directed to determine the arm's length price accordingly, and the appeal was partly allowed.
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