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2022 (12) TMI 861 - AT - Income TaxTP Adjustment - comparable selection - selection of comparables for benchmarking the international transaction pertaining to Provision of Investment Advisory Services - HELD THAT - Companies functionally dissimilar with that of assessee need to be deselected from final list. Transfer pricing adjustment - international transaction of Payment of Interest on Fully Convertible Debentures (FCDs) - HELD THAT - As there is no change in facts and the methodology adopted by the assessee for benchmarking the international transaction of Payment of Interest on FCDs‟ has been accepted in the prior years, we see no reason to deviate from the view so taken by the coordinate bench of Tribunal in assessee‟s own case cited supra. Further, the learned DR could not show us any reason to deviate from the aforesaid order. Thus, respectfully following the order passed by the coordinate bench of Tribunal in assessee‟s own case cited supra, we uphold the plea of the assessee and delete the impugned adjustment in respect of international transaction of Payment of Interest on FCDs‟. Accordingly, grounds No. 1 and 2 aised in assessee's appeal are allowed.
Issues Involved:
1. Inclusion and exclusion of comparable companies for benchmarking international transactions. 2. Transfer pricing adjustment with respect to the international transaction pertaining to payment of interest on Fully Convertible Debentures (FCDs). Issue-wise Detailed Analysis: 1. Inclusion and Exclusion of Comparable Companies for Benchmarking International Transactions: ICRA Management Consulting Services Ltd: The assessee included ICRA Management Consulting Services Ltd as a comparable company for benchmarking the "Provision of Investment Advisory Services." The TPO rejected this comparable citing functional dissimilarity, but the CIT(A) directed its inclusion. The Tribunal upheld the CIT(A)'s decision, noting that ICRA Management Consulting Services Ltd was accepted as a comparable in the assessee's own case in prior and subsequent years, and there was no change in its functional profile. The Tribunal also referenced the jurisdictional High Court's decision in a similar case, affirming the inclusion of ICRA Management Consulting Services Ltd as a comparable. Informed Technologies (India) Ltd: The assessee included Informed Technologies (India) Ltd as a comparable, which was rejected by the TPO on the grounds of functional dissimilarity, labeling it as a "Knowledge Process Outsourcing" company. The CIT(A) upheld the TPO's decision. However, the Tribunal directed the inclusion of Informed Technologies (India) Ltd, citing prior decisions where the company was considered functionally similar to the assessee's investment advisory services. Motilal Oswal Investment Advisers Pvt. Ltd: The TPO included Motilal Oswal Investment Advisers Pvt. Ltd as a comparable, but the CIT(A) directed its exclusion, which was upheld by the Tribunal. The Tribunal noted that Motilal Oswal Investment Advisers Pvt. Ltd is engaged in multiple business verticals, including investment banking and private equity syndications, which are not comparable to the assessee's non-binding investment advisory services. Ladderup Corporate Advisers Pvt. Ltd: The TPO included Ladderup Corporate Advisers Pvt. Ltd as a comparable, but the CIT(A) directed its exclusion, which was upheld by the Tribunal. The Tribunal found that Ladderup Corporate Advisers Pvt. Ltd is engaged in high-end investment banking and debt capital management, which are not comparable to the assessee's services. The Tribunal referenced multiple decisions where Ladderup Corporate Advisers Pvt. Ltd was excluded as a comparable for companies providing non-binding investment advisory services. Future Capital Investment Advisory Services and Goldman Sachs India Securities Private Limited: The Tribunal directed the exclusion of Future Capital Investment Advisory Services and Goldman Sachs India Securities Private Limited, acknowledging the assessee's and Revenue's agreement on their exclusion due to functional dissimilarity and lack of relevant data. 2. Transfer Pricing Adjustment with Respect to the International Transaction Pertaining to Payment of Interest on Fully Convertible Debentures (FCDs): The assessee benchmarked the interest rate on FCDs issued to its associated enterprise at 12% using the Comparable Uncontrolled Price (CUP) method, referencing lending rates published by the Reserve Bank of India. The TPO, however, applied a rate based on the average of 6-month USD LIBOR + 800 basis points, resulting in an upward adjustment. The Tribunal upheld the assessee's approach, referencing a prior decision in the assessee's own case where the methodology of using Indian banks' PLR was accepted. The Tribunal noted that the assessee's functional profile and the methodology for benchmarking had not changed from previous years, and thus, there was no reason to deviate from the established approach. The Tribunal deleted the adjustment made by the TPO, affirming the assessee's benchmarked interest rate. Conclusion: The Tribunal's decision addressed the inclusion and exclusion of specific comparable companies for benchmarking international transactions and upheld the assessee's methodology for benchmarking the interest rate on FCDs. The Tribunal's analysis was grounded in consistency with prior decisions and functional comparability, ensuring that the benchmarking process adhered to established legal and factual precedents.
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