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TMI Blog2014 (11) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness activity was carried out during the year, therefore, having considered the business profile of the assessee as well as M/s Motilal Oswal Investment Advisor Pvt. Ltd., the company is not functionally comparable with the business of the assessee and it cannot be regarded as good comparable for the purpose of determination of arm’s length price in respect of international transaction of the assessee – the AO/TPO is directed to exclude the company from the set of comparables - The details of comparables have also been considered by the TPO in the set of four comparables from which, Motilal Oswal Investment Advisor Pvt. Ltd. is not a good comparable, the mean margin of the remaining three comparable comes to 24.99% in comparison to the assessee’s margin of 23.29% - Since the assessee’s margin is within the tolerance range of +/- 5% of the mean margin, therefore, no adjustment on account of transfer pricing is required in respect of international transaction of the assessee – Decided in favour of assessee. - ITA NO.143/Mum/2014 - - - Dated:- 4-7-2014 - SHRI R.C. SHARMA AND SHRI VIJYA PAL LRAO, JJ For The Shri Vijay Mehta For The Shri Rajesh Ranjan Prasad CIT (DR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MOIAPL: MOIAPL is engaged in Investment banking activities which is significantly different from the non-binding investment advisory services rendered by appellant to its AE. MOIAPL's employee cost ratio is significantly lower when compared with other comparable companies in the final set. The sales turnover of MOIAPL is significantly high as compared to appellant and also comparable companies in the final set. Thereby it enjoys better economies of scale as compared to appellant. The analysis of financial results of MOIAPL over a period of 5 years clearly suggests that the company is high risk taking enterprise whereas on the other hand the appellant is a risk free entity which is guaranteed a minimum of22% net profit on its operating costs. MOIAPL stands rejected by applying one of Ld. TPO's own fi.lter criterion where he rejected one of the appellant's comparable company namely IDFC Investment Advisors Ltd on the basis of drop in sales year on year. It is pertinent to note that there has been a significant drop in sales turnover of MOIAPL year on year (Rs. 45.23 crore in A Y 09-10 compared to ₹ 62.77 crore in A Y 08-09). MOIAPL has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as PLI for determination of ALP in respect of its international transaction by selecting eight comparables. The mean margin arrived at by the assessee at 18.60% in comparison to the assessee s operating margin at 23.29%, accordingly the assessee claimed that its international transactions are at arm s length price. The TPO noted that the assessee has used multi year data and not the current year data. The TPO has also rejected five of comparables out of eight selected by the assessee thereby accepted three comparables selected by the assessee. The TPO then added one more comparable namely M/s Motilal Oswal Investment Advisor Pvt. Ltd. and computed the mean margin by applying PLI OP/OC at 39.44% in comparison to the assessee s margin at 23.29%. Accordingly the TPO made an adjustment of ₹ 53,51,953/-. After receiving the order of the TPO with the recommendation of an upward adjustment of ₹ 53,51,953/-, the Assessing Officer prepared a draft assessment order dated 30.01.2013 against which the assessee filed objection before the DRP but could not succeed. 3. Thus the main grievance of the assessee is inclusion of M/s Motilal Oswal Investment Advisor Pvt. Ltd. as compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were mainly from cross boarder merger and acquisisiton activity and related financial solution. therefore, the decision of Co-ordinate Bench of Tribunal in respect of assessment year 2008-09 is not applicable for the assessment year under consideration. He has contended that M/s Motilal Oswal Investment Advisor Pvt. Ltd. is a comparable company as it has shown the revenue from advisory services which is similar to the assessee s activity. He has relied upon the orders of authorities below. 6. We have considered the rival submissions as well as relevant material on record. The assessee has bench marked its international transactions by selecting eight comparables as under:- Sr. No. Company Name Financial Year Operating Profit As Percentage of Cost 1. A R Venture Funds Management Pvt. Ltd March 2009 27.49% 2. Crisil Risk Infrastructure Solutions Ltd December 2008 38.94% 3. I CR A Management consulting Services Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The TPO has recommended an upward adjustment of ₹ 53,51,953/- in respect of arm s length price. The grievance of the assessee is inclusion of Motilal Oswal Investment Advisor Pvt. Ltd on the ground that the said company is not functionally comparable with the assessee . The TPO has recorded the business profile of the assessee in para 4 of its order as under:- 4. On going through the transfer pricing study report, it is seen that Acumen Fund Advisory Services India Private Limited (Acumen India) engaged in providing non- binding investment advisory services to its parent company. The parent company i.e. Acumen Fund Inc. is a non- profit global venture which makes investments globally in projects that help solve poverty issues. Acumen Fund Inc. invests in projects related to health, housing, water, energy, agriculture and services which are aimed at general upliftment/ benefit of society at large. The assessee company assists the parent company by rendering following services: Pre-investment advisory services which include due-diligence on potential investee companies, generation of deal flow, case representation, investment structure design, fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th its delivery capabilities in cross border acquisition for its clients in India. 10. The said company has completed its third Financial Year since inception and 45 transactions in the field of takeover, acquisition, disinvestment. The primary activity of M/s Motilal Oswal Investment Advisor Pvt. Ltd. during the year was in the field of capital market, private equity and mezzanine finance as well as acquisition mergers and the cross boarder acquisition for its clients in India. The Ld. Authorized Representative has also filed the other details of business activity of the said company regarding investment banking, corporate finance advisory wherein the said company has acted as sole arranger, strategic and financial advisor, sole book running lead manager, merchant banker and arranger etc. We note that the majority of transactions completed by Motilal Oswal Investment Advisor Pvt. Ltd. are in the filed of investment banking transactions comprising private placing of equity, syndication of project debt by taking of equity shares, acquisition, initial public offer (IPO), open offer and sponsor etc. The co-ordinate Bench of this Tribunal in the case of M/s Carlyle India Advisors P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sor Pvt. Ltd. completed 23 transactions in the said year in the same field of acquisition, disinvestment, IPO etc. We find that the similar business activity was carried out during the year under consideration, therefore, having considered the business profile of the assessee as well as M/s Motilal Oswal Investment Advisor Pvt. Ltd., we find that the said company is not functionally comparable with the business of the assessee and, therefore, cannot be regarded as good comparable for the purpose of determination of arm s length price in respect of international transaction of the assessee. Accordingly we direct the Assessing Officer/TPO to exclude the said company from the set of comparables. The assessee has filed the revised margins of the comparables as under:- Sr. No. Name of the Comparable Operating Margin on cost (%) 1. Appellant 23.29% 2. A R Venture Funds Mgmt. Pvt. Ltd. 27.49% 3. Kshitij Investments Advisory Co. ltd. 25.31% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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