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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 ..... Rs. 53,51,9531- in respect of investment advisory services rendered by appellant to its overseas associated enterprise ("AE"). The appellant humbly submits that no transfer pricing adjustment is warranted in its case and wishes to raise the following grounds of appeal, which are without prejudice to each other: 1.1 The Hon'ble DRPI Ld. Transfer Pricing Officer ('TPO') /Ld. AO erred in law and in facts by wrongly rejecting the systematic benchmarking analysis carried out by the appellant. Further, the Ld. TPO erred in cherry picking comparable company i.e. Motilal Oswal Investment Advisors Pvt Ltd. ("MOIAPL') with high margins without adopting any search process. 1.2 The Hon'ble DRP 1 Ld. TPO 1 Ld. AO erred in requiring the appellant to use latest year data for comparable companies when the transfer pricing regulations requires documentation to be contemporaneous. 1.3 The Hon'ble DRP/ Ld. TPO / Ld. AO erred in law and in facts by rejecting functionally similar selected by appellant on adhoc and arbitrary basis citing follwong reasons * Functional dissmilarity * Different accounting year as compared to appellant * Non-detailed segmental accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone carrying out the philanthropic work and the appellant does not play an important role in achieving group's philanthropic objective. It is pertinent to note that sole objective of existence of the Appellant is to support its AE in achieving the group's philanthropic objective which is evident from the fact that the appellant operates as captive service provider to its AE. 1.8 The Hon'ble DRP / Ld. TPO / Ld. AO erred in not appreciating the need for adjustments required to the margins of comparable companies on account of differences in various factors such as differences in functions performed, risk assumed, accounting policies etc. 1.9 The Hon'ble DRP / Ld. TPO / Ld. AO has erred in not considering the need to account for working capital adjustment for the purpose of removing impact of differences in level of payables and receivables. GROUND 2: PENALTY PROCEEDINGS The Hon'ble DRP / Ld. TPO / Ld. AO erred in law and in initiating penalty proceedings under section 271(1)(c) of the Act." 2. During the Financial Year relevant to the Assessment Year under consideration, the assessee has entered into International transactions with its AE, M/s Acumen fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of this Tribunal dated 7.2.2014 in the case of M/s Carlyle India Advisors Pvt Ltd. Vs. DCIT in ITA no. 7367/Mum/2012 and submitted that the Tribunal while deciding the functional comparability of this company has held that Motilal Oswal Investment Advisor Pvt. Ltd is registered with the SEBI as a merchant banker. Though the company has shown the income from operation as advisory fee however, it is admittedly a company engaged in diversified activities of takeover, acquisition, disinvestment etc. The Ld. Authorized Representative has also referred the Director's report of Motilal Oswal Investment Advisor Pvt. Ltd and submitted that there is no change in the functions and business carried out by the company in the year under consideration in comparison to the A.Y. 2008-09 which was examined and analyzed by the Co-ordinate Bench in the case of Carlyle India Advisors Pvt. Ltd. Thus the Ld. Counsel has submitted that if M/s Motilal Oswal Investment Advisor Pvt. Ltd. is excluded from the set of comparables then the mean margin of the remaining four companies comes to 24.99% in comparison to the assessee's margin at 23.29% and thereby the assessee's margins are within +/- 5% range of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder:- Sr. No. Company Name Operating Profit as percentage of Cost 1. A R Venture Funds Management Pvt Ltd. 27.49 2. Kshitij Investments Advisory Company Ltd 25.31 3. Motilal Oswal Investment Advisor Pvt. Ltd 82.77 4. Motilal Oswal Ventrue Capital Advisors Private Ltd ( Now Known As Motilal Oswal Pvt Equity Advisors Private Limited 22.18 Arithematic Mean 39.44 Acument India 23.29 8. The TPO has recommended an upward adjustment of Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the Company is very experienced and capable of providing our clients with the most optimal solutions across various products viz capital markets, private equity and mezzanine finance. A better access to capital would also lead to resurgence of activity in acquisition by our clients in order to strengthen their business position on a global platform. The Company has had unique success with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. [ as per our findings ] and including M/s. IDC [ as per the directions of the DRP ] in the light of the provisions of Sec. 92C(2) r.w. Section 92C(2A) of the Act. Ground No. 4.1 and ground No. 9 are accordingly allowed." 11. It is clear from the order of this Tribunal in the case of M/s Carlyle India Advisors Pvt Ltd. Vs. DCIT (supra) that M/s Motilal Oswal Investment Advisor 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 Ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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