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TMI Blog2014 (11) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... salaries and expenses of seconded employees is set aside and the for reimbursement of expenditure on account of professional fee is remitted back to the AO for fresh adjudication – Decided partly in favour of revenue. Transfer pricing adjustment u/s 92CA – Receipts of investment advisory services – Selection of comparables - Held that:- Following the decision in Temasek Holdings Advisors (I) P. Ltd. Versus Dy. Commissioner of Income Tax [2013 (9) TMI 48 - ITAT MUMBAI] - The assessee which is mainly engaged in rendering of investment advisory services to its parent company at Singapore has received mark-up of 21% - This margin of 21% has been benched marked by using TNMM as the most appropriate method with PLI as operating profit to operating cost - its margin on the transaction carried out with its parent company was at ALP - The TPO out rightly rejected the assessee's comparables, firstly, on the ground that they are not in investment advisory services and secondly the assessee has not carried out search by using the key phrase "investment advisory services". No proper reasoning has been given by the TPO as to why data from "Prowess" is not reliable and the "capital line da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriately as per the provisions of the Act. 2. Whether on the facts and in the circumstances of the case and in law, the DRP was justified in deleting the adjustment of ₹ 89,56,506/- made on account of transfer pricing adjustment under section 92CA, on the international transactions relating to receipts in respect of investment advisory services rendered by the assessee without appreciating the fact that the selection of comparables was done appropriately as per the provisions of the I.T. Act. 2.Rival contentions have been heard and record perused. Facts in brief are that the assessee is Temasek Holdings Advisors India Pvt. Ltd. (for short THAIPL ), is wholly owned (100%) subsidiary of Temasek Holding Pte. Ltd. (for short THPL ), which is an Asia investment firm based at Singapore. The assessee renders investment advisory services to THPL, Singapore, which includes identifying and analyzing potential investment particulars in India, evaluating political and economic scenario for the investment purpose in India and monitoring and making recommendation to THPL in respect of specified investment in India, specifically for unlisted companies. All these services are pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es rendered by the Indian company i.e., the assessee, for which it has been making payment at a mark-up of 21%. The Singapore company has sent two senconded employees under the secondment agreement who are under the control and supervision of the Indian Company for the purpose of rendering services in India for the Indian Company and for the Indian operation. Since the seconded persons were the employees of Singapore company, the payment of salary and cost of the expenditure in terms of appointment letter has been borne by the Singapore company. While doing to, it has withheld the taxes and deposited the sum under the provisions of section 192 of the Act with the Government of India treasury. Thus, the payment of salary has already been subjected to TDS. The Indian company which is rendering services for Singapore company has utilized the services of these seconded employees for their Indian operation. The concept of secondment employee is that an employee is temporarily transferred to another job to a different party, for a defined period of time or for specific purpose and may be to the mutual benefit of the parties. This concept is prevalent in most part of the world, where on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the file of the AO to examine and decide afresh. Respectfully following the order of the Tribunal in assessee's own case, we delete the disallowance made with respect to reimbursement of salaries and expenses of seconded employees. However, reimbursement of expenditure on account of professional fee is restored back to the file of the AO for deciding afresh as per the directions given by the Tribunal in its order dated 30-8-2013 vide its para 33 as reproduced above. 6. The Revenue is also aggrieved for deleting an adjustment made on account transfer pricing adjustment u/s.92CA, on the international transactions relating to receipts in respect of investment advisory services rendered by the assessee. 7. We have considered the rival contentions and found from the record that the AO/TPO had made upward adjustment to the value of international transaction of investment advisory services rendered by the assessee by rejecting Access India selected by the assessee as comparable company in the TP documentation maintained by the assessee. The AO/TPO has also included CRISIL as comparable company with regard to the investment advisory services rendered by the assessee. 8. By t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the data should have been accessed from the capital line data base . No proper reasoning has been given by the TPO as to why data from Prowess is not reliable and the capital line data should have been taken. On a perusal of his own search for selection of comparables, it is seen that he himself has selected the comparables using the Prowess data which is evident from the financials taken by the TPO of his comparables which are appearing from Page-555 to 564 of the paper book submitted before us. He has also not established that by entering the key phrase investment advisory service , the selection of the functionally similar companies are available from the data. Be that as it may, the selection of eight comparables by the TPO, as have been incorporated in the forgoing paragraphs, it is seen that these companies are either engaged as a broking company or merchant banker or asset management company. In case of stock broking companies, the main functions are marketing and prospecting for new clients, execution and settlement of the transaction and trading of shares which are mostly on own account or on behalf of the customers. The risk assumed is far more than the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparables can be included for the comparability analysis for bench marking the transactions carried on by the assessee under TNMM. 54. Coming to the assessee's comparables, it is seen that some of them have been found to be proper comparable by the TPO himself in the assessment year 2007-08 and also in the assessment year 2009-10. Without any proper reason or change in the functionality and any financial data, it cannot be held that the same companies are not comparable in the intermediary period of the assessment year 2008-09. The TPO has to bring some material on record to show that why these comparables which were good comparable in the earlier year also in and succeeding year, cannot be compared in this year. Thus, three comparables viz. ICRA Management Consulting Services Ltd., ICRA Online Ltd. and IDC India Ltd., cannot be rejected out rightly. Coming to the functional profiles of all the six comparables, it is seen that- (i) ICRA Management Consultant Ltd. This company is engaged in operations of advisory services and is offering consultation service in the area of strategy, risk management, operations, improvement regulatory economics and transactions adviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the data outsourcing charges are mostly related to analysing of data based on which advise is given for the investment purpose in India. Moreover, this company has been accepted by the TPO in the year 2009-10 also. Thus, it is a good comparable. (v) Kinetic Trust Ltd. This company though registered as a NBFC but is mainly engaged in corporate consultancy and financial services which also include investment advisory service. Moreover, this company has also been accepted to be a good comparable by the TPO in the assessment year 2009-10. Thus, this company has rightly been included by the assessee for comparability analysis. 55. Thus, all the six companies shortlisted by the assessee are quite good comparables looking to the overall functions and also that the same have been found to be so by the Department in the preceding and succeeding years. Accordingly, the entire adjustment made by the TPO cannot be sustained as the margin of the assessee @ 21% is at arm's length looking to the average margin of the six comparables. Accordingly, the adjustments made by the TPO are deleted. Thus, the ground no.2, raised by the assessee is treated as allowed.' 11. It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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