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TMI Blog2014 (10) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... ices and products. It also demonstrates that Cyber India Ltd. has launched numerous media properties for the B2B communities which has made it the largest specialized media house in the country. The other functions performed by IDC and the properties held by IDC demonstrate that the functional profile is totally different from the functional profile of the assessee, which is in the activity of providing investment advisory services to its A.E. In view of the above, we are inclined to uphold the order of the TPO as upheld by the DRP and reject this claim of the assessee. TPO was right in rejecting M/s Cyber India Research Ltd. Now known as IDC as a comparable. TPO is directed to provide the benefit of + 5% range to the assessee - ITA No. 1998/Del/2014 - - - Dated:- 17-10-2014 - C. M. Garg (Judicial Member) And J. Sudhakar Reddy (Accountant Member) For the Petitioner : Dr. Rakesh Gupta, Rohan Khare For the Respondent : Peeyush Jain ORDER J. Sudhakar Reddy (Accountant Member) This is an appeal filed by the assessee directed against the order of the AO passed u/s 143(3) r.w.s.144C of the Income Tax Act, 1961. The AO passed the impugned order on 28.2.2014, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial pronouncements which uphold this company as a comparable in respect of the financial advisory and consultancy services performed by the tested party such as the Appellant. 7. On facts and in law, the Hon'ble DRP, Ld. AO and Ld. TPO erred in selection of Motilal Oswal Investment Advisors Ltd. as a comparable company and by doing so: 7.1 in contravention of the Section 92C(3) of the Act read with Rule 108(2) of the Rules, erred in including this company which is not comparable to the Appellant in terms of functions performed, assets employed and risks assumed and ignoring judicial pronouncements in this regard; 7.2 erred in selecting this company having highly volatile margins across past years, thus ignoring judicial pronouncements in this regard including the one in the Appellant's own case for prior assessment years; 7.3 erred in selecting this company with extreme results, in the final comparables' set for benchmarking a low risk captive unit such as the Appellant. 8. Without prejudice to Ground 7, on facts and in law, the Ld. AO and Ld. TPO made computational errors in calculating the working capital adjusted margin of Motilal Oswal Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by its management, staff and the Government of United Kingdom. Actis is a leading PE investor in emerging markets and has been investing exclusively in these markets for nearly 60 years. Actis invests in three asset classes. P.E.: Actis provides a variety of funding solutions for comparables. Actis provides equity capital for buyout and growth transactions, typically with a minimum investment size of US $ 50 million. Infrastructure: Actis invests in infrastructure businesses in Africa, Latin America and South and South East Asia with a particular focus on power, roads, ports and airports. Investment is made at all stages of the project life, from providing development or expansion capital to acquiring mature operational assets. Real estate: The Actis Group employs teams of experienced real estate professionals which are based in Johannesburg, Mumbai and London. Actis invests equity capital in office, residential, industrial, hotel and retail projects in Africa and India. International Venture Capital Management Limited ('IVCM')IVCM is a private company limited by shares incorporated in Mauritius as a subsidiary of Actis LLP. The main obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nably be required in order to preserve and promote the interests of the funds managed by the Group; and h) Advise on the negotiations of the terms of any purchase or sale of an investment or proposed investment. Actis India also renders the following services: i) Give prompt notice of any proposed changes in the nature of scope of investment opportunities or the business of operations of the Group and of any event or condition which might materially and adversely affect the carrying on of Group's business or operations; and j) Give prompt notice of any litigation or administrative proceedings before any court or arbitral body or other authority, which might materially and adversely affect Actis India or the investments managed by the Group. 2.1. There is no dispute on the characterization of the transactions or on the most appropriate method (MAM) to be adopted in this case. The only issue disputed before us is on the inclusion of M/s Mothilal Oswal Investment Advisors (P) Ltd. (MOIA Pvt.Ltd. for short) as a comparable by the TPO and also the exclusion of a comparable cited by the assessee i.e. Cyber Media Research Ltd ., now known as IDC by the TPO. As r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvisors P.Ltd., At page 79 of the paper book copy of the directors report presented along with the audited accounts of the company M/s Motilal Oswal Investment Advisory P.Ltd., was enclosed. A perusal of the same demonstrates that the company had unique success with its delivery capabilities in cross product border acquisition for its clients. This is in addition to providing clients with optimal solutions across various products viz. Capital market, private equity and mezzanine finance. Hence the argument of the assessee that the functional profile of M/s Motilal Oswal Investment Advisors P.Ltd., is different from the functional profile of the assessee is correct and hence has to be accepted. 5.4. We are supported by the decision of the Co-ordinate Bench of the Tribunal in the case of Carlyle India (P) Ltd., (supra) wherein at para 12, page 8, it is held as under: 12. We have carefully considered the rival submissions and perused the orders of the lower authorities and the lrelevant material evidences brought on record and referred to in the light of Rule 18(6) of ITAT Rules, 1963. The only dispute is whether MOIA Pvt.Ltd.can be considered as a comparable for the determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the TPO/AO. 5.8. Ld. Counsel for the assessee Dr. Rakesh Guptha submits that the functional profile is identical and proper reasons were not given by the DRP for eliminating this comparable cited by the assessee. Further he submitted that IDC has been accepted as a comparable by the AO in the subsequent AYs. He submit that the Co-Oridnate Bench of the Tribunal in the case of Carlyle India Advisors P.Ltd. has also accepted IDC as comparable in cases where the functional profile of the assessee is investment advisory and related support services. 5.9. Ld.DR refers to the functional profile as brought out by the DRP at page 12 of the order and submits that this comparable was rightly eliminated by the TPO and this decision was rightly upheld by the DRP. As regards TPO accepting the comparable in the subsequent year and the Co-Ordinate Bench directing the acceptance of this comparable in the case of Carlyle India Advisors P.Ltd., he argued that these facts were not brought to the notice of the authorities. 6. After hearing rival contentions we find that at page 12 of the DRP's order the functional profile of IDC Ltd., is narrated, which we extract for ready reference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communities which has made it the largest specialized media house in the country. The other functions performed by IDC and the properties held by IDC demonstrate that the functional profile is totally different from the functional profile of the assessee, which is in the activity of providing investment advisory services to its A.E. In view of the above, we are inclined to uphold the order of the TPO as upheld by the DRP and reject this claim of the assessee. 6.2. Coming to the Coordinate Bench decisions, we find that these facts were not placed before the Bench. The TPO accepting IDC as a comparable for the subsequent AY, does not persuade us to come to a conclusion that the functional profile of IDC is same as that of the functional profile of the assessee company. Hence we reject ground no.6 of the assessee by holding that the TPO was right in rejecting M/s Cyber India Research Ltd. Now known as IDC as a comparable. 7. On ground no.10 both the parties agreed that the issue should be set aside to the file of the AO with a specific direction that both the income arising out of reimbursement of expenses and the related expenditure should both be considered while computing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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