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TMI Blog2016 (3) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... on provision of Advisory Services given to Associate Enterprises (AE). The dispute mainly revolves around inclusion and exclusion of certain comparables for the purpose of benchmarking the margin of arm's length price (ALP). 4. Brief facts of the assessee's case are that, assessee, Blackstone Advisors India Pvt. Ltd., is incorporated in India and is providing sub-advisory services to its AE, Blackstone Management Partners, VLLC. The Blackstone group is one of the world's leading alternative asset management group and is one of the largest operators within the profit equity market. As a sub-advisor, key function performed by assessee consists of following services/ functions: (a) Understanding the investment strategy of the fund as articulated in the prospectus so that it can identify investment opportunities that may be of interest to the AE on behalf of the Fund; (b) Identifying, investigating and evaluating potential investment opportunities in the Indian market; (c) Providing weekly updates to the AE's Review and Investment Committees; (d) Gathering feedback from the AE's Review and Investment Committees and on that basis undertaking additional review or analysis; (e) Coor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparables. After detailed search analysis and qualitative analysis, the assessee short-listed 8 external comparables, the average mean margin of which was arrived at 8.72% and hence, it was reported that, the assessee's mark-up margin of 18.44% was at Arm's length. The list of assessee's comparable included following companies: (i) Agrima Consultants International Ltd. (ii) Almondz Global Securities Ltd. (iii) Crisil Risk & Infrastructure Solutions Ltd. (iv) ICRA Management Consulting Services Ltd. (v) ICRA Online Ltd. (vi) IDC (India) Ltd. (vii) IDFC Investment Advisors Ltd. (viii) Rites Ltd. 6. The Ld. TPO on examination of assessee's economic analysis of the comparables observed that, the comparables are mainly engaged in general advisory business hence, there functions are not fully comparable and the search conducted by the assessee is more generic considering vide range of key-words used rather than selecting the key-words specific to Investment Advisory Services. Further, the assessee has not computed the margin for the financial year 2007-08, albeit has used average margin for three financial years, which is not permissible under Rule 10B (4). Accordingly, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal Investment Advisors Pvt Ltd Carlyle India Advisors Pvt Ltd vs The DCIT, Mumbai, (43 Taxman.com 184, AY 2008-09) Carlyle India Advisors Pvt Ltd vs The DCIT, Mumbai, (49 Taxman.com 476, AY 2009-10) Acumen Fund Advisory Services India Private Limited vs DCIT (50 taxmann.com317-AY 2009-10) Bain Capital Advisors (India) Private Limited vs DCIT (ITA No. 1360/Mum/2014 AY 2009-10) Q India Investment advisors Pvt Ltd. vs DCIT (ITA 923/M/2015) AY 2010-11) NVP Venture Capital India Pvt Ltd vs DCIT (ITA 1564/M/2015) AY 2010-11 DCIT vs Arisaig Partners India (ITA No.1083/M/2014)AY 2009-10 2 Brescon Corporate Advisors Pvt Ltd Temasek Holdings Advisors (I) Pvt Ltd. 38 Taxmann.com 80(AY 2008-09) TPG Capital India Pvt Ltd vs ACIT, Mumbai ITAT (ITA 880/M/2013 AY 2008-09) Temasek Holdings Advisors (I) P Ltd 47 taxmann.com 311 (AY 2009-10) 3 ICRA Management Consulting Services Ltd Temasek Holdings Advisors (I) P Ltd (38 taxmann.com80, AY 2008-09) Temasek Holdings Advisors (I) P Ltd. (47 taxmann.com 311 AY 2009-10) 4 ICRA Online Limited Temasek Holdings Advisors (I) Pvt Ltd (38 Taxmann.com 80 -AYs 2007-08 & AY 2008-09) Temasek Holdings Advisors (I) Pvt Ltd (47 taxmann.com 311 AY 2009-10) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were: (i) I C R A Management Consulting Services Ltd.:- The company provides management consulting services, it offers consulting services in economics, transaction advisory and process re-engineering. The company's clientele includes banks & financial service companies, corporate entities, institutional investors, governments, regulators, and multilateral agencies, wide-ranging management advisory services covering the areas of strategy practice, risk management practice, regulatory practice, transaction practice, and content. While strategy practice focuses on improving an organization's competitiveness across its value chain, regulatory practice advises clients like governments and regulators on formulation of economic and financial policies. Thus, this company is rendering advisory services in wide range of industries, which assessee also analyses variety of industries while recommending its AE for the investments to be made. (ii) I C R A Online Ltd :- The company is involved in Information Product and Services, Outsourced Services segment provides financial and analytical services support to its clients in the area of Data Extraction, Aggregation, Electronic Conversion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason that it has income from advisory fees, then on same logic Motilal Oswal should also be included. Similarly regarding Brescon Corporate Advisors Pvt Ltd, he submitted that, this company is again rendering advisory services in various fields, therefore, the same should be accepted. Thus, he strongly relied upon the order of the TPO as well as DRP for inclusion of these comparables. So far as inclusion of assessee's comparable, which has been rejected by the TPO, he submitted that, the TPO has given detail analysis for rejecting the said companies being functionally not comparable. Thus, he strongly relied upon the order of the TPO as well as the DRP. 13. We have carefully considered the rival submissions, perused impugned order and material placed on record. The assessee is rendering sub-advisory services for identifying the investment opportunities to be done by the AE in India for which it is remunerated with cost plus markup. Such advisory services are purely non-binding. Being risk mitigated Investment Advisory Company, the assessee has benchmarked its margin with the companies involved in investment or corporate advisory services by adopting TNMM method as MAM. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re ownership instead of loans. It also provides advisory on corporate matters to the companies in which they invest. The focus is on negotiated private equity investment. The wide ranges of activities include portfolio management, credit syndication, counseling on M&A, etc. This whole range of functions and activities carried out by Motilal Oswal is definitely are far wider and much different from investment advisory services where core functions is to give advice for making the investments in diversified fields. A company which is engaged in merger and acquisitions, private equity syndication, loan/credit syndication and performing most of the function as a Merchant Banker, then the entire functions and transactions affects the generation of revenue and margins. Such functions are entirely different from investment advisory services. Mere classification of revenue as 'advisory fees' will not put the company in a comparable basket sans functional similarity and transactional analysis. In case of Carlyle India Advisors Pvt. Ltd (supra), it has been held that, the merchant banking functions are entirely different from investment advisory services and this decision of the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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