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TMI Blog2017 (1) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... ise (A.E). In the previous year relevant to the assessment year under dispute, the assessee had entered into international transaction with its A.E. and earned revenue of ₹ 62,24,67,829, towards provision of investment advisory services. The assessee had bench marked the arm's length price of the international transaction by adopting TNMM as the most appropriate method with OP/OC as the PLI by considering itself as a tested party. Assessee had undertaken a search analysis in the data bases and short listed five companies as comparables with average margin of 18.80%. As the margin of the assessee shown at 20.33% is higher to the average margin of the comparables, the price charged to the A.E. towards international transaction was stated to be at arm s length. The Transfer Pricing Officer to whom the Assessing Officer had made a reference to determine the arm's length price, however, did not agree with the transfer pricing analysis made by the assessee. After rejecting the transfer pricing study report of the assessee, the Assessing Officer proposed a new set of eleven comparables with average arithmetic mean of 70.33% for the purpose of bench marking the arm's leng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only:- ICRA LIMITED 4. The learned Authorised Representative objecting to selection of this comparable submitted, this company basically is a credit rating agency and is listed in NSE/BSE. He submitted, company has three reportable segments i.e., rating services, information services and BPO services. He submitted, only segment which could be taken as a comparable to the assessee is information service segments. However, this particular segment during the relevant previous year suffered loss. He submitted, in the relevant previous year, the company had not reported any income from BPO service and 99.28% of the revenue earned by the company is from rating service alone. In this context, the learned Authorised Representative drew the attention of the Bench to the Profit Loss account of the company at Page-185 of the paper book. He, therefore, submitted, this company being only engaged in credit rating service, is functionally different, hence, cannot be treated as comparable to the assessee. He submitted, after considering the objections of the assessee in assessment year 2009-10, the Transfer Pricing Officer himself has excluded the company from being treated as a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company cannot be treated as comparable to the assessee. DEUTSCHE ASSET MANAGEMENT INDIA LTD . 7. Objecting to the inclusion of this company, the learned Authorised Representative submitted, it is involved in investment management services and provides portfolio management service. In this context, the learned Authorised Representative drew our attention to the director s report at Page-339 of the paper book and notes to accounts of the company. Learned Authorised Representative submitted, the company operates in mutual fund industry and has received awards for managing Deutsche mutual fund and is investment manager to the fund. He submitted, the company earns 57.76% of its revenue from investment management fees. He submitted, the balance income earned is in the nature of investment advisory and other misc. income. However, there are no recognisable segments provided in the annual report to identify the different sources of income. He submitted, the company has also high related party transaction of 134.53% which makes it un-comparable. He submitted, in assessee s own case, though, the Transfer Pricing Officer proposed this company as a comparable, however, after con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Schedule-L on notes to account of the company forming part of the annual report of the company, the learned Authorised Representative submitted, the company operates in a single segments i.e., broking activities. He submitted, the balance sheet abstracts and companies general business profile states the service description has share/stock broking service/merchant banking. He submitted, considering the aforesaid facts, the Transfer Pricing Officer in assessee s own case for assessment year 2009-10, though, had proposed the company as a comparable, however, after considering assessee s submissions had excluded it from the final set of comparable. In support of such contention, learned Authorised Representative relied upon the following decisions:- i) Sandstone Capital Advisors Pvt. Ltd. v/s ACIT, [2013] 32 taxmann.com 216 (Mum.); ii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2013] 27 ITR (Trib.) 125 (Mum.); iii) DCIT v/s Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2014] 47 ITR (Trib.) 311 (Mum.); iv) General Atlantic Pvt. Ltd. v/s DCIT, [2013] 32 taxmann.com (Trib.) 178 (Mum.); v) Carlyle India Advisors Pvt. Ltd. v/s ACIT, [2012] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions of the parties and perused the material on record, we are of the considered opinion that this company cannot be treated as comparable for the very same reason on which Shriyam Broking Intermediary Ltd. was excluded as comparable. We have noted, the Tribunal, Mumbai Bench, had excluded the company expressing similar view in the following cases which are for the very same assessment year. i) Sandstone Capital Advisors Pvt. Ltd. v/s ACIT, [2013] 32 taxmann.com 216 (Mum.); and ii) Temasek Holdings Advisors India Pvt. Ltd. (supra). 16. Accordingly, we direct exclusion of this company from the list of comparables. SBI FUND MANAGEMENT PVT. LTD . 17. Objecting to inclusion of this company, the learned Authorised Representative submitted, the company is primarily engaged in asset management activities, as it manages off-shore fund and provides portfolio management service. In this context, he referred to the director s report of the company as submitted in the paper book. He submitted, the company earns 84.31% of its revenue from management fee and balance income is earned from portfolio advisory fees, income from investments and other misc. income. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Only a nominal 3.43% income is earned from advisory services. He submitted, the company has related party transaction of 60.50%. In this context, he referred to the annual report of the company. He submitted, in the relevant previous year, there was business re- structuring as its advisory services segment was transferred to a subsidiary and further two wholly owned subsidiary were merged into the company. He submitted, the assessee in its transfer pricing study had included this company as a comparable on the basis of multiple year data relating to information segment. However, the information segment was discontinued from January 2007. He submitted, the information and advisory segment of the company was rejected in assessee s own case for assessment year 2005-06 by the Transfer Pricing Officer, DRP and the Tribunal. Whereas, it was accepted by the Transfer Pricing Officer and the DRP in assessment year 2006-07. He, therefore, submitted, the company should be excluded from the list of comparable. In support of such contention, he relied upon the decision of the Tribunal in Sandstone Capital Advisors Pvt. Ltd. (supra). i) Sandstone Capital Advisors Pvt. Ltd. v/s ACIT, [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable to assessee providing investment advisory services. In this context, he relied upon the following decisions:- i) Sandstone Capital Advisors Pvt. Ltd. v/s ACIT, [2013] 32 taxmann.com 216 (Mum.); ii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2013] 27 ITR (Trib.) 125 (Mum.); iii) DCIT v/s Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2014] 47 ITR (Trib.) 311 (Mum.); iv) General Atlantic Pvt. Ltd. v/s DCIT, [2013] 32 taxmann.com (Trib.) 178 (Mum.); v) Carlyle India Advisors Pvt. Ltd. v/s ACIT, [2012] 17 ITR (Trib.) 24 (Mum.); vi) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Mum./2015, A.Y. 2010-11, order dated 25.2.2016; vii) AGM India Advisors (P) Ltd. v/s DCIT, [2016] 70 taxmann.com 219 (Mum.). 25. Learned Departmental Representative on the other hand objecting to the inclusion of this company as a comparable submitted, IDC India Ltd. is a product company, hence, cannot be considered as functionally similar to the assessee. In this context, he relied upon the decision of the Tribunal, Mumbai Bench, in Tevapharm Pvt. Ltd. v/s ACIT, [2012] 18 taxmann.com 148 (Mum.). 26. We have conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07, the assessee had shown a margin of cost plus 17% and the DRP has granted relief to the assessee. He submitted, in assessment year 2007-08, margin shown by the assessee at cost plus 17.5% was accepted by the Transfer Pricing Officer himself. Learned Authorised Representative submitted, the assessee had entered into advance pricing agreement (APA) under section 92CC of the Act with CBDT on 24 th November 2015, wherein, the arm's length price of international transaction relating to investment advisory services provided to the A.E. has been accepted at operating profit margin of not less than 20%. He, therefore, submitted, in view of the APA, the margin shown by the assessee in the impugned assessment year at 20.33% should be considered at arm s length. 28. Learned Departmental Representative vehemently objecting to the aforesaid contention of the learned Authorised Representative had submitted that transfer pricing is not a gross profit issue. Therefore, there is no basis for accepting the margins of the assessee at a particular percentage, hence, nothing will turn on APA. 29. Having considered the submissions of the parties, we are of the view that no conclusive findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operating cost at ₹ 102,99,68,234 and the resultant shortfall of ₹ 34,16,50,457 was considered as transfer pricing adjustment under section 92CA. In accordance with the order passed by the Transfer Pricing Officer, the Assessing Officer passed draft assessment order proposing the addition on account of transfer pricing adjustment. Though, the assessee raised objections against the draft assessment order before the DRP, however, DRP rejected objections of the assessee and in pursuance to the direction of the DRP, the impugned assessment order was passed. 34. Learned Authorised Representative confined his argument to selection/rejection of following comparables:- INTEGRATED CAPITAL SERVICES LTD . 35. Learned Authorised Representative objecting to the selection of this company as a comparable submitted, it is engaged in providing investment banking services, advisory in mergers and acquisitions and re-construction of business. In this context, learned Authorised Representative referred to the director s report forming part of the annual report of the company. He submitted, the company is also engaged in business and debt re-restructuring. He submitted, as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed Representative objecting to the inclusion of this company as a comparable submitted, it is registered with SEBI as a merchant banker, hence, it cannot be considered as a comparable to the assessee. In this context, learned Authorised Representative relied upon the following decisions:- i) DCIT v/s Warburg Pincus India P. Ltd., ITA no.3840/Mum./2009, A.Y. 2005-06, etc., order dated 29.7.2016; ii) Carlyle India Advisors P. Ltd. v/s DCIT, [2014] 49 taxmann.com 476 (Trib.) iii) Acumen Fund Advisory Services India Pvt. Ltd. v/s DCIT, [2014] 50 taxmann.com 317 (Mum.); iv) Bain Capital Advisors India P. Ltd. v/s DCIT, ITA no.1360/Mum./2014, A.Y. 2009-10, order dated 5.1.2015; v) DCIT v/s Arisaig Partners India P. Ltd., ITA no.1083/Mum./2014, etc., order dated 25.3.2015; vi) Goldman Sachs India Securities Pvt. Ltd. v/s DCIT, ITA no.222/Mum./2014, A.Y. 2009-10, order dated 30.11.2015. vii) Carlyle India Advisory Pvt. Ltd. v/s DCIT, [2014] 43 taxmann.com 184 (Mum.); viii) M/s. Blackstone Advisors India P. Ltd. v/s DCIT, ITA no.319/Mum./2014, order dated 9.3.2016; ix) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings Advisors India Pvt. Ltd. v/s DCIT, [2013] 27 ITR (Trib.) 125 (Mum.); and iii) M/s. Blackstone Advisors India P. Ltd. v/s DCIT, ITA no.1581/Mum./2014, order dated 9.3.2016; iv) Bobst India P. Ltd. v/s DCIT, [2015] 63 taxmann.com 339 (Pune); v) TIBCO Software India P. Ltd. v/s DCIT, [2015] 56 taxmann.com 91 (Pune); vi) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Mum./2015, A.Y. 2010-11, order dated 25.2.2016; vii) AGM India Advisors (P) Ltd. v/s DCIT, [2016] 70 taxmann.com 219 (Mum.). 42. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. Though, the Transfer Pricing Officer and the DRP have excluded this company observing that it is not functionally similar to the assessee, however, on a perusal of the annual report of the company we have noticed that it is basically engaged in consulting services. The Tribunal, Mumbai Bench, in DCIT v/s Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2014] 47 ITR (Trib.) 311 (Mum.), while considering comparability of this company in the very same assessment year i.e., assessment year 2009-10, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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