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TMI Blog2018 (8) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... gher rate than the other employees of the company as the payment of the bonus is performance based and not designation based. Thus the payment made to the four employee directors of the company is not a payment made in lieu of dividend as in fact found on facts by the Tribunal. No substantial question of law. TPA - M/s. ICSL is not a comparable to the assessee company under Section 10B(2)(i) and (ii)? - Held that:- Tribunal on consideration of all the facts before it has come to the conclusion that ICSL providing services of a merchant/investment banker. This finding of the Tribunal can only be said to be perverse if some material/evidence is placed on record which would establish that the conclusion reached by the Tribunal could not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to shareholder employees is allowable under Section 36(1)(ii) of the Act? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal is correct by holding the M/s. ICSL is not a comparable to the assessee company under Section 10B(2)(i) and (ii)? (iii) Whether comparables can be rejected on the ground that the comparables have exceptionally high profit margin as compared to the assessee in transfer pricing analysis? 3. Regarding Question no.1: (a) In the previous order relevant to the subject Assessment Year, the respondent-assessee had paid bonus to its directors and employees claiming benefit of Section 36(1)(ii) of the Act. The respondent-assessee had paid bonus to the following shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the grievance of the revenue that the entire payment of bonus to the employee shareholders had resulted in payment of less taxes in comparison to tax payable on the same if distributed as dividend was found incorrect. Reliance was also placed upon the decision of the Supreme Court in the case of CIT v/s. Shahzada Nand and Sons (108 ITR 358) wherein almost identical circumstances an issue of commission paid to the employee shareholders was held to be allowable under Section 36(1)(ii) of the Act. In the above view, the appeal of the respondent was allowed by the impugned order dated 20th February, 2015. (c) The grievance of the Revenue before us is that the bonus which was paid to the employee directors was much higher than the bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two of its Associate Enterprises (AE). The respondent-assessee has entered into two transactions with its AE's. The respondent-assessee is engaged in the business of providing research advisory services to its AE's. For the purpose of arriving at the Arm's Length Price (ALP), in the transactions entered into with AE's the Transactional Net Margin Method (TNMM) was adopted. The Revenue inter alia seeks to rely upon comparable viz. Integrated Capital Services Limited (ICSL) amongst other comparables in determining the ALP of the transactions with AE's. The impugned order of the Tribunal has on facts found that the ICSL is an entity which is engaged in providing advisory and consulting services in the specialized area of me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of a investment/merchant bank, in the context of merger and turnaround structuring advisory services, the function, assets and risk involved would be different from that involved in rendering nonbinding advisory services as in this case. It is pertinent to note that the above case also makes a reference to the decision of the Tribunal in the case of M/s. Carlyle India Advisors (P.) Ltd. to support the finding of the Tribunal. In this case also the impugned order places reliance upon M/s. Carlyle India Advisors (P.) Ltd. of the Tribunal and confirmed by this Court in the appeal filed by the Commissioner of Income Tax (ITA no.1286 of 2012). Thus, the view taken by the impugned order of the Tribunal in excluding ICSL is in these facts is pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not arise from the impugned order of the Tribunal. The impugned order of the Tribunal excluded ICSL from the list of comparables on the basis of functional test viz. ICSL carries out the function of merchant/investment banker which is different from a function carried out by the respondent-assessee of investment advisory. The exclusion of ICSL was not on the basis of a abnormally high profit margin so as to be not comparable with the respondent assessee. (b) In the above view, the question as proposed is academic in the present facts. In the above view, this question also does not give rise to any substantial question of law and thus not entertained. 6. Accordingly, Appeal is dismissed. - - TaxTMI - TMITax - Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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