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TMI Blog2018 (11) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken by the Appellant relating to provision of non-binding investment advisory services on account of the following; a) Rejecting all the companies selected as comparables by the Appellant in the transfer pricing documentation on the basis that they are not comparable. b) Rejecting the use of contemporaneous and multiple year date available for computing the ALP as on the date of filing of return of income and relying only on the singly year data (i.e for the year ended 31 March 2011) for the purpose of determining the ALP c) Cherry picking of an additional company as comparable without following a scientific search prices, namely, Ladderup Corporate Advisory Pvt Ltd. which is functionally not comparable to the Appellant's non-binding investment advisory services; d) Without prejudice to the above, not providing a detailed search process undertaken in identifying the company which has been alleged to be comparable to the appellant. e) Not granting the Appellant the benefit of working capital adjustment and adjustment or difference to risk profile. 3. The Ld. A.O erred in incorrectly computing the interest levied under Section 234D of the Act. 4. The Ld. AO erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer pricing adjustment has been re-determined at Rs. 6,47,24,374/-, which is the subject matter of the appeal before us. 5. In the above background, the Ld. AR for the assessee has made two specific pleas-firstly, that the income-tax authorities have wrongly included M/s Ladderup Corporate Advisory Private Limited as a comparable as the same is functionally incomparable. Secondly, that the concerns selected by the assessee as comparables has been wrongly excluded by the income tax authorities, such concerns being: (1) ICRA Management Consulting Services Limited; (2) ICRA Online Limited; (3) IDC (India) Limited; (4) Informed Technologies Limited; (5) Integrated Capital Services Limited. 6. In order to appreciate the pleas of the Ld. Representative, it would suffice to note that there is no difference between assessee and the Revenue so far as the selection of the method for benchmarking of the international transaction is concerned. The assessee as well as the Revenue have adopted the Transactional Net Marginal Method (TNMM) as the most appropriate method for benchmarking the international transaction of provision of non-binding investment advisory services. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed and applied by the Tribunal in the case of DCIT Vs. General Atlantic (P.) Ltd., [2018] 91 taxmann.com 406 (Mumbai), wherein also the Bench was considering an assessee who was rendering non-binding investment advisory services to its associated enterprise. 9. On the aspect of exclusion of M/s Ladderup Corporate Advisory Private Limited, the Ld. DR appearing for the Revenue has not disputed the factual matrix brought out by the Ld. Representative regarding the precedents, but reiterated the stand of the TPO and the DRP. According to her, the relevant discussion in the order of the TPO as well as that of the DRP notes that the said concern is receiving income by way of advisory fee and therefore it was a good comparable. Our attention has also been invited to the discussion in para 6.1.12 of the order of the TPO to say that the Annual Accounts of the said concern also mention that it was operating in one business segment, viz financial and management consultancy. It was therefore contended by the Ld. DR that the said concern was not rendering general consultancy services but it was providing financial consultancy, which is comparable to the instant services rendered by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ww.ladderup.com/aboutladderup. htm (Page 340), which revealed that the said comparable, viz. Ladderup Corporate Advisory Private Limited was formed in 2007 as a subsidiary company of M/s. Ladderup Finance Limited, and was engaged in the business of Investment banking. It was submitted by the ld. A.R that the aforesaid downloaded extract revealed that the said comparable was formed as a separate group entity offering Investment banking, Corporate finance and Corporate advisory services. Thus in the backdrop of the aforesaid factual matrix, it was submitted by the ld. A.R that it stood revealed beyond any scope of doubt that the aforesaid comparable, viz. M/s. Ladderup Corporate Advisory Private Limited was into 'Investment banking business', which by no means could be compared with the 'Investment advisory business' as that of the assessee company. The ld. A.R relying on the order of the Tribunal so passed in the case of General Atlantic (P) Limited Vs. DCIT, Circle 3(1), Mumbai (2013) 32 Taxmann.com 178 (Mumbai Trib) (Page 85-97 of APB), which thereafter had been affirmed by the Hon'ble High Court of Bombay in the case of CIT-3, Mumbai Vs. General Atlantic (P) limited. (2016) 68 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s horizon, which revealed that during the year it was not engaged in merchant banking activities. It was thus in the backdrop of the aforesaid facts submitted by the ld. D.R that the aforesaid comparable was not engaged in merchant banking activities during the year under consideration and had rightly been included by the TPO in the final list of the comparables. 11. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material placed on record before us. We have given a thoughtful consideration to the facts of the case and find that the aforesaid comparable, viz. Ladderup Corporate Advisory Pvt. Limited is registered as a category one merchant banking with SEBI and is engaged in rendering merchant banking services w.e.f July 2010, which factual position stands duly substantiated from the perusal of the web portal extracts of the aforesaid company. We further find that as per the 'Annual report' the aforesaid comparable is engaged in only one segment, which includes merchant banking. We thus in the backdrop of the very fact that the aforesaid comparable is engaged in the merchant banking/investment banking and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequently, even in the case of M/s General Atlantic Pvt Ltd (supra) for A.Y 2011-12 the Tribunal reiterated its earlier stand and held that M/s Ladderup Corporate Advisory Private Limited is not comparable to a concern which is rendering non-binding investment advisory services. 12. In view of the aforesaid precedents which clearly hold the field as they have been rendered under similar circumstances, we find that the action of the income-tax authorities of including M/s Ladderup Corporate Advisory Private Limited in the set of comparables is untenable. We hold so. 13. The next point sought to be made out by the assessee is for inclusion of ICRA Online Ltd in the final set of comparables. Pertinently, the said concern has been excluded by the income-tax authorities on the ground that the same is functionally incomparable as it provides consultancy services pertaining to software services, KPO services, ITES services, etc. Though the Ld. Representative has pleaded for its inclusion, but the Mumbai bench of the Tribunal in the case of AGM India Advisors India Pvt Ltd., Vs. DCIT, Mumbai in ITA No. 4757/Mum/2015 vide order dated 18.05.2016 has held that such concern is not compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. A.R assailing the rejection of M/s. ICRA Management Consultancy Services Limited by the TPO, which thereafter had been upheld by the DRP, therein drew our attention to Page No. 30 - Para 4.12 of the order of the DRP. It was submitted by the ld. A.R that the DRP had upheld the rejection of the aforesaid comparable by the TPO for the reason that his predecessor in the case of the assessee for the immediately preceding year, i.e A.Y. 2010-11, had upheld the rejection of the said comparable by the TPO. It was thus submitted by the ld. A.R that the upholding of the rejection of the aforesaid comparable, viz. ICRA Management Consultancy Services Limited during the year under consideration was only supported by the observations recorded by the DRP in respect of the said comparable in the case of the assessee for the immediately preceding year, viz. A.Y. 2010-11, and not on the basis of any new facts. The Ld. A.R referring to the aforesaid observations of the DRP submitted that the ITAT, Mumbai bench 'K', vide its order passed in the case of the assessee, marked as: Temasek Holding Advisors India Private Limited Vs. DCIT, Circle 14(3)(1), Mumbai, in ITA No. 776/Mumbai of 2015 for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to prove that the aforesaid comparable ,viz. ICRA Management Consultancy Services Limited during the year under consideration was found to be either functionally or otherwise at variance, as in comparison to the preceding years, thus were not justified in most arbitrarily excluding it from the final list of the comparables. The ld. A.R further referring to Page 10 of the order of the TPO for the year under consideration therein submitted that the functions performed, assets used and risk taken ('FAR') of the aforesaid comparable as against that of the assessee company during the year under consideration was concededly the same as in the A.Y. 2010-11, and drew our attention to Page 9-10 of the TPO order for the aforesaid preceding year, i.e A.Y. 2010-11 (copy placed on record). It was thus submitted by the ld. A.R that now when the facts involved in context of the aforesaid comparable during the year under consideration were the same as against those of the immediately preceding year, viz. A.Y. 2010-11, wherein the said company had been accepted by the Tribunal as a good comparable, coupled with the fact that even in the preceding years also it was accepted as a comparable, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e functional comparability of ICRA Management Consultancy Services Limited had duly been appreciated by the Tribunal in the case of the assessee in the earlier years, then in the backdrop of the 'Principle of Consistency', a different view on the same set of functional profile cannot be drawn. Per contra, Ld. Departmental Representative (for short D.R) in order to drive home his contention that ICRA Management Consultancy Services Limited could not be accepted as a comparable, therein relied on the order of the ITAT, Delhi in the case of Motorola Solution India (P) Ltd. Vs. ACIT, Circle-2 (2014) 48 taxmann.com 248 (Delhi-Trib), and took us through Para 143-145 of the order. The Ld. D.R further placed reliance on the order of the ITAT, Mumbai 'K' Bench in the case of : Maersk Global Centres (India)(P). Ltd. vs. ACIT (2014) 43 taxmann. Com. 100 (Mumbai - Trib). The ld. D.R during the course of hearing of the appeal averred that for the purpose of adjudicating the present appeal of the assessee, the earlier orders passed by the Tribunal in the assesses own case cannot be characterized as a precedent. The ld. D.R in order to drive home his aforesaid contention, relied on the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the comparables every year by the TPO, without pointing out that the facts in context of the comparables accepted in the preceding years had changed during the year under consideration, cannot be permitted. We further find that the aforesaid comparable, viz. ICRA Management Consultancy Services Limited had also been held to be a good comparable by the Tribunal in the case of the assessee for A.Y(s). 2007-08, 2008-09 and 2009-10, while for in the earlier years the TPO himself had accepted the said company as a comparable. We further find that the order of the ITAT, Mumbai in the case of the assessee for A.Y. 2008-09 wherein ICRA Management Consultancy Services Limited was held to be a good comparable, had been upheld by the Hon'ble High Court of Bombay in CIT-3 Vs. Taemask Holdings Advisors Pvt. Ltd (ITA No. 1051 0f 2014); Dt. 17.11.2016. We have given a thoughtful consideration to the contentions of the ld. D.R and are not persuaded to accept his contention that ICRA Management Consultancy Services Limited was functionally different as in comparison to the assessee before us. We have deliberated on the judgments of the Hon'ble Apex Court and find that it has been held that a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rability of ICRA Management Consulting Services Ltd in the case of non-binding investment advisory services. In the case of M/s General Atlantic Pvt Ltd (supra), the Tribunal followed an earlier decision of the Tribunal in the case of AGM India Advisors Pvt ltd Vs. DCIT, in ITA No. 537/Mum/2016 dated 04.01.2017 which was also rendered in relation to A.Y 2011-12, i.e the year before us. 19. We have considered the rival stands and find that plea of the assessee is supported by the precedents rendered by the Mumbai Bench of the Tribunal under similar circumstances and therefore we deem it fit and proper to direct that ICRA Management Consulting Services Ltd (supra) be adopted as a good comparable. 20. Apart from the aforesaid, assessee had pleaded for inclusion of IDC (India) Ltd as well as Informed Technologies Ltd. However, a pertinent plea was raised to the effect that once M/s Ladderup Corporate Advisory Private Limited is excluded and ICRA Management Consulting services Ltd., is included, the resultant margin of the comparables shall compare favourably with the margin of the assessee. Since we have accepted the pleas of the assessee for exclusion of M/s Ladderup Corporate Advis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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