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TMI Blog2019 (11) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... risk mitigated entity. For the assessment year under consideration, the assessee entered into international transaction of non-binding investment advisory services with its A.E. and earned revenue of Rs. 26.58 crore. The assessee while filing return of income for the year under consideration reported international transaction with its AE. The assessee also furnished its transfer pricing report as required under the Income -tax Act. For bench marking the transaction, the assessee undertook a study by adopting Transaction Net Margin Method (TNMM) as most appropriate method with OP/OC as the Profit level indicator ( PLI). By considering itself as the tested party, the assessee undertook a search process in the data bases and identified following four comparables with average arithmetic mean of 8.82% on the basis of three year data. The Assessing Officer referred the matter to the TPO for determination of ALP of International Transaction. For benchmarking the International Transaction, the assessee adopted TNM as most appropriate method, operating profit/operating cost was considered as profit level indicator and assessee company has taken tested party. The assessee has selected four c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case and in law, the learned AO, based on the directions of the Hon'ble DRP, erred in re-computing the arm's length price of the international transaction undertaken by the Appellant relating to non-binding investment advisory and related services and enhancing the cost plus mark-up from 18.26% to 38.38% as a result of rejection of com parables identified by the Appellant and including an additional comparable. Ground 2 That on the facts and in the circumstances of the case and in law, the learned AO, based on the directions of the Hon'ble DRP, erred in making an upward transfer pricing adjustment of Rs. 7,63,03,456 in determining the arm's length price of the international transaction undertaken by the Appellant relating to provision of non-binding investment advisory and related services on account of the following: a) Rejecting the economic analysis undertaken and documentation maintained by the Assessee and all the companies selected as comparables by the Assessee in the transfer pricing documentation; b) Identifying Ladderup Corporate Advisory Private Limited (Ladderup) as an additional comparable from the search process con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate method for bench marking of international transaction. Further there is no dispute for the calculation of assessee's operating margin. The narrow dispute about the set of comparable and the determination of their margin. On the basis of single year margin, the assessee has arrived on average arithmetic mean of - 4.32% of four comparable selected by assessee. The ld. TPO rejected all the comparable of the assessee and adopted Ladderup whose margin is at 38.38%. We have noted that on same set of fact in assessee's appeal for A.Y. 2010-11 in ITA No. 7403/Mum/2014 dated 25.10.2016, ICRA Management Consultancy Services Ltd. Informed Technology and IDC (India) Ltd. were held to be a good comparable. The relevant part of the finding of Tribunal in respect of various comparable is extracted below: (A) ICRA Management Consultancy Services Ltd. 24. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. From the documentary evidences brought on record by the assessee, we have observed that the assessee is also providing non-binding investment advisory service in various sectors such as infrastruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, urban infrastructure, energy sector, banking and financial services and advising cross border M&A transaction etc. Some other observation made by the TPO is that ICRA has participated in various international forums, partnered with foreign company in multiple projects and has a very big client base unlike assessee. However all these facts do not affect the core competency and functions of the said company, which is advisory, because in all the fields it is rendering only advisory and consultancy services. The whole revenue is again from consultancy/advisory fees. In the instant case also, the assessee is providing Investment Advisory Services to its AE in diverse industries like, infrastructure, telecom, media, banking etc. to enable the AE to take decision for making investments. The functions of consultancy/advisory have to be seen as its core competence area and not in the field in which such consultancy is given. Under the TNMM, one has to see the transaction undertaken are comparable or not and whether any adjustment is required to obtain a reliable result, because under TNMM the net margin are less affected by transactional differences and is more tolerant to some minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be correct. Further, we have noted that in case of Temasec Holdings Advisors India Pvt. Ltd. (supra), the very same argument of IDC India Ltd. being a product company and provides go to market service was advanced by the learned Departmental Representative. However, rejecting such contentions of the learned Departmental Representative, Tribunal included this company as a comparable holding as under:- "22. This comparable though accepted by the TPO as a good comparable, however, the DRP has additionally rejected this comparable. In assessment year 2008-09, the Tribunal has held to be a good comparable, firstly, on the ground that this company is also engaged in the advisory and consultancy services for the purpose of investment made in various sectors and secondly, it has been found to be good comparable by the TPO in the assessment year 2007-08 and 2009-10. Once company has been held to be good comparable consistently for three years then without any change in the material facts, it cannot be held that this comparable could be rejected in this year. Moreover, in the case of Carlyle Advisory India Ltd., ITAT Mumbai Bench, reported in 43 taxman.com 184, the Tribunal held that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding the company as a comparable has observed as under:- "(v) Informed Technologies Ltd. This company mostly offers range of data management services to the financial sector in USA. It collects and analyses data of financial fundamentals, corporate governance and capital market. It outsource services i.e., BPO services consisting of financial data base and back office activities for research and advisory reports. Thus, the data outsourcing charges are mostly related to analysing of data based on which advise is given for the investment purpose in India. Moreover, this company has been accepted by the TPO in the year 2009-10. Thus, it is a good comparable." 36. We do not find any material difference between the facts in assessee's case and in case of Temasek Holdings Advisors (I) Pvt. Ltd. (supra) on the basis of which the Tribunal included it as a comparable. Moreover, there is no dispute that the Transfer Pricing Officer has accepted this company as a comparable in assessee's own case for assessment year 2009-10. That being the case, in our considered opinion, the company should be treated as comparable to the assessee. 9. In view of the aforesaid discussion, wherein in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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