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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 ..... ering 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. AO 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. Thus companies functionally dissimilar with that of assessee to be deselected from final list. - ITA No. 1415/Mum/2017, S.A. No. 564/Mum/2018 - - - Dated:- 11-9-2019 - Shri G.S. Pannu, Vice-President And Shri Pawan Singh Judicial Member For the Appellant : Shri Nishant Thakkar with Ms. Jasmin Amalsadvala (AR s) For the Respondent : Shri Anand Mohan (CIT-DR) ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. The appeal by assessee is directed against the order dated 27.01.2017 passed under section 143(3) r/w section 144C(13) of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.95% 3 Informed Technology (India) Ltd. 17.28% 8.26% 4 Integrated Capital Services Ltd. 0.95% -1.98% Average 8.82% -4.32% 3. The TPO rejected all comparables of the assessee and selected/included Ladderup Corporate Advisory Pvt. Ltd. as comparable company whose OP/OC is 38.38% and accordingly, the TPO suggested the computation in the following manner: Amount A. Operating Cost 247,253,988 B. ALP OP/OC Margin 38.38% C. ALP operating Profit (Ax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional 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 ₹ 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 conducted by the Assessee without considering the fact that Ladderup has earned revenues from rendering services in the nature of investment/merchant banking services; c) Rejecting the use of contemporaneous and multiple year data available for computing the ALP as on the date of filing of return of income and relying only on the single year dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in, 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 infrastructure, retail, telecommunication and networking equipment, health care, financial intermediaries, design and engineering related to infrastructure, media and communication. Thus, as could be seen, though, the service provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 functional differences between controlled and uncontrolled transactions. However, if any unique function or property significantly affects the operating costs or net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 company is a good comparable with the companies rendering investment advisory services. This decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable 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 discus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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