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TMI Blog2018 (8) TMI 1902X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s 14A - HELD THAT:- As per the learned representative, in the absence of any receipt of exempt dividend income during the year under consideration, the disallowance u/s 14A of the Act is not merited. The aforesaid proposition of the assessee is fully supported by the judgment of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] . Insofar as the fact-position of absence of any exempt income is concerned, the ld. CIT-DR has also not controverted the same and, therefore disallowance u/s 14A of the Act is directed to be deleted. - ITA NO. 1427/MUM/2017 - - - Dated:- 31-8-2018 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For the Appellant : Shri Madhur Agrawal For the Respondent : Shri Jayant Kumar ORDER PER G.S. PANNU, AM : The captioned appeal by the assessee is directed against the order dated 31.01.2017 passed by the Assessing Officer u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (in short the Act ) giving effect to the directions of Dispute Resolution Panel-I, Mumbai (DRP) dated 29.11.2016. 2. In this appeal, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Rules, 1962 (Rules) on strategic investments made by the Appellant in Benchmark Asset Management Company Private Limited (BAMC) by ignoring the fact: a) that the primary objective of investment made in BAMC is to have a controlling stake and to further the business interest of the Appellant in BAMC and not with an intention to earn any exempt income in the form of dividend; b) that the entire investment is a strategic investment and no administrative expenditure has been incurred by the Appellant for holding or monitoring the said investment. 3. In initiating penalty proceedings under section 271(1)(c) of the Act. 3. The appellant before us is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of providing asset management and investment advisory services. For the assessment year under consideration, it filed a return of income on 24.11.2012 declaring a total income of ₹ 5,87,38,850/-, which was subject to a scrutiny assessment whereby the total income has been assessed at ₹ 8,11,95,550/-. Two of the principal additions made to the returned income were, namely, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose margin was 38.38%. The TPO compared this margin with that of the assessee and accordingly, worked out the adjustment of ₹ 2,94,32,651/- which, according to him, was required to be made to the stated value of the international transaction of providing of investment advisory services in order to bring it to its arm s length price. This aspect of the matter has also been affirmed by the DRP and accordingly, the Assessing Officer finalised the assessment by making an addition of ₹ 2,94,32,651/- to the returned income. 5. In this background, the learned representative for the assessee pointed out that there was no dispute so far as the nature of services being rendered by the assessee is concerned, being non-binding investment advisory services. It is pointed out that the action of the TPO in considering Ladderup Corporate Advisory Pvt. Ltd. as a comparable is incorrect inasmuch as the said concern is functionally dissimilar. It has been pointed out that the said concern is registered with the SEBI as a Category-I merchant banker and is, inter-alia, engaged in rendering services in investment banking, capital markets, wealth management, project finance and grow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, contended that the income-tax authorities made no mistake in treating the said concern as a comparable in order to benchmark the tested transaction. 8. We have carefully considered the rival submissions. Insofar as the nature of activities undertaken by the assessee is concerned, there is no dispute inasmuch as the assessee is rendering investment advisory services to its associated enterprise, which is sought to be benchmarked. By its very nature, providing of investment advisory services stands on an altogether different footing than merchant banking activities. This distinction has been kept in mind by our co-ordinate Bench in the case of Temasek Holdings Advisors (India) Pvt. Ltd. (supra) wherein also the tested transaction was of providing of investment advisory services. In the said case too, the TPO had considered Ladderup Corporate Advisory Pvt. Ltd. as a good comparable, which was not found acceptable by the Tribunal. A perusal of the said decision dated 03.01.2018 (supra) shows that for an earlier Assessment Year of 2011-12, the said concern was found incomparable primarily on the ground that it was engaged in merchant banking activities, which was quite di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs DCIT, ITA No. 927/Mum/2016 902/Mum/2016 dated 11.01.2017; ii) Wells Fargo Real Estate Advisors Pvt. Ltd. vs DCIT, ITA No. 1520/Mum/2016 dated 17.01.2018; iii) DCIT vs Temasek Holdings Advisors (India) Pvt. Ltd., ITA Nos. 477 816/Mum/2016 dated 11.08.2017; iv) FIL Capital Advisors India Pvt. Ltd. vs DCIT, ITA No. 7403/Mum/2014 dated 25.10.2016; v) CIT vs Temasek Holdings Advisors (India) Pvt. Ltd., ITA No. 359 of 2015 dated 11.07.2017 (Bombay High Court); vi) DCIT vs Temasek Holding Advisors (P.) Ltd., 47 taxmann.com 311 (Mumbai-Trib.); vii) CIT vs Temasek Holdings Advisors (India) Pvt. Ltd., ITA No. 1051 of 2014 dated 17.11.2016 (Bombay High Court); and, viii) Temasek Holdings Advisors (India) Pvt. Ltd. vs DCIT, ITA Nos. 4203 6504/Mum/2012 dated 30.08.2013 14. On the other hand, the ld. CIT-DR reiterated the stand of the TPO, which we have already noted in the earlier paras and is not being repeated for the sake of brevity. 15. We have carefully considered the rival submissions. In the context of inclusion of Informed Technologies India Ltd., we find that in the case of Temasek Holdings Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed Technologies India Ltd. as a comparable, considering the aforesaid submissions, there does not remain a need to adjudicate on the other pleas for inclusion of the other two concerns, namely, ICRA Management Consulting Services Ltd. and IDC (India) Ltd. In view of the aforesaid, we direct the Assessing Officer to recompute the arm s length price of the international transactions of providing investment advisory services, as per our aforesaid directions. 18. The only other issue in this appeal is with regard to disallowance of ₹ 30,09,500/- made u/s 14A of the Act. 19. On this aspect, the short point pleaded by the assessee was based on the judgment of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs CIT, 378 ITR 33 (Del). As per the learned representative, in the absence of any receipt of exempt dividend income during the year under consideration, the disallowance u/s 14A of the Act is not merited. The aforesaid proposition of the assessee is fully supported by the judgment of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. (supra). Insofar as the fact-position of absence of any exempt income is concerned, the ld. CIT-D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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