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TMI Blog2019 (9) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant : Shri Madhur Agrawal For the Respondent : Shri Rakesh Ranjan ORDER PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Dispute Resolution Panel-II, Mumbai [hereinafter for short "DRP"] dated 29.11.2013 for the A.Y. 2009-10. 2. Assessee has raised the following grounds in its appeal: - "1. The learned AO and Honourable DRP failed to appreciate that the arm's length price (ALP) as determined by the Appellant should have been accepted, as the jurisdictional pre-condition in section 92C(3) of the Act before the learned transfer pricing officer could proceed to determine the ALP was not fulfilled in its case. 2. The learned AO, based on the directions of the Honourable DRP, erred on facts and in law, in making an upward adjustment of ₹ 55,191,720 in determining the ALP of the international transaction of investment advisory services rendered by the Appellant, on the following grounds: 2.1 In rejecting the comparable companies, namely Access India Advisors Limited, ICRA Management Consulting Services Limited and Kinetic Trust Limited, selected by the Appellant in the transfer pricing documentation to benchmark the internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for provision of non-binding investment advisory services can be considered to be at arm's length. 4. Ld. DR vehemently supported the orders of the authorities below. 5. We have heard the rival submissions and perused the orders of the authorities below. On a perusal of the decision of the Tribunal for the A.Y. 2010-11 in ITA No. 581/MUM/2015 dated 16.09.2016 we find that the Tribunal held as under: - "19. Now, we come to various comparable companies, which are being disputed before us by the assessee. From the chart incorporated above, it can be seen that, assessee had chosen 8 comparable companies, out of which, 3 comparables were rejected by the TPO and 2 additional comparables were added from the DRP stage and 3 comparable companies which were chosen by the assessee and accepted by the TPO, same has been further rejected by DRP, leading to set of only 3 comparable companies, the arithmetic mean of which was arrived at 55.06% as against the assessee's operating margin of 20%. The comparables selected by the assessee, TPO and DRP are illustrated in the following manner:- S No Particulars Assessee's Set TPO's Set DRP' Set 1 Access India Advisors Ltd NC NC NC 2 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s its core area and competency. The revenue generation is purely from consultancy fees which is evident from profit and loss account as on 31st March 2010 (appearing at page 176 of the paper book). The TPO in his order has noted that its consultation or advisory operations ranges in various fields which have been tabulated by him at pages 9 to 11 of the order, which according to him assessee is not performing. On the perusal of the directors' report and also the remarks of the TPO, we find that the ICRA Management is providing consultancy services in a myriad areas ranging from development, transportation, 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en that, the company is concentrating on its main activity of corporate consultancy services and financial services. Being a NBFC has not changed the nature of activity undertaken by the company and its core business competency and its revenue is from consultancy services. So far as the turnover filter applied by the TPO, we find that, first of all at the time of selection process, the assessee has not considered the turnover filter for accepting or rejecting the comparables. The turnover filter cannot be one of the tool for cherry picking by either of the parties at a later stage, as it has to be done at the threshold level only, i.e. at the time of search process and by applying quantitative filter. However, once turnover filter has not been applied then comparability has to be done at qualitative level based on FAR Analysis. If on FAR analysis there are differences on account of either assets deployed and risk assumed materially affecting costs or margins then probably such comparability can be rejected. But here in this case, merely on the ground that it has a low turnover cannot be the reason or criteria for rejection. Moreover, from the perusal of the decision of Triolgy E. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices are quite similar to the functions of the assessee and, therefore, we accept the assessee's contention that this comparable cannot be rejected. Accordingly, same is directed to be included in the comparability list. Motilal Oswal Investment and Advisor Ltd :- 25. This comparable has been included by the TPO and while including the said comparable he has observed that its income is only from Advisory fees during the year and it is performing advisory services in that field of investment like assessee. Before us, Ld. CIT DR arguing for its inclusion submitted that, if the ICRA Management services can be included for having revenue from advisory services then on same analogy this company should also be given the same treatment. From the perusal of the directors' report, it is seen that this company derives its business income from four different business verticals, i.e. Equity capital markets, merger and acquisitions, profit equity syndications and structured debt. It also give advises on cross border acquisition. Its core competence is in the field of merchant banking. It also provides comprehensive investment banking solutions and transaction expertise covering private plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this comparable on the ground that it is in the process of shutting down its business. However, during the year, it has continued to render the investment advisory services and the realignment agreement was effective from 1st January, 2010, the realignment is also for investment advisory activities. Thus, there is not much impact on the net margins especially in the assessment year 2010-11, therefore, this company cannot be rejected and TPO is directed to include the same in the final comparability list". The aforesaid decision qua the comparables in dispute will apply here in this case also, because there is not much difference in the function performed. It has also been pointed out that, these comparable companies have also been dealt in several other decisions while analyzing the functions of the companies rendering investment advisory services, the copy of which was filed separately by the Ld. Counsel. Since we have already taken note of the aforesaid decision, therefore, we are not analyzing the other decisions. 21. In view of the aforesaid finding and following the aforesaid decision, we hold as under: (i) ICRA Management Consultancy Services Ltd is directed to be inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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