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TMI Blog2019 (2) TMI 1817X X X X Extracts X X X X X X X X Extracts X X X X ..... also relevant to note, in assessee s own case for assessment year 2009 10, this company has been accepted as a comparable by the DRP. Even otherwise also, the observations of the Transfer Pricing Officer on difference in skill set between the assessee and the comparable company appears to be not on the basis of proper analysis of fact and more on assumption and presumption. As regards other functional differences of this comparable pointed by the learned Departmental Representative, it needs to be mentioned, neither Transfer Pricing Officer nor DRP have deliberated on those aspects. Since these issues raised by the learned Departmental Representative are completely new issues and never raised at any stage earlier, we do not consider it appropriate to deal with them as it requires verification of fresh facts - we direct the Assessing Officer to accept this company as a comparable. - ITA No.423/Mum/2016, IT(TP)A No. 1164/Mum/2017, ITA No.299/Mum/2016 - - - Dated:- 20-2-2019 - SHRI SAKTIJIT DEY, JM AND SHRI M.BALAGANESH, AM For the Appellant : Shri Anuj Kisnadvala / Shri Rushabh Vora / Shri Maulik Doshi For the Respondent : Shri Anand Mohan ORDER PER M. BALAGA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -binding investment advisory services 6,63,82,418 TNMM 2 Payment of support and global management charges 64,84,986 TNMM 3 Reimbursement of expenses 33,47,700 Cost to cost Total 7,62,15,104 3.1. The assessee benchmarked its international transactions by using multiple year data of last three years average margin and by identifying following five comparables and arrived at weighted average margin of 14.31% as under:- Sr. No. Name of the Company Three year average Operating Profit / Operating Cost 1 ICRA Management Consulting Services Ltd., 5.03 2 ICRA Online Ltd., 34.87 3 IDC (India) Ltd., 12.30 4 Informed Technologies India Ltd., 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operating profit (C) 97,61,840 OP/OC 17.77% Arm's Length OP/OC 43.25 % Arm's Length Operating Income (E) 7,86,93,992 Adjustment -E- A 1,39,97,428/- 105% of Income (A) 6,79,31,392 95% of Income (A) 6,14,61,736 3.5. The assessee filed objections before the Hon ble Dispute Resolution Panel (Ld. DRP) and the Ld. DRP vide its directions u/s.144C(5) of the Act dated 23/09/2015 directed the TPO to include Motilal Oswal Investment Advisory Pvt. Ltd., and ICRA Technoanalyst Ltd., in the list of final comparables chosen by the Ld. TPO and directed the Ld. TPO to arrive at the revised benchmarking and make suitable adjustments thereon to ALP. 4. Against the said directions of the Ld. DRP, both assessee as well as the revenue are in appeal before us. Revenue is in appeal against the directions of the Ld. DRP to include Motilal Oswal Investment Advisory Pvt. Ltd., and ICRA Technoanalyst Ltd. in the list of comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Pricing Officer and the DRP, learned Authorised Representative submitted, the company being a merchant / investment banking company, is functionally different from the assessee, hence, cannot be treated as comparable to an investment advisory service provider like the assessee. In this context, he relied upon the following decisions: i) DCIT v/s General Atlantic Pvt. Ltd., 91 taxmann.com 406 (Mum.); ii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2017] 87 taxmann.com 168; iii) Well Fargo Real Estate Advisors Pvt. Ltd. v/s DCIT, [2018] 90 taxmann.com 18 iv) Avenue Asia Advisors Pvt. Ltd. v/s DCIT, [2017] 85 taxmann.com 311 (Del.) 13. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and the DRP. 14. We have considered rival submissions and perused materials on record. From the functional profile of the aforesaid company it appears that it is registered as Category 1 Merchant Banking Company with SEBI and is engaged in merchant banking services w.e.f. July 2010. Considering the aforesaid factual aspect, the Co ordinate Bench in the decisions cited by the learned Authorised Representative for the assessee has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 928 1370/Mum/2018 dated 30/11/2018 for A.Y.2011-12 in the case of Blackstone Advisors India Pvt. Ltd., had observed as under:- 8. This is one of the companies selected by the assessee. The Transfer Pricing Officer rejected this comparable on the reasoning that the company is not functionally similar to the assessee on the basis functions provided, asset employed and risk undertaken. The Transfer Pricing Officer observed, while the assessee is providing investment advisory services, as per the information obtained under section 133(6) of the Act, this company provides management consultancy and advisory services to corporate banks, government, multilateral agencies, institutional agencies, etc. Whereas, the assessee is providing investment advisory services for private equity investment as well as real estate investment to the A.Es. Thus, he held that the company is not a comparable. This view of the Transfer Pricing Officer was also endorsed by the DRP. 9. The learned Sr. Counsel for the assessee submitted, functions performed by this company is more or less similar to the investment advisory services provided by the assessee to the A.Es. He submitted, in a number of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory service provider. It is relevant to observe, in case of AGM India Advisors Pvt. Ltd. v/s DCIT, [2017] 79 taxmann.com 86 which is for the very same assessment year, the Tribunal after considering argument advanced by the Department regarding difference in skill set held that ICRA Management Consultancy Services is a valid comparable to a company providing non binding investment advisory services. It is also relevant to note, in assessee s own case for assessment year 2009 10, this company has been accepted as a comparable by the DRP. Even otherwise also, the observations of the Transfer Pricing Officer on difference in skill set between the assessee and the comparable company appears to be not on the basis of proper analysis of fact and more on assumption and presumption. As regards other functional differences of this comparable pointed by the learned Departmental Representative, it needs to be mentioned, neither Transfer Pricing Officer nor DRP have deliberated on those aspects. Since these issues raised by the learned Departmental Representative are completely new issues and never raised at any stage earlier, we do not consider it appropriate to deal with them as it requires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of various international transactions carried out by the assessee during the year are as under:- Sr.No. Nature of International transaction FY 2011-12 Method Used 1 Provision of non-binding investment advisory services 59,546,585 TNMM 2 Availing of support and global management charges 7,295,607 TNMM 3 Reimbursement of expenses 3,351,875 Cost to cost Total 70,194,067 9.2. The assessee claimed its profit margin at 15.07%. The assessee benchmarked its transactions by using both multiple year data and single year data of the following comparables as under:- Sr. No. Name of the Company Three year average Operating Profit / Operating Cost Single Year updated margins (FY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 growth stage investing, etc. Reference has also been made to para 9.1 of the order of TPO to point out that assessee had brought out, on the basis of the website extract of the said concern, that it was engaged in rendering investment banking and debt capital services and not investment advisory services. Before the TPO, assessee has also pointed out that even if there was any element of investment advisory services being rendered by the said concern, the Annual Report of the said concern showed that there was no separate reportable segment and, therefore, the said concern could not be compared with the tested transactions. At the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 distinct from its activity of rendering investment advisory services. 9. In view of the said precedent, which has been rendered based on the fact-situation of the financial year relevant to the assessment year before us, we find no justification to uphold the action of the TPO in considering that Ladderup Corporate Advisory Pvt. Ltd. is a good comparable. Thus, on this aspect, the plea of the assessee is upheld and Ladderup Corporate Advisory Pvt. Ltd. is directed to be excluded from the final list of comparables. 12.1. Respectfully following the aforesaid decision, we direct the Ld. TPO to exclude Ladderup Corporate Advisory Pvt. Ltd. and include Informed Technologies India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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