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TMI Blog2020 (9) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... sory Pvt. Ltd. from the list of comparables. M/s. Motilal Ostwal Investment Pvt. Ltd ('MOAIPL ) is to excluded as it is engaged in diversified activities and that segmental reporting is not available. New Berry Advisors Ltd. ( NBAL ) is engaged in the business of marketing and distribution of financial products. Further, the notes to the financial statement mention that the company is in the business of distribution/marketing of financial products under the head Inventories , thus to be rejected. - ITA No. 502/Mum/2016, ITA No. 835/Mum/2016 - - - Dated:- 9-9-2020 - Shri Vikas Awasthy (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Madhur Aggarwal, AR For the Revenue : Mr. Anand Mohan, CIT-DR ORDER PER N.K. PRADHAN, A.M. The captioned cross appeals-one filed by the assessee and the other by the Revenue - are directed against the order passed by the Assistant Commissioner of Income Tax, Circle 7(1)(1), Mumbai [hereinafter the AO ] u/s 143(3) r.w.s. 144C(13) of the income Tax Act, 1961 (the Act). Since common issues are involved, we are proceedings to dispose them off them through a consolidated order. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year (AY) 2011-12 on 21.11.2012 declaring total income of ₹ 10,93,07,170/-. The assessee is engaged in providing non-binding investment advisory services to its Associated Enterprise ( AE ) viz Goldman Sachs Asset Management International, UK. The assessee earned a cost plus margin of 22%. It had benchmarked the said transaction using TNMM as the most appropriate method. The single year margin of the comparable companies selected by the assessee for the provision of non-binding investment advisory services is stated below: Sr. No. Company Name Operating Margin for FY 2010-11 1. ICRA Management Consulting Services Limited 15.90% 2. IDC (India) Limited 10.33% 3. Informed Technologies Limited 11.70% 4. Integrated Capital Services Limited 6.61% Arithmetic Mean 11.13% The margin of the comparables adopted by the TPO is mentioned below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s own case for AY 2013-14 and AY 2014-15. It is further explained by him that Informed Technologies India Ltd. is accepted as comparable in the following orders for AY 2011-12 : Temasek Holdings Advisors India Private Limited v. DCIT (ITA No. 477 816/Mum/2016) Wells Fargo Real Estate Advisors Pvt. Ltd. v. DCIT (ITA No. 1520/Mum/2016) 4.2 Elaborating further, the Ld. counsel submits that IDC (India) Ltd. is accepted as comparable by the TPO in assessee s own case for AY 2013-14. Further, it is stated by him that IDC (India) Ltd. is accepted as comparable in the following orders for AY 2011-12 : Goldman Sachs (India) Securities Private Limited v. DCIT (ITA No. 927/Mum/2016 ITA No. 902/Mum/2016), Principal CIT-14 v. AGM India Advisors Private Limited (ITA No. 1377 of 2017) (Mumbai High Court decision) Carlyle India Advisors Pvt. Ltd. v. Asst. CIT (ITA No. 2410/Mum/2016 and ITA No. 2506/Mum/2016) 4.3 Regarding the inclusion of Ladderup Corporate Advisory Pvt. Ltd. by the TPO, the Ld. counsel submits that it is rejected as comparable by the Tribunal in assessee s own case for AY 2012-13 (ITA No. 1427/Mum/2017). Further it is stated by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt banking. Thus the Ld. DR submits that merely because a SEBI registered merchant banker does not mean that the company has earned its income or any part of it from merchant banking. Thus it is argued by him that Ladderup Corporate Advisory Pvt. Ltd. is a valid comparable in the instant case. 6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The assessee herein is a wholly owned subsidiary of GSAM India Holdings Ltd., a company incorporated in Mauritius. The assessee received regulatory approval from SEBI to start mutual fund business in India on 01.09.2008. However, given the economic scenario post September 2008, it deferred its plans to launch mutual fund scheme in the Indian market. It also obtained SEBI approval to provide non-binding advisory services to its overseas AE w.e.f. 11.12.2008. Accordingly, the assessee provided investment advisory services, in respect of listed Indian securities to its overseas AE during the period 01.04.2010 to 31.03.2011. Investment Advisory Services refer to the support services provided by the Indian firms to the overseas fund managers in equity and genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial fundamentals, corporate governance, director/executive compensation and capital market. Its outsource services consist of financial data bases and back office activity for research/advisory report and it has a focus on the niche market segment of financial content. Accordingly, the services provided by the company are comparable to the investment advisory services rendered by the assessee. Further, we notice that ITIL is accepted as a comparable by the Tribunal in ITA No. 1427/Mum/2017 in assessee s own case for AY 2012-13. It is also accepted as a comparable in assessee s own case by the TPO for AY 2013-14 and AY 2014-15. Also, the Tribunal has accepted ITIL as a comparable in (i) Temasek Holdings Advisors India Private Limited v. DCIT (ITA No. 477 816/Mum/2016) and (ii) Wells Fargo Real Estate Advisors Pvt. Ltd. v. DCIT (ITA No. 1520/Mum/2016). In view of the above factual matrix, we direct the TPO/AO to include ITIL as a comparable for the year under consideration. 6.3 Then we turn to IDC (India) Ltd. We observe that IDC (India) Ltd. is a global provider of market intelligence and advisory services and it is engaged in the research and survey functions, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable to the advisory functions performed by the assessee. It is the contention of the Ld. DR that as per the annual report of LCAPL, its income during the year is ₹ 11.18 crores derived from financial and management consultancy fees; there is no evidence that the income has been received from merchant banking. It is also explained by him that merely being a SEBI registered merchant banker does not mean that the company has earned its income or any part of it from merchant banking. Thus it is stated that LCAPL is a valid comparable. 6.5 Let us discuss the case laws relied on by the Ld. Counsel. In Wells Fargo Real Estate Advisors Pvt. Ltd. (supra), the assessee is engaged in the business of providing non binding advisory services, it adopted TNMM to determine the ALP of the international transactions entered into by it with its AEs. The Tribunal observed that (i) Ladderup Corporate Advisory Pvt. Ltd. is registered as a category 1 merchant banking with SEBI and is engaged in rendering merchant banking services w.e.f. July 2010, which factual position stands duly substantiated from the perusal of the web portal extracts of the aforesaid company, (ii) As per the annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decisions cited by respective representatives for exclusion / inclusion of the comparable. First of all, both sides converge on the point that the assessee was engaged in providing investment advisory services of non-binding in nature. The fact is not in dispute before the lower authorities. On this backdrop, we find that so far as the selection of final comparable namely Ladderup is concerned, this Tribunal in the case of Temasek Holding Advisors India P. Ltd. Vs. DCIT [87 Taxmann.com 168] for identical Assessment year observed that Ladderup was registered as Category-1 Merchant Banker with SEBI and was engaged in rendering merchant banking services w.e.f. 01/07/2010 which fact was duly substantiated by the website of the company as well as its Annual Reports and therefore, not functionally comparable with an entity which was engaged in the business of rendering non-binding investment advisory services. The ratio of this decision has subsequently been followed in recent decision of the Tribunal rendered in Wells Fargo Real Estate Advisors Private Ltd. Vs DCIT [ITA No. 1520/M/2016 17/01/2018]. We also find that the reliance of the revenue on the case of AGM India Advisors Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether on the facts and in the circumstances of the case, the DRP was correct in rejecting the comparable i.e. M/s. Motilal Ostwal Investment Pvt. Ltd. despite the Transfer Pricing Officer had established functional similarity based on the factual finding for AY 2011-12, whereas the DRP has based its decision on the ruling of the Hon ble ITAT for AY 2010-11. 9. The DRP excluded M/s. Motilal Ostwal Investment Pvt. Ltd (in short MOAIPL ) from the list of comparables on the following ground: 2.26 Now coming to the comparables selected by the TPO, as regards Motilal Oswal Investment Advisors Pvt. Ltd., we find that the Hon'ble ITAT Mumbai Bench in the case of Carlyle India Advisors Pvt. Ltd. Vs. DCIT Cir-10(1), Mumbai (ITA No.7367/M/2012 pertaining to the A.Y. 2008-09) order dated 07.02.2014 has rejected Motilal Oswal Investment Advisors Pvt. Ltd. as a comparable to investment advisory services. The Hon'ble Tribunal has held that the said company is engaged in diversified activities and that segmental reporting is not available. Hon'ble ITAT has observed that the said company is registered with SEBI as a merchant banker and the Directors report show that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly indicate that MOAIPL is engaged in merchant banking/investment banking activities. It offers comprehensive investment banking solutions and transactions expertise covering private placement of equity, debt and convertible instruments covering international and domestic capital markets, mergers and acquisitions advisory and restructuring advisory and implementations. The income of MOAIPL is largely from cross border mergers and acquisitions activity and the related financing solutions. Thus MOAIPL is engaged in merchant banking and other similar activities, which are not functionally comparable to the assessee, which is engaged in rendering advisory services. We also find that MOAIPL is rejected as comparable by the Tribunal in ITA No. 6989/Mum/2014 in assessee s own case for AY 2010-11. Also it has been rejected as a comparable by the DRP in assessee s own case for AY 2011- 12. We further find that MOAIPL is rejected as comparable in the decision in (i) Goldman Sachs (India) Securities Private Limited v. DCIT (ITA No. 927/Mum/2016 ITA No. 902/Mum/2016), (ii) Principal CIT-14 v. AGM India Advisors Private Limited (ITA No. 1377 of 2017) (Bombay High Court), (iii) Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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