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TMI Blog2021 (6) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... on-binding investment advisory and research services in connection with investment opportunities in India to its Associated Enterprises (AEs) viz. Standard Chartered -Real Estate Fund ; Standard Chartered Bank, Singapore Branch ; Standard Chartered IL & FS and Merlion India Managers Limited. We find that the AEs provide nondiscretionary investment management and other related services to Investment Funds ( hereinafter referred to as 'Funds') that are based in the overseas location, in relation to the investments made by the Funds. The AEs review and undertake a detailed evaluation of all investment/ divestment recommendations provided by assessee in India. The AEs then take appropriate decisions with respect to making final investment / divestment recommendation to the Funds. The analysis carried out by assessee is not binding on the AEs and AEs may take a decision not to recommend investment / divestment opportunity identified by assessee to the Funds. 3.1. Functions performed by assessee The main objective of assessee is to conduct industry and market research and furnish industry / market feedback of Indian companies with a view to provide information and thereby enabling the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered on economic and market events, national and international events, public and corporate policies and performance facts of companies. In order to collect secondary data. It uses various sources, such as trade journals, periodicals, official documents, news papers and magazines. The analyst arrange meetings with various company officials for the purpose of understanding the growth prospects and the future outlook of the industry. b) Preliminary Investment Analysis The analysts review the narrative and statistical information gathered and on the basis of such information they write research reports which include statistical forecasts, summary tables, graphs and charts. This analysis involves a due diligence review of the proposed investee company. If required, inputs from external lawyers are also taken on the basis of the analysis above, the analysts make a presentation, summarizing the findings to the AEs. Such preliminary due-diligence is required to allow a reasonable assessment to be made, the competitive position and the financial prospects of the prospective investee companies and of qualification and expertise of their management. c) Final Investment Analysis Bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, monitoring and sale of assets, such as transmission and placement of investment orders, making investments, secure holding of investments made and disposal of investments. Investment Committee The decision to make final investment / divestment recommendation to the Fund is made by the Investment Committee ('IC') in the AE's who acts as the fund manager. The IC is comprised of senior employees of the AEs such as the Global Head of Principal Finance, the Global Co-Head of Private Equity, the Chief Operating Officer along with other SCB group representatives. When assessee representative(s) attend the IC meeting, they attend to explain the recommended investment / divestment opportunities in India. They do not participate nor control the investment approval process. Funds The ultimate decision of investment / divestment is made by the board of directors of the Funds incorporated outside of India. 3.3. The assessee had arrived at the Arms Length Price (ALP) Margin by adopting Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM). We find that the Profit Level Indicator used by the assessee was Operating Profit to Total Cost (OP / TC) and its margin was 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives for both the parties, and also perused the orders of the lower authorities and the judicial pronouncements relied upon by them in context of the aforementioned comparable. We find that the issue as to whether the aforementioned comparable, viz. Motilal Oswal Equity Adivisors Pvt. Ltd. could be selected as a company for benchmarking the international transactions of an assessee which was providing non-binding investment advisory services, had been looked into by the Tribunal in the case of New Silk Route Advisors Pvt. Ltd. Vs. ACIT, Circle-7(2)(2), Mumbai [IT (TP) Appeal No. 1148/Mum/ 2016, dated 30.11.2018) for A.Y. 2011-12. In its aforesaid order, the Tribunal relying on the earlier orders of its coordinate benches viz. (i) DCIT Vs. General Atlantic Pvt. Ltd., 91 taxmann.com 406 (Mum); (ii) Temasek Holdings Advisors India Pvt. Ltd. Vs. DCIT, (2017) 87 taxmann.com 168; (iii) Well Fargo Real Estate Advisors Pvt. Ltd. Vs. DCIT, (2018) 90 taxmann.com 18; and (iv) Avenue Asia Advisors Pvt. Ltd. Vs. DCIT, (2017) 85 taxmann.com 311 (Del), had concluded that the aforementioned company could not be considered as a comparable to an investment advisory service provider due to difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company. Hence in view of the same and also by respectfully following the said decision of this tribunal in the case of Bain Capital Advisors(India) Ltd vide its order dated 11.6.2019, we direct the ld. TPO / ld AO to exclude Motilal Oswal Private Equity Advisory Private Limited in the final list of comparables for working out the arithmetic mean margin of the comparables. 3.6. Exclusion of Ladderup Corporate Advisory Pvt Ltd At the outset, we find that the ld AR stated that this comparable had been held to be functionally not comparable with assessee rendering non-binding investment advisory services, by the order of this tribunal dated 11.6.2019 passed in the case of Bain Capital Advisors(India) Ltd vs ACIT in ITA No. 1996/Mum/2016. We find that this comparable company is in the business of providing financial and corporate advisory services to corporate clients. These advisory services cover the major spectrum of capital structure - advising clients to raise traditional debt facilities as well as structures debt, restructuring advisory services, raising private equity and sourcing & executing Merger & Amalgamation opportunities - domestic as well as cross border. We find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue that the aforementioned company viz. Ladder up Corporate Advisory Pvt. Ltd. could not be treated as a comparable to an investment service provider, had been looked into by the Tribunal in the case of New Silk Route Advisors Pvt. Ltd. Vs. ACIT, Circle-7(2)(2), Mumbai [IT (TP) Appeal No. 1148/Mum/2016, dated 30.11.2018) for A.Y. 2011-12. The Tribunal in the aforementioned case taking cognizance of the functional profile of the aforementioned company which was registered as a Category-1 Merchant Banking company with SEBI, and was engaged in Merchant Banking Services with effect from July, 2010, had therein held that the same could not be treated as a comparable to a company engaged in the activity of rendering investment advisory services. The Tribunal while concluding as hereinabove, had relied on the earlier decisions of the coordinate benches of the Tribunal viz. (i) DCIT Vs. General Atlantic Pvt. Ltd., 91 taxmann.com 406 (Mum); (ii) Temasek Holdings Advisors India Pvt. Ltd. Vs. DCIT, (2017) 87 taxmann.com 168; (iii) Well Fargo Real Estate Advisors Pvt. Ltd. Vs. DCIT, (2018) 90 taxmann.com 18; and (iv) Avenue Asia Advisors Pvt. Ltd. Vs. DCIT, (2017) 85 taxmann.com 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Advisory Pvt Ltd in the final list of comparables for working out the arithmetic mean margin of the comparables. 3.7. Inclusion of Cyber Media Research Limited We find that this comparable has been included in the final list of comparables by this tribunal in assessee's own case for the Asst Year 2010-11 vide its order dated 8.2.2019 as functionally comparable. There is absolutely no change in the functions performed in Asst Year 2010-11 and 2011-12. Hence there is no reason to take a divergent stand for us. Respectfully following the said decision of the tribunal in assessee's own case, we direct the ld TPO / ld AO to include Cyber Media Research Limited in the final list of comparables for working out the arithmetic mean margin of the comparables. 4. Apart from this, we find that the ld AR stated that a resolution under Advance Pricing Agreement (APA) has been reached with respect to transactions between the assessee and its 2 AEs viz Standard Chartered Bank, Singapore Branch and Standard Chartered-Real Estate Fund, which includes the assessment year under consideration before us. We find that the APA entered with CBDT had arrived at the ALP of Cost plus 20%. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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