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TMI Blog2022 (12) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... of the coordinate Bench, assessee s contention that the RPT filter should be applied only with respect to the total expenditure did not find favour with the Bench. Thus, the claim of the assessee that this company was functionally different and also failed the RPT filter was rejected by the Bench. Basic facts relating to the comparability of this company, being more or less identical in the impugned assessment year, respectfully following the aforesaid decision of the co-ordinate Bench in assessee s own case, we hold that Motilal Oswal Advisors Pvt. Ltd. being comparable to the assessee cannot be excluded. IM+Capitals Ltd., formerly known as Brescon Corporate Advisors be excluded from the list of comparables. M/s Keynote Corporate Services Ltd be excluded as functionally different from the assessee. Working capital and risk adjustment - We agree with the assessee that considering the nature of risk undertaken by the assessee as well as the comparables, adjustment in specific cases has to be made to the margin of the comparables on account of risk profile, however, burden is entirely on the assessee to furnish required details regarding the risk profile of the comparables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (OP/OC), the mean margin of the comparables was worked out at 6.28%. The margin shown by the assessee at 25.84% being much higher to the average margin of the comparables, the assessee claimed the transaction with the AE to be at arm s length. The Transfer Pricing Officer (TPO), however, did not accept the benchmarking of the assessee, though, he accepted TNMM as the most appropriate method with OP/OC as PLI, however, he was of the view that there are various deficiencies in the transfer pricing analysis done by the assessee. According to TPO, the assessee did not apply proper qualitative and quantitative filters resulting in exclusion of various functionally similar comparables and inclusion of some companies which are not comparable. Accordingly, he rejected the benchmarking of the assessee. Having done so, he proceeded to select fresh comparables independently. In the process, he shortlisted 13 companies as comparables with average margin of 43.01%. Of course, out of the four comparables selected by the assessee, the TPO retained three comparables while rejecting One. While computing the margin, the TPO did not provide for any adjustment on account of risk undertaken by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative submitted, since plea is unacceptable as similar contention of the assessee was rejected by the Tribunal in assessment year 2009-10. Thus, he submitted, this company cannot be rejected as a comparable. 5. In rejoinder, learned counsel for the assessee submitted, for applying RPT filter, sale to sale and expenses to expenses ratio has to be seen in case of the assessee as well as comparables. He submitted, the assessee operates in a completely risk free environment as the transactions are with the AE. 6. We have considered rival submissions and perused the material available on record. The assessee has sought exclusion of Motilal Oswal Investment Advisor Pvt. Ltd. primarily on the ground that it is functionally different from the assessee and secondly it does not qualify RPT filter. Notably, while examining the functional similarity of the aforesaid comparable in assessee s own case in assessment year 2009-10, the Tribunal had excluded this company as a comparable. However, while deciding Revenue s appeal in ITA No. 286/2018, the Hon'ble High Court, in order dated 12.03.2018, remanded the issue relating to comparability of this company to the Tribunal for f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en before us there was no functional dissimilarity shown in the comparable vis- -vis the functions of the assessee. In view of this we are of the view that Motilal Oswald investment and advisory services Ltd. has crossed the RPT filter and is functionally similar therefore same cannot be excluded. 7. As could be seen from the foresaid observations of the coordinate Bench, assessee s contention that the RPT filter should be applied only with respect to the total expenditure did not find favour with the Bench. Thus, the claim of the assessee that this company was functionally different and also failed the RPT filter was rejected by the Bench. Basic facts relating to the comparability of this company, being more or less identical in the impugned assessment year, respectfully following the aforesaid decision of the co-ordinate Bench in assessee s own case, we hold that Motilal Oswal Advisors Pvt. Ltd. being comparable to the assessee cannot be excluded. 8. The next comparable under challenge is IM+Capitals Ltd., formerly known as Brescon Corporate Advisors. Objecting to selection of this company, learned counsel for the assessee submitted, the company has a completely differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services Ltd, this comparable has been selected by the learned transfer pricing officer. The assessee has raised several objections in para number 8.1 at page number 28 of the transfer pricing officer s order. The assessee has raised the functional dissimilarity issue stating that the comparable company is engaged in the merchant banking business and has also acted as a lead manager in various initial public offerings and right issues. This functional dissimilarity has been dealt with in the last paragraph at page number 37 of the order of the learned transfer pricing officer wherein it has been stated that this entity has been used as a comparable by the assessee in previous year and in this year too it qualifies as a comparable based on the assessee s own search process. He held that comparable company is also functioning in the domain of financial consultancy and therefore the same will be used for the purpose of benchmarking the transaction of the assessee. The learned CIT-A has given one of the reasons for the exclusion of the above comparable that the dispute resolution panel in the assessee s own case for assessment year 2006-07 has held that this comparable is not a robust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the observations of the Hon'ble jurisdictional High Court while deciding assessee s appeal in assessment year 2008-09: 41. This Court, on a perusal of the orders of the lower authorities and the assessee s submissions before them which have been placed on record in this appeal, finds that securities were based only on their exceptionally high profit margins for the assessment year in question and not on the grounds of functional dissimilarities. Indeed, the assessee did not contend the later before the lower authorities. The assessee has sought to highlight differences in the risk profiles of the assessee and Brescon in the present appeal. However, this court holds that such a contention cannot be raised for the first time at this stage. Therefore, Brescon and Khandwala Securities are held to be functionally similar, and the matter is remitted to the DRP for the purposes of examination under Rule 10B(3) of the Rules. In the event that the material differences arising out of the extremely high profits cannot be eliminated as per Rule 10B(3), these two entities will have to be discarded as comparables. 14. Learned Departmental Representative submitted, risk adju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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