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TMI Blog2024 (12) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... KESH BANERJEE, JUDICIAL MEMBER For the Assessee: Mr. Porus F Kaka / Mr. Manish Kanth For the Revenue: Ms. Dhivya Ruth J (SR DR) ORDER PER ANIKESH BANERJEE (JM) : These cross appeals arise out of the order of the Ld. Commissioner of Income-tax (Appeals)-58, Mumbai [in short, Ld.CIT(A) ], date of order 15/03/2019 for A.Y. 2011-12 order passed under section 250 of the Income-tax Act, 1961 (in short, the Act ). Impugned order was emanated from the order of the Ld. Deputy Commissioner of Income-tax-14(3)(1), Mumbai order passed under section 143(3) read with section 144C(1) of the Act, date of order 11/03/2015. 2.1. The Assessee has taken the following grounds of appeal:- All the grounds of appeal as raised below are without prejudice to each other: 1. The Commissioner of Income-tax (Appeals) - 58, Mumbai [hereinafter to be referred as 'the CIT(A)'] erred on facts and in law in partially upholding the action of the Deputy Commissioner of Income-tax, Circle-14(3)(1), Mumbai [AO] and the Transfer Pricing Officer - Addl. Commissioner of Income-4(2), Mumbai [TPO] resulting into transfer pricing adjustment, to the Appellant's total income, in respect of non-binding investment adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has erred on facts and circumstances of the case and in law in directing TPO/AO to collect relevant information about the segmental profitability from Motilal Oswal Private Equity Advisors Private Limited, without considering the fact that the explicit information on segmental profitability are not available in audited financial statements and single segment i.e. providing financial services are only reported in accordance with Accounting Standards -17. 9. Without prejudice to the above, the CIT(A)/AO/TPO erred on facts and circumstances of the case in not allowing proper adjustments under the provisions of Rule 10B(1)(e)(iii) of the Rules, to account for differences between the risk profile of the Appellant and the comparables selected by the CIT(A)/AO/TPO. 10. The CIT(A)/ AO erred on facts and circumstances of the case in levying interest under Section 234B, Section 234C and Section 234D of the Act. The Appellant prays that suitable direction to be given to delete/reduce these interest. 11. The CIT(A)/ AO/ erred on facts and circumstances of the case and in law in initiating penalty proceedings under Section 271(1)(c) of the Act. The Appellant crave leave to add, amend, delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility purpose? 3.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in including PRAISIPL as comparable, though RPT is more than 40%? 3.3 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in excluding the trade advances in working out RPT ratio? 4.1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in not giving his decision in accordance with provisions of section 251(l)(a) of the Act and instead directing the AO/TPO to conduct fresh inquiries to gather information of segmental profits from Motilal Oswal Private Equity Advisors Pvt. Ltd independently for fresh adjudication on the matter of including this entity as a comparable? 4.2 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in not deciding the case by passing a speaking order, but virtually setting aside the matter to the TPO/AO though such powers of set aside do not remain with CIT(A) w.e.f. 1.6.2001? 4.3 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in setting aside so, when he has powers u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djustment at Rs. 7,67,24,390/- which is proposed to be added back with the total income of the assessee. The Ld.AR proceeded the argument company-wise, which are as follows: - MOIAPL: 4.1 The grievance for the assessee is that the variable is not accepted due to functional non comparability considering the management discussion and analysis report of the company. The company in coming years has involved in investment banking space, equity, capital markets, M A Equity Syndication and structures it, business segmental data, abnormal profits, etc. The issue is squarely covered by the order of the co-ordinate bench of ITAT in assessee s own case in IT(TP) A No.3068/Mum/2017, date of order 21/06/2019, wherein it has been held as under:- 25. In this appeal, the Revenue has challenged the decision of the (Appeals) in excluding Motilal Oswal Investment Advisors Pvt Ltd. as a comparable. 26. As discussed earlier, this company was introduced by the Transfer Pricing Officer as a fresh comparable by the despite the objection of the assessee. However, learned Commissioner (Appeals)having found that the company is engaged in the business of investment / merchant banking has excluded it as a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the following decisions:- i) DCIT v/s General Atlantic Pvt. Ltd., ITA no.1717/Mum./ 2016, dated 21.02.2018; ii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2017] 87 taxmann.com 168; iii) Sun Ares India Real Estate Pvt. Ltd. v/s DCIT, ITA no. 621/Mum./2016, dated 09.02.2018; and iv) Wells Fargo Real Estate Advisors \Pvt. Ltd. v/s DCIT, ITA no.1520/Mum./2016, dated 17.01.2018. 22. The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and the DRP. 23. 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 Sr. Counsel for the assessee has held that this company cannot be a comparable to a company engaged in the activity of investment advisory services. Since. The aforesaid decisions are for the very same assessment year and no distinguishing fact in the present appeal was brought to our notice by the learned Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r operates 4 different business verticals, viz financial advisory, investment advisory, management and facilitation services and identifying investment opportunities. We find that despite the aforesaid multiple sectors of operations, no segmental data is available in the 'Annual report', and the income from the advisory operating constitute only 42.10% of its total operating income. We are further of the considered view that a: observed by us hereinabove, the aforesaid comparable unlike the assessee is engaged in the business of managing and advising funds in the Growth Capital as well as Real Estate Space. That a perusal, o 'Schedule E' to the balance sheet of the aforesaid comparable therein reveals that the latter had made investments in one of the funds managed, by it, i.e 'India Reality excellence fund'. Thus in the totality of the aforesaid facts we are of the considered view that functions performed by the aforementioned comparable, viz. Motilal Oswal Equity Pvt. Limited, which is into managing and investment into funds, cannot be compared to the assessee whose functions are strictly limited to as that of an investment advisor. Thus in light of our af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Sr.Counsel, which are for the very same assessment year, this company has been accepted as a comparable to an investment advisory provider. Respectfully following the decisions of the Tribunal in assessee s own case as well as in case of others as cited supra, we direct the Assessing Officer to include this company as a comparable. 5.2. Cyber: Cyber Media Research Limited has been considered as a comparable company in the assessment years 2008-09 and 2010-11. Cyber Media Research Limited is engaged in providing market research and management consultancy services. It is a subsidiary of Cyber Media. The company provides a comprehensive research on market trends and focus, competition analysis, even profiles analysis, revenue segmentation and information on customer requirements. Its research covers the communications hardware, peripherals, software, service and government sectors. The Ld.AR placed the judicial pronouncement covered by the co-ordinate bench of ITAT, Mumbai in assessee s own case in ITA No.7594/Mum/2014 date of pronouncement 08/02/2017 A.Y. 2009-10 where it has been held as under: - We have heard the Ld. Representatives, perused the records and the orders of the lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aded to observe that there had been a shift in the nature of business of the assessee during the year under consideration, as against that of the immediately preceding year, coupled with the fact that the Tribunal had consistently in host of decisions as had been so relied upon by the Ld. A.R therein concluded that the aforesaid comparable, viz EDC India Ltd (supra) was into investment advisory business, therefore do not find any reason to take a different view. Thus, in light of our aforesaid observations we are of the considered view that the TPO had wrongly excluded the aforesaid comparable from the list of the comparables selected by the assessee company, and therefore set aside the order of the CIT(A) who had upheld the said findings of the TPO. 5.3. ITIL: The Ld.AR further placed that the company provides outsourced services consisting of research on financial databases and back-office activities for research / advisory reports for its off-shore clients mainly in the USA. The company also focuses on financial research and analytics and it analyses data on financial fundamentals, corporate governance, director / executive compensation and capital; market. Considering these act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he various departments to understand the functioning of the company in which AE has subsequently invested. The managing director has admitted that assessee is doing portfolio management. lt is also mentioned in the agreement that assessee is doing restructuring and portfolio management. Mr. Bhatia has explained that he along with his team members have interacted with various lenders, negotiated with the lenders about the Debts in the case of Vishal .Mr. Bhatia, head of Assessee was actively involved in the Renegotiation of Debts in the case of Vishal. It has been explained by Sumedh Jog that they have interacted at various LEVEL TO understand functioning of the Janalaxmi Bank. Thus the functions performed by assessee are much wider than investment advisory. It is not a plain vanilla investment advisory service, rather, it's a full meal. All these functions are not performed by the so called comparables selected by assessee. The assessee is going into each and every intricate detail in understanding the business of the companies where AE is interested. They are even interacting with lawyers, Chartered Accountant on various issues related to investment. It is very much evident fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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