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TMI Blog2019 (6) TMI 1737X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid submissions of learned Sr. Counsel, all other grounds, except, ground no.5, 6 and 7 are dismissed as not pressed. 3. In grounds no.5 and 6, the assessee has challenged rejection / selection of the following comparables:- i) ICRA Management Consulting Services Ltd. ii) Future Capital Holdings Ltd. iii) ICRA Online Ltd. 4. Before we proceed to deal with the issues raised in these grounds, it is necessary to narrate the facts leading to the present dispute. 5. Brief facts are, the assessee, an India company, is a subsidiary of TPG Capital L.P., USA. It provides non-binding investment advisory services to TPG Capital L.P., USA, which is its AE. During the year under consideration, the assessee entered into various international transactions with its AE. However, in the present appeal the only point in dispute is with regard to the adjustment made to the arm's length price of non-binding investment service provided to the AE. It is evident from the facts on record, for provision of investment advisory service to the AE during the year, the assessee has earned revenue of Rs. 24.56.91.499. To benchmark the arm's length price of the aforesaid transaction, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid decision of the Transfer Pricing Officer. 9. The learned Sr. Counsel for the assessee submitted, the only reason for which the Department has rejected this company is, its advisory services are different from the assessee. The learned Sr. Counsel submitted, in assessee's own case the Tribunal has accepted this company as comparable in A.Y. 2008-09 and 2009-10. He submitted, even in case of assessee's sister concern for the very same assessment year the Tribunal has accepted this company as a comparable to an investment advisory service provider. Thus, he submitted, the company being functionally similar to the assessee should be included as a comparable. In support of such contention, he relied upon the following decisions:- i) TPG Capital India Pvt. Ltd. v/s ACIT, ITA no.880/Mum./ 2013, dated 29.10.2014; ii) TPG Capital India Pvt. Ltd. v/s DCIT, ITA no.7594/Mum./ 2014, dated 08.02.2017; iii) TPG Capital India Pvt. Ltd. v/s DCIT, ITA no.5411/Mum./ 2016, dated 07.12.2018; iv) CIT v/s Temasek Holdings Advisors India Pvt. Ltd., ITA no. 1051/Mum./2014, dated 17.11.2016; v) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no. 776/Mum./2015, dated 18.05.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such fact, learned Sr. Counsel drew our attention to the decision of the Tribunal in Carlyle India Advisors Pvt. Ltd. v/s ACIT, [2016] 66 taxmann.com 14 (Mum.). The learned Sr. Counsel submitted, while deciding the aforesaid company's appeal for the very same assessment year i.e., 2010-11, the Tribunal has noted that the margin of the investment advisory segment of the company is 16.26%. Further explaining, learned Sr. Counsel submitted, the difference in margin between the Transfer Pricing Officer and the figures mentioned in the Tribunal's decision in case of Carlyle India Advisors Pvt. Ltd. is, because of the fact that the unallocated corporate expenditure of Rs. 5,25,74,918, has not been allocated to all the segments. The learned Sr. Counsel submitted, if unallocated expenditure is proportionately allocated to all the segments, the margin of this company from investment advisory segment would be 16.26% as has been mentioned in the Tribunal's order in Carlyle India Advisors Pvt. Ltd. (supra). Thus, he submitted, the margin of this company should be computed @ 16.26% subject to verification by the Transfer Pricing Officer. 14. The learned Departmental Representative, though, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable to an investment advisory service provider. In support of his contention, the learned Sr. Counsel relied upon the following decisions:- i) AGM India Advisors Pvt. Ltd. v/s DCIT, ITA no.4757/Mum./ 2015 and ITA no.4801/Mum./2015, dated 18.05.2016; ii) Arisaig Partners India Pvt. Ltd. v/s ACIT, ita no.840/Mum./ 2015, dated 11.11.2016; iii) Sparkles Dhandho Advisors Pvt. Ltd. v/s ITO, ITA no.1047/ Mum./2015, dated 03.01.2018; and iv) Mount Kellet Capital Management India Pvt. Ltd. v/s DCIT, ITA no.887/Mum./2015, dated 11.11.2016 18. The learned Departmental Representative strongly supporting the exclusion of this company submitted, since the assessee itself had selected it as a comparable and had never objected it before the Departmental Authorities, it cannot do so now before the Tribunal.He submitted, whether a particular company is a comparable or not is a purely factual issue requiring investigation into facts. Therefore, assessee's contention for removing the comparable on the basis of fresh facts should not be entertained at this stage. 19. In rejoinder, the learned Sr. Counsel for the assessee submitted, the entire purpose of introducing the transfer pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons / grounds on which the assessee seeks exclusion of this company as a comparable. Therefore, in the interest of fair play and justice, we are inclined to restore the issue relating to the comparability of this company to the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. The Assessing Officer while deciding the issue must deal with and keep in view the submissions to be made by the assessee and the ratio laid down in the decisions relied upon. Grounds no.5 and 6, are disposed of accordingly. 21. In ground no.7, the assessee has challenged disallowance of risk adjustment. 22. The learned Sr. Counsel for the assessee submitted, in course of proceedings before the Transfer Pricing Officer, the assessee had made detailed submissions and has also furnished a working providing for risk adjustment while computing the margin of the comparables. However, the Departmental Authorities have not properly considered assessee's claim. He submitted, assessee being a captive service provider to its AE is a completely risk mitigated entity. Whereas, the comparables are not so as they are exposed to various risk factors including market risk. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e comparable on account of risk factor, however, it has made a risk analysis. It is evident, assessee is a captive service provider to its AE and is remunerated at cost plus mark-up basis. Thus, it is a fact that most of the risks are assumed by the AE and the assessee so to say is a risk mitigated entity. It is apparent, in course of proceedings before the Transfer Pricing Officer, the assessee in its submissions dated 30th July 2013, has claimed risk adjustment and has also furnished a working providing for risk adjustment while computing margin of the comparables. It is observed, neither the Transfer Pricing Officer nor learned Commissioner (Appeals) have properly appreciated the claim of the assessee vis-a-vis the facts on record. While the Transfer Pricing Officer has rejected assessee's claim of risk adjustment by stating that the assessee has not done so in the transfer pricing study report, learned Commissioner (Appeals) has rejected assessee's claim by stating that the assessee also bears single customer risk. In our view, assessee's claim of risk adjustment requires consideration. Now, it is fairly well settled that in appropriate cases, adjustment towards risk factor can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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