Exclusion of comparables upheld due to functional differences in investment advisory services. Adjustments directed for arm's length price.

The Tribunal upheld the exclusion of KJMC Corporate Advisors (India) Limited from comparables, citing functional differences with the assessee's investment advisory services. Motilal Oswal Investment Advisors Pvt. Ltd. was also excluded due to dissimilarity in activities. The Assessing Officer/TPO was directed to adjust the arm's length price accordingly. The revenue's appeal was dismissed, and the assessee's Cross Objection was allowed.

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Issues Involved:
1. Exclusion of KJMC Corporate Advisors India Ltd. from the list of comparable companies.
2. Inclusion of Motilal Oswal Investment Advisors Pvt. Ltd. as a comparable company.
3. Rejection of the assessee's claim for risk and working capital adjustment.

Detailed Analysis:

1. Exclusion of KJMC Corporate Advisors India Ltd. from the List of Comparable Companies:
The revenue challenged the exclusion of KJMC Corporate Advisors India Ltd. from the comparables by the DRP, which relied on the decision of the Tribunal in Carlyle India Advisors Private Limited Vs. DCIT. The Tribunal had previously determined that KJMC Corporate Advisors (India) Limited, engaged in investment, merchant banking, and corporate finance, could not be compared to the assessee's investment advisory activities. The Tribunal reiterated that since the assessee's international transaction with its AE was solely for investment advisory services, KJMC Corporate Advisors (India) Limited was not functionally comparable. Consequently, the Tribunal found no error in the DRP's decision to exclude this company from the list of comparables.

2. Inclusion of Motilal Oswal Investment Advisors Pvt. Ltd. as a Comparable Company:
The assessee objected to the inclusion of Motilal Oswal Investment Advisors Pvt. Ltd. as a comparable, arguing it was not functionally comparable. The Tribunal referred to its decision in Carlyle India Advisors Private Limited Vs. DCIT, which had excluded Motilal Oswal Investment Advisors Pvt. Ltd. from the comparables on the grounds that it was engaged in merchant banking activities, which were not comparable to investment advisory services. The Tribunal also cited the decision in Acumen Fund Advisory Services India Private Limited Vs. DCIT, which similarly excluded Motilal Oswal Investment Advisors Pvt. Ltd. for being functionally different. The Tribunal directed the Assessing Officer/TPO to recompute the arm's length price excluding Motilal Oswal Investment Advisors Pvt. Ltd. from the comparables.

3. Rejection of the Assessee's Claim for Risk and Working Capital Adjustment:
The assessee claimed risk and working capital adjustments due to different risk profiles compared to the companies selected by the TPO. However, the Tribunal's judgment did not provide a separate detailed analysis on this issue within the provided text. The focus remained on the comparability of selected companies and the functional differences that necessitated their exclusion or inclusion.

Conclusion:
The Tribunal upheld the DRP's decision to exclude KJMC Corporate Advisors (India) Limited from the list of comparables, aligning with the precedent set in Carlyle India Advisors Private Limited Vs. DCIT. It also directed the exclusion of Motilal Oswal Investment Advisors Pvt. Ltd. based on its functional dissimilarity to the assessee's business of providing investment advisory services. The Tribunal instructed the Assessing Officer/TPO to recompute the arm's length price considering these exclusions. The appeal by the revenue was dismissed, and the Cross Objection by the assessee was allowed.

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