Tribunal directs inclusion of new comparables, removes mark-up, and upholds exclusion of others.

The Tribunal partially allowed the appeal, directing the inclusion of ICRA Management Consultancy Services Ltd., Kinetic Trust Ltd., IDC India Ltd., and Future Capital Investment Advisory Ltd. as comparables. It upheld the exclusion of Integrated Capital Services Ltd. and Motilal Oswal Investment Advisors Pvt. Ltd. The Tribunal also ordered the removal of the additional 3% mark-up imposed by the TPO, finding that the monitoring activities were part of the advisory services provided by the assessee.

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Issues Involved:
1. Transfer Pricing Adjustment for Investment Advisory Services.
2. Exclusion and Inclusion of Comparable Companies.
3. Addition of Extra Mark-Up by the TPO.

Detailed Analysis:

1. Transfer Pricing Adjustment for Investment Advisory Services:
The core issue revolves around the transfer pricing adjustment of Rs. 9,41,19,278/- for the determination of Arm's Length Price (ALP) for the provision of investment advisory services to the assessee's associate enterprise (AE). The assessee, a Private Limited Company and a 100% subsidiary of Tamasek Holdings Private Limited, Singapore, provided non-binding investment advisory services to THPL. The services included providing research reports, macroeconomic analysis, identifying investment opportunities, and monitoring portfolio companies. The assessee reported a mark-up margin of 21.4% using the Transactional Net Margin Method (TNMM) as the most appropriate method (MAM).

2. Exclusion and Inclusion of Comparable Companies:
The dispute includes the exclusion and inclusion of specific comparable companies to benchmark the assessee's margins. The assessee's comparables, such as ICRA Management Consultancy Services Ltd., Integrated Capital Services Ltd., and Kinetic Trust Ltd., were rejected by the TPO, while Motilal Oswal Investment Advisors Pvt. Ltd. was included.

ICRA Management Consultancy Services Ltd. (Rejected by TPO):
The Tribunal had previously accepted ICRA as a comparable in earlier years. The company provides consultancy in diverse areas, similar to the assessee's advisory services. The Tribunal held that the core competency in advisory services makes ICRA a good comparable, and it should be included in the final comparables.

Kinetic Trust Ltd. (Rejected by TPO):
The TPO rejected Kinetic Trust Ltd. due to its low turnover and registration as an NBFC. The Tribunal noted that turnover filter was not applied during the selection process, and the company's core competency in consultancy services makes it a good comparable. The Tribunal directed its inclusion in the final comparables.

IDC India Ltd. (Rejected by DRP):
IDC India Ltd. was accepted by the TPO but rejected by the DRP without giving the assessee an opportunity to contest. The Tribunal held that IDC India Ltd. is functionally comparable to the assessee and directed its inclusion.

Future Capital Investment Advisory Ltd. (Rejected by DRP):
The DRP rejected this comparable without providing an opportunity to the assessee. The Tribunal found that the company is engaged in investment advisory services and directed its inclusion.

Integrated Capital Services Ltd. (Rejected by TPO):
The Tribunal upheld the rejection of Integrated Capital Services Ltd. based on previous judicial decisions that found it not comparable to investment advisory services.

Motilal Oswal Investment Advisors Pvt. Ltd. (Included by TPO):
The TPO included Motilal Oswal, stating it provides advisory services similar to the assessee. However, the Tribunal found that Motilal Oswal operates in multiple business verticals, including merchant banking, which is not comparable to the assessee's investment advisory services. The Tribunal directed its exclusion from the comparables.

3. Addition of Extra Mark-Up by the TPO:
The TPO added a further mark-up of 3% over the average PLI of 37.51%, arguing that the assessee provided additional portfolio management services. The Tribunal found no evidence of additional functions beyond investment advisory services and held that the monitoring activities are part of the advisory services. The Tribunal directed the deletion of the extra mark-up.

Conclusion:
The Tribunal allowed the appeal in part, directing the inclusion of ICRA Management Consultancy Services Ltd., Kinetic Trust Ltd., IDC India Ltd., and Future Capital Investment Advisory Ltd. in the final comparables. It upheld the exclusion of Integrated Capital Services Ltd. and Motilal Oswal Investment Advisors Pvt. Ltd. Additionally, the Tribunal directed the deletion of the extra 3% mark-up added by the TPO.

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