2018 (2) TMI 1950 - AT - Income Tax

Tribunal allows appeal, rejects revenue's comparables, and directs inclusion of assessee's proposed comparables for transfer pricing adjustment.

SUN-Ares India Real Estate Private Ltd. (formerly known as SUN AREA Real Estate Pvt Ltd.) Versus Deputy Commissioner of Income Tax-Circle 14 (3) (2), Mumbai

SUN-Ares India Real Estate Private Ltd. (formerly known as SUN AREA Real Estate Pvt Ltd.) Versus Deputy Commissioner of Income Tax-Circle 14 (3) (2), ... Issues:Assessment Year 2011-2012 - Transfer Pricing Adjustment - Selection of Comparables - Arm's Length Price Determination - Appeal by AssesseeAnalysis:1. The appeal by the assessee for Assessment Year 2011-2012 challenges the final assessment order primarily concerning the transfer pricing adjustment made by the lower authorities. The assessee, a resident corporate entity providing investment advisory services, was assessed at Rs. 783.36 Lacs after a transfer pricing adjustment of Rs. 527.54 Lacs, as opposed to the returned income of Rs. 255.81 Lacs. The Transfer Pricing Officer (TPO) proposed an upward TP adjustment of Rs. 736.40 Lacs, leading to a final TP adjustment of Rs. 527.54 Lacs in the assessment completed on 05/01/2016. The assessee contested this adjustment, leading to the appeal.2. The international transaction involved the provision of investment advisory services to Associated Enterprises (AE) with benchmarking using the Transactional Net Margin Method (TNMM). The TPO rejected the assessee's comparables and suggested new ones, ultimately resulting in an upward TP adjustment. The Dispute Resolution Panel (DRP) upheld the adjustment, reducing it to Rs. 527.54 Lacs. The assessee appealed against this decision, while the revenue accepted the DRP's verdict.3. The Authorized Representative for Assessee argued that the assessee's comparables were functionally similar and appropriate, citing judicial precedents. On the other hand, the Departmental Representative supported the final comparable selected by the TPO, claiming functional similarity based on a tribunal order.4. The Tribunal analyzed the comparables selected by both parties. It excluded the comparable selected by the revenue, Ladderup, as it was not functionally comparable to the assessee. The Tribunal directed the inclusion of two comparables selected by the assessee, ICRA Management Consulting Ltd. and IDC Ltd., based on their functional similarity. The Tribunal rejected the inclusion of ICRA online Ltd. due to a lack of evidence supporting functional similarity. The matter was remanded to the Assessing Officer for income re-computation based on the revised comparables.5. Consequently, the assessee's appeal was allowed, and the order was pronounced on 09th February 2018.