Tribunal directs reassessment of arm's length price, dismisses interest and penalty issues.

The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal. The Assessing Officer was directed to rework the arm's length price following the Tribunal's observations and include/exclude specified comparables accordingly. Issues regarding the levy of interest and initiation of penalty proceedings were dismissed as either consequential or premature.

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Issues Involved:
1. Transfer Pricing Adjustment
2. Selection/Rejection of Comparables
3. Levy of Interest under Section 234B
4. Initiation of Penalty Proceedings under Section 271(1)(c)

Detailed Analysis:

1. Transfer Pricing Adjustment:
The primary issue in both the assessee's and the Revenue's appeals is the addition made on account of transfer pricing adjustment. The assessee, a wholly owned subsidiary of Blackstone Group, provided investment sub-advisory services to its overseas Associated Enterprises (A.E.) and declared a total income of Rs. 13,25,18,104 for the assessment year 2011-12. The Transfer Pricing Officer (TPO) rejected the assessee's transfer pricing study report and selected different comparables, resulting in an adjustment of Rs. 16,20,80,342 under section 92CA of the Income Tax Act, 1961.

2. Selection/Rejection of Comparables:
The dispute primarily revolved around the selection and rejection of certain comparables for determining the arm's length price (ALP).

- ICRA Management Consulting Services Ltd.:
The TPO rejected this company as a comparable, stating it was not functionally similar to the assessee. However, the Tribunal found that the company provides advisory services similar to the assessee and directed the Assessing Officer to include this company as a comparable.

- IDC (India) Ltd.:
This company was also rejected by the TPO and the Dispute Resolution Panel (DRP) on the ground of functional dissimilarity. The Tribunal, however, found this company to be functionally similar to the assessee based on previous decisions and directed its inclusion as a comparable.

- Ladderup Corporate Advisory Pvt. Ltd.:
The TPO and DRP included this company as a comparable. The Tribunal, however, found that it is engaged in merchant banking services, which are functionally different from the assessee's services, and directed its exclusion.

- Motilal Oswal Equity Advisors Pvt. Ltd.:
The Tribunal found that this company has multiple business verticals without segmental data, making it functionally different from the assessee. Therefore, it directed its exclusion as a comparable.

- Motilal Oswal Investment Advisors Pvt. Ltd.:
The DRP excluded this company as a comparable, considering it a merchant banker. The Tribunal upheld this decision, citing functional differences between the activities of the company and the assessee.

The Tribunal directed the Assessing Officer to work out the ALP of the international transaction entered into by the assessee with its A.Es following the observations made.

3. Levy of Interest under Section 234B:
The assessee's ground against the levy of interest under section 234B of the Act was found to be either consequential or premature at this stage. Therefore, the Tribunal did not adjudicate on this issue.

4. Initiation of Penalty Proceedings under Section 271(1)(c):
Similar to the interest levy issue, the ground against the initiation of penalty proceedings under section 271(1)(c) was also found to be either consequential or premature. Hence, the Tribunal dismissed this ground without adjudication.

Conclusion:
The Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal. The Assessing Officer was directed to rework the ALP following the Tribunal's observations and include/exclude the specified comparables accordingly. The issues related to the levy of interest and initiation of penalty proceedings were dismissed as either consequential or premature.

Order pronounced in the open Court on 30.11.2018.

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