Tribunal directs inclusion/exclusion in comparables list for international transaction

The Tribunal directed the AO to exclude certain companies and include others in the comparables list for determining the arm's length price in an international transaction case involving Investment Advisory Services. The Tribunal allowed the assessee's appeal and dismissed the revenue's appeal, providing relief from adjustments made by the AO/TPO.

---

---

Issues Involved:

1. Adjustment to the Appellant's international transaction of provision of Investment Advisory Services.
2. Rejection of the Transfer Pricing Study maintained by the Appellant.
3. Exclusion of certain comparables by the AO/TPO.
4. Inclusion of functionally incomparable companies by the AO/TPO.
5. Non-application of multiple year data for comparable companies.
6. Non-allowance of credit of Tax Deducted at Source (TDS).

Detailed Analysis:

1. Adjustment to the Appellant's International Transaction:

The Dispute Resolution Panel (DRP) upheld the action of the Assistant Commissioner of Income Tax (AO) and the Transfer Pricing Officer (TPO) in making an adjustment of Rs. 12,14,10,530 to the Appellant's international transaction of providing Investment Advisory Services. The TPO had initially proposed a set of three comparables, which were subsequently adjusted by the DRP, resulting in a final adjustment by the AO.

2. Rejection of the Transfer Pricing Study:

The DRP upheld the rejection of the Transfer Pricing Study maintained by the Appellant and the fresh search subsequently submitted. The TPO had rejected the initial set of five comparables proposed by the assessee and selected three new comparables based on a single year updated margin.

3. Exclusion of Certain Comparables:

The DRP upheld the exclusion of comparables such as Cyber Media Research Ltd., Frontline Venture Services Private Limited, and Primary Real Estate Advisors Private Limited by the AO/TPO. The TPO observed that these companies were not functionally comparable to the assessee, which was engaged in providing investment advisory services.

4. Inclusion of Functionally Incomparable Companies:

The DRP upheld the inclusion of Motilal Oswal Private Equity Advisors Pvt. Ltd. and Ladderup Corporate Advisory Pvt. Ltd. in the final set of companies for determining the arm's length price. However, the Tribunal found that Motilal Oswal Private Equity Advisors Pvt. Ltd. and Ladderup Corporate Advisory Pvt. Ltd. were not functionally comparable to the assessee, based on previous judicial pronouncements and functional profiles.

5. Non-Application of Multiple Year Data:

The DRP upheld the AO/TPO's decision to use data for the financial year 2010-11 alone, rejecting the application of multiple year data for comparable companies. The Tribunal did not specifically address this issue in detail in the judgment.

6. Non-Allowance of Credit of TDS:

The issue of non-allowance of credit of Tax Deducted at Source (TDS) amounting to Rs. 73,78,312 was raised by the appellant. However, the Tribunal's judgment primarily focused on the comparability analysis and adjustment issues, without providing a detailed analysis on the TDS credit issue.

Tribunal's Conclusion:

The Tribunal directed the AO to exclude Motilal Oswal Private Equity Advisors Pvt. Ltd. and Ladderup Corporate Advisory Pvt. Ltd. from the final list of comparables and to include Cyber Media Research Ltd. (formerly IDC India Ltd.). The Tribunal allowed the appeal of the assessee and dismissed the appeal of the revenue, thereby providing relief to the assessee from the adjustments made by the AO/TPO.

Order Pronouncement:

The order was pronounced in the open court on 11.06.2019, allowing the appeal of the assessee and dismissing the appeal of the revenue.

---