Tribunal updates transfer pricing case, changes comparables, excludes one, includes another, directs reassessment.

The Tribunal allowed the appeal of the assessee in a transfer pricing case involving the re-computation of the arm's length price for non-binding investment advisory services. The Tribunal directed the exclusion of Ladderup Corporate Advisory Private Limited and the inclusion of ICRA Management Consulting Services Ltd as comparables. Other issues raised regarding the computation of interest under Sections 234D and 244A were not specifically addressed. The Assessing Officer was instructed to re-determine the total income of the assessee based on the revised comparables. The order was pronounced on 16.11.2018.

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Issues Involved:
1. Re-computation of arm’s length price (ALP) for non-binding investment advisory services.
2. Rejection and selection of comparable companies for transfer pricing.
3. Incorrect computation of interest under Section 234D.
4. Incorrect computation of interest receivable under Section 244A.

Detailed Analysis:

1. Re-computation of Arm’s Length Price (ALP) for Non-binding Investment Advisory Services:

The primary issue in this appeal is the addition of Rs. 6,47,24,374/- made by the Assessing Officer (AO) while determining the ALP of the international transactions entered by the assessee with its associate enterprise. The assessee, engaged in providing non-binding investment advisory services, received a consideration of Rs. 21,70,60,516/- for these services, which constituted an ‘international transaction’ under Sec. 92B of the Act. The AO referred the matter to the Transfer Pricing Officer (TPO), who proposed an adjustment of Rs. 9,22,89,891/-. After objections from the assessee, the Dispute Resolution Panel (DRP) re-determined the adjustment at Rs. 6,47,24,374/-.

2. Rejection and Selection of Comparable Companies for Transfer Pricing:

The assessee contested the inclusion and exclusion of certain comparables used by the TPO for determining the ALP:

- Inclusion of Ladderup Corporate Advisory Private Limited: The assessee argued that Ladderup Corporate Advisory Private Limited is functionally incomparable. The Tribunal noted that this company is engaged in merchant banking/investment banking, which is different from the non-binding investment advisory services provided by the assessee. The Tribunal cited precedents where Ladderup was excluded as a comparable for similar services, and thus directed its exclusion.

- Exclusion of ICRA Online Ltd: The income-tax authorities excluded ICRA Online Ltd on the grounds of functional incomparability, as it provides consultancy services related to software, KPO, and ITES. The Tribunal upheld this exclusion based on a precedent where ICRA Online Ltd was found not comparable to non-binding investment advisory services.

- Exclusion of Integrated Capital Services Limited: This company was excluded due to its involvement in mergers, acquisitions, and speculation business, which the Tribunal upheld based on a precedent involving a similar assessee.

- Inclusion of ICRA Management Consulting Services Ltd: The Tribunal found that this company had been accepted as a comparable in previous years and directed its inclusion, noting no material change in its functional profile.

3. Incorrect Computation of Interest under Section 234D:

The assessee raised an issue regarding the incorrect computation of interest levied under Section 234D of the Act. However, the Tribunal did not specifically address this issue in the detailed analysis provided.

4. Incorrect Computation of Interest Receivable under Section 244A:

Similarly, the issue of incorrect computation of interest receivable under Section 244A was raised but not specifically addressed in the detailed analysis provided by the Tribunal.

Conclusion:

The Tribunal directed the exclusion of Ladderup Corporate Advisory Private Limited and the inclusion of ICRA Management Consulting Services Ltd in the final set of comparables. The necessity for adjudication of other comparables was rendered academic due to these adjustments. The AO was directed to re-determine the total income of the assessee in light of these decisions. The appeal of the assessee was allowed, and the order was pronounced in the open court on 16.11.2018.

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