TaxTMI 
TaxTMI 
2014 (11) TMI 91
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....sfer price of the international transactions of the appellant, alleging that the same to be not at arm's length in terms of the provisions of sections 92C(1) and 92C(2) of the Act, read with Rule 10D of the Income Tax Rules, 1962. 3. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in arbitrarily rejecting the economic analysis/transfer pricing study undertaken by the appellant in accordance with the provisions of the Act read with the Rules for the determination of the arm's length price. 4. That on the facts and circumstances of the case and in law, the AO/DRP/TPO, have erred in arbitrarily selecting of the comparable companies, namely (a) KLG Capital Services Limited (b) KJMC Corporate Advisors (India) Limited and (c) Motilal Oswal Investment Advisors Pvt Ltd based on incorrect appreciation of functional, asset and risk profile and the related party transactions. 5. That on the facts and in the circumstances of the case and in law, the AO/DRP/TPO have erred in not granting the benefit of economic/risk adjustments. 6. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in ignoring the provi....
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....imited and Motilal Oswal Investment Advisors Pvt Ltd. It is the argument of the assessee that these 3 companies are not comparable qua FAR analysis and also related party transactions. Bringing our attention to the issue raised in the ground, Ld Counsel for the assessee put-forward the following arguments. Giving background to the issue of comparables, Ld Counsel mentioned that the assessee entered into international transactions with its AE amounting to Rs. 41,44,25,505/-in return to the services (investment advisory relates support services). The Profit Level Indicator (PLI) operative expenses/operative profit OP/TC is 15%. Assessee followed the cost plus method for conducting ALP of these transactions. Assessee considered the available comparables with the following OP/TC. Sl No. Name of the Company OP/TC 1 Quantum Advisors Pvt Ltd 10.90% 2 Indian Venture Capital Limited -11.84% 3 Kshitij Investment Advisory Co. Ltd 27.82% 4 Future Capital Holdings Limited (Inv. Adv. Seg) -25.94% 5 Future Capital Investment Advisors Ltd 20.67% Mean 4.50% 5. From the above, the average mean of the said comparabl....
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....mparable in the final set of comparables considered for computing for ALP. ♦ KLG, it is submitted, is a SEBI registered merchant banker and is inter alia engaged the business of investment, dealing in shares, securities bonds and renders financial and consultancy services. Further, KLG does not report any segment for its financial and consultancy services. ♦ The Hon'ble Tribunal in appellant's own case for AY 2007-2008 as upheld by the Bombay High Court and for AY 2008-2009 has held that companies into the business of investment banking, merchant banking, loan syndication, corporate finance and similar activities cannot be compared to the investment advisory activity undertaken by the appellant. ♦ It is further submitted that total turnover of KLG is INR 49,50,000/- which is less than one Cr and therefore, it also does not satisfy less than one crore turnover filter. It is a startup company and the perusal of the profit and loss account for the year ending 31st March, 2009 and 31st March 2008 would show that the company is still in the process of setting up, whereas the appellant during the year has a turnover of INR 41,44,25,505/-. Thus, KLG dese....
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....relates to whether (i) KLG Capital Services Ltd (KLG); (ii) KJMC Corporate Advisors (India) Limited (KJMC) and (iii) Motilal Oswal Investment Advisors Pvt Ltd (MOIAPL) are functionally comparable cases or not considering the decision of the Tribunal as well as the judgment of the Bombay High Court relied upon by the assessee. Regarding MOIAPL, assessee relied heavily on the order of the Tribunal in its own case for the AY 2008-2009, a copy of which is placed at page 282 of the paper book. On perusal of the said order of the Tribunal, we find that it is decided in favour of the assessee vide ITA No.7367/Mum/2012 (AY 2008-2009), dated 7.2.2014. On perusal of para 12 of the said order of the Tribunal, which contains the operational part, we find the same is relevant and the Tribunal has given its finding under the facts which are similar to that of the AY under consideration. The MOIAPL, which has engaged in the business of merchant banking is not a good comparable for determining the ALP. Relevant contents of the said para 12 are reproduced here for the sake of completeness of this order which read as under: "12. ....The only dispute is whether Motilal Oswal Investment Advisors Pv....