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2015 (12) TMI 966
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....d served upon the assessee. The following transactions reported by the assessee in Form No. 3CEB were noticed: S.No. Particulars Amount Method 1 Provision of Investment banking services Rs. 23,975,939 (Receipt Services) Rs. 197,487,761 (Payment for services) TNMM 2 Investment advisory services in respect of listed Indian equities Rs. 113,802,147 TNMM 3 Investment advisory and support services in respect of strategic investments into India. Rs. 463,736,750 TNMM 4 Securities broking services in respect of securities traded in the cash equity segment on NSE and BSE Rs. 741,198,967 CUP 5 Securities broking and clearing sevices in respect of contracts entered in the derivatives segment on NSE and BSE Rs. 365,367,953 CUP 6 Provision of Information Technology Enabled Services Rs. 435,013,724 TNMM 7 Reimbursement/recovery of expenses Rs. 432,490,891 NA 8 Allocation of expenses Rs. 87,487,835 NA 3.1. Accordingly, a reference u/s. 92C(1) of the Act was made to the TPO and TP adjustment proceedings started. During the course of the Transfer Pricing assessment proc....
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....Technologies Ltd 9. Integrated Capital Services ltd. 10.Kinetic Trust ltd 3.6. The TPO issued a show cause notice to the assessee asking him as to why the following companies should not be regarded as comparable companies for Investment Advisory Services (listed and unlisted. S. No. Name of the Company Margin for the year ended 31st March 2009 (%) 1. Axis Private Equity Ltd 30.42% 2. Brescon Advisors 116.24 3. Future Capital Investment Advisors Ltd. 23.4 4. Khandwala Securities Ltd. 40.8 5. Kshitiji Investment Advisory Co. Ltd. 28.28 6. Motilal Oswal Investment Advisors Pvt. Ltd. `82.44 7. Sundram Finance Distribution Ltd. 10847 8. Integrated Capital Services Ltd. 69.79 Arithmetic Mean 62.50% 3.7. The assessee's objection is as under: a) Rejection of TP documentation is not proper b) TPO has resorted to cherry picking the companies c) Rejection of companies earning super normal profits d) Appropriateness on use of various filters applied e) Use of single year data not proper and ....
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....ceeded the TP adjustments proceedings by integrating both the services. The Ld. Sr. Counsel once again strongly objected to the inclusion of the following comparables viz., Sr. No. Name of the comparable As per TP order A.Y. 2009-10 Margin (%) Ìteration1:Excluding Motilal,Brescon,Sundaram, Integrated Khandwala and Axis from TPO set 1. Motilal Oswal Investment Advisors Pvt. Ltd. 82.44% - - 2. Brescon Corporate Advisors Pvt. Ltd., 116.24% - - 3. Sundram Finance Distribution Ltd. 108.47% - - 4. Integrated Capital Services Ltd. 69.79% - - 5. Khandwala Securities Ltd. 40.80% - - 6. Axis Private Equity Ltd 30.42% - - 6.1 The Ld. Senior Counsel furnished a detailed chart stating that if the comparables are excluded the operating margins of the assessee would be in the range of +/-5% from the arithmetic mean. The Ld. Counsel drew our attention to the decision of the Tribunal in assessee's own case for A.Y. 2007-08 in ITA No. 7724/M/2011. It is the say of the Ld. Counsel that since the DRP has drawn support from the findings given in earlier assessment years and the order of the DRP has b....
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....ndram Finance Distribution Ltd. 108.47% Integrated Capital Services Ltd. 69.79% Arithmetic mean 62.50% 8.2. Let us now consider the comparables selected by the TPO and objected by the assessee by one by one. 1. Motilal Oswal Investment Advisors Pvt. Ltd. This company has been excluded as a comparables for Investment Advisory Services by the Co-ordinate Benches in the case of Arisaig Partners India Pvt. Ltd in ITA No. 1083/M/2014 wherein the Co-ordinate Bench at para-15 has held that this company is engaged in the business of Merchant Banking and, therefore, is not a good comparable of a company providing investment advisory services to the AE. Similar view was taken by the Tribunal in the case of Wells Fargo Real Estate Advisors Pvt. Ltd in ITA No. 1093/M/2014 wherein the Tribunal at para-6 of its order has held that Motilal Oswal Investment Advisors Pvt. Ltd. was carrying on business of mergers and acquisitions and other related activities and is also a merchant banker. Drawing support from the decision of the Co-ordinate Bench given in the case of Carlyle India Advisors Pvt. Ltd. in ITA No. 2200/M/2011, it was held that Motilal Oswal Investment A....
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....ncome is recognized from insurance agency commission and brokerage. This company was not considered by the Coordinate Bench in the case of J.P. Morgan India Pvt. Ltd. in ITA No. 8193/M/2010 wherein the Co-ordinate Bench at para-24 has observed that this company has no employees on its pay roll and has outsourced its activities and for similar reasons the Tribunal in the case of Stream International Services Pvt. Ltd in ITA No. 8997/M/2010 has directed the exclusion of this company from the list of comparables. Respectfully following the findings/observations of the Co-ordinate Benches (supra), we direct the TPO for the exclusion of this company for the final list of comparables. 4. Integrated Capital Services Ltd. The only reason for including this company in the final set of comparables is that the DRP was of the strong view that the assessee itself has adopted this company as comparable though during the course of the proceedings before the DRP, the assessee requested for the rejection of this company as comparable. The DRP did not accept this contention since the assessee had not taken any ground relating rejection of this comparable. This reasoning given by the DRP cannot....
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....nder the head segmental information, the company has not reported any secondary segment information. This company has also been excluded by the Co-ordinate Bench in the case of Carlyle India Advisors Pvt. Ltd. in ITA No. 7901/M/2011 for the reason that the TPO himself has rejected this company as comparable on the ground that its income is very akin as security and stock brokers. Though the TPO changed his view and included this company in the final list of comparable, the Co-ordinate Bench accordingly directed for the exclusion of this company. This order of the Tribunal was confirmed by the Hon'ble High Court of Bombay vide Income Tax Appeal L. No. 1286 of 2012 dt. 22.2.2013. Respectfully following the observation/findings of the Co-ordinate Bench, we direct the TPO for the exclusion of this company from the final list of comparables. 6. Axis Private Equity Ltd. This company is engaged in managing directly or indirectly investments, mutual funds, venture, capital funds of share funds, pension funds, provident funds, insurance funds or any other funds and to promote manage and carry on any venture capital funds operation. This company acts as investment manager of Axis infra....
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....of the undertaking which was confirmed by the DRP. 11.3. Before us, at the very outset, the Ld. Counsel for the assessee drew our attention to the decision of the Hon'ble High Court of Bombay in the case of CIT Vs Gem Plus Jewellery 330 ITR 175. 11.4. Per contra, the Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue. 11.5. We have given a thoughtful consideration to the facts qua the decision of the Hon'ble High Court of Bombay (supra). Respectfully following the ratio laid down by the Hon'ble High Court of Bombay, we direct the AO to exclude the telecommunication expenses from total turnover also. Ground No. 3 & 4 are treated as allowed for statistical purpose. 12. Ground No. 5 & 6 relate to the grievance related to ESOP cost. 12.1. The AO has considered this issue at para-6 of his order. While scrutinizing the return of income, the AO found that the employee costs include the cost of restrictive stock unit and stock option's plant under the Goldman Sachs Group Inc. amended and Restated Stock Incentive Plan, which is being charged to the profit and loss accounts over the period of vesting. The assessee was asked to ....
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....y the ITAT is that the amount paid as penalty was on account of irregularities committed by the assessee's clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such a case the explanation to Sec. 37 would not apply. Accordingly question (C) raised by the revenue cannot be entertained." Respectfully following the ratio laid down by the Hon'ble High Court (supra), we direct the AO to delete the impugned additions. Ground No. 7 is accordingly allowed. 14. Ground No. 8 relates to non-allowance of deduction on the ground that bonus expense amounting to Rs. 1,11,48,316/- are not actually paid. 14.1. This issue has been considered by the AO at para-9 of his order wherein the AO observed that an amount of Rs. 1,11,48,316/- is adjusted during the year which pertains to bonus of employees of other group companies. The assessee was asked to justify its claim. The ssessee filed a detailed reply vide letter dated 18.2.2013 by which the assessee explained that in A.Y. 2008-09, the assessee has disallowed bonus amounting to Rs. 36,46,21,050/- payable to employees as the same was not paid on or before the due date of filing th....