TaxTMI 
TaxTMI 
2015 (5) TMI 953
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.... 61,790,764/- in determining the arm's length price (ALP) of the international transaction pertaining to investment advisory/ support services provided by the Appellant to its overseas Associated Enterprises (AE) by rejecting comparables selected by the Appellant, inter alia, on following grounds: i. Rejecting the search process adopted and documentation maintained by the Appellant for the international transaction for the purpose of determining arm's length price; ii. Not providing a detailed search process undertaken to arrive at the final set of comparable companies; iii.Adopting a set of comparable companies inter-alia engaged in rendering merchant banking/ investment banking and management consultancy in turnaround & restructuring, mergers and amalgamations etc. which are not comparable to the assesse. iv. Rejecting the multiple year data and relying only on the single year data (i.e. for the year ended March 2009); v. Considering companies with supernormal profits as comparable to the Appellant vi. Considering comparable companies having substantial related party transactions as comparable to the Appellant. ....
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.... computation of ALP of the interna -tional transactions entered into by the assessee.The TPO tabulated the international transactions of the assessee in following manner:- SN Nature of Transaction AE with which transaction undertaken Value of transaction (in Rs.) Most Appropriate Method 1. Finanical support services Wachovia Development Corporation, USA 69,32,335 TNMM 2. Service income Wachovia Development Corporation, USA 18,15,66,918 TNMM 3. Reimbursement of expenses(paid) Various AEs 4,10,69,549 TNMM He found that financial result for the year under consideration were as follows: Description Amount(Rs.) Operating Revenues 18,21,24,386 Operating Expenses 15,38,70,269 Operating profit 2,82,54,117 OP/TC (PLI) 18.36% After going through the details filed by the assessee,the TPO held that the operating profit to the total cost ratio was to be taken as Profit Level Indicator (PLI) in TNMM analysis, that the PLI of the assessee was at 18.36% on cost, that the average PLI of the comparables was 14.67% as per the analysis of the TP document,that the price charged by t....
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....swal Investment Advisors Pvt. Ltd.(MOIAPL), Future Capital Investment Advisors Ltd.(FCIAL)and Integrated Capital Services Ltd.(ICSL). He directed the assessee to submit annual report of the company for the FY 2008-09 and to compute the PLI of operating profit margin on operating cost after excluding effects of foreign exchange fluctuation, non-operating items and extra ordinary items. The assessee vide its letter dt.13.1.2013 objected to considering the comparable selected by the TPO. After considering the objections of the assessee the TPO considered following comparable: Sl.No. Name of the company PLIassesseeOP/TC(%) 1. Motilal Oswal Investment Advisors Pvt. Ltd. 82.44 2. Future Capital Investment Advisors Ltd. 23.40 3. Integrated Capital Services Ltd. 69.72 Arithmetical Mean Margin 58.52 Finally,the TPO computed the APL as under : Arm's Length mean margin 58.52% on cost Operating Cost Rs.15,38,70,269/- Arms Length Mean Margin 58.52% of the Operating Cost Arms Length Price @ 158.52% of operating cost Rs.24,39,15,150/- Price charged Rs.18,21,24,386/- Shortfall being adjustment u/s. 92C....
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.... debts, that it had advised clients on financial restructuring and giving over view of the Indian Financial markets, that in one of the project it had helped a client in obtaining a joint venture partner, that the assessee had performed the service of analysing "the various financial option, review and financing of models for its c1ients,that MOIAPL also performed similar activity and helped its clients in raising funds through various methods, that the TPO had rightly included the same in the final list of comparables. The DRP did not pass any direction with regard to Integrated Capital Services Ltd. and Fututre Capital Investment Advisors Ltd. 5.During the course of hearing before us, Authorised Representative (AR) stated that that transactions with AE was within the arm's length range under the provisions of section 92 of the Act, that the TPO had rejected seven comparables selected by the assessee, that he introduced three new comparables, that no opportunity was given to the assessee in that regard, that the TPO had discussed as what was the basis for selecting the three comparable, that he did not give the job profile of the comparables selected by him, that the DRP ha....
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....as MOIAPL was carrying on business of mergers and acquisitions and other related activities. The assessee is not a merchant banker like MOIAPL. In the case of Carlyle India Advisors Private Limited (supra),the Tribunal has held that MOIAPL cannot be taken as a valid comparable in cases, where the assessee is rendering advisory servcies.In that matter the Tribunal held as under : "8.We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. It is an undisputed fact that the assessee is engaged in the business of rendering investment advisory and related services to its principal Carlyle Hong Kong. The dispute raised in ground no.4 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....
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....ase of Carlyle India Advisors Private Limited (IT Appeal 1286 of 2012,dt.22.2.2013). Here, we would also like to refer to the order of NVP Venture Capital India Private Ltd. (supra),where in a case of investment advisory the comparable of MOIAPL was rejected by the Tribunal. In that matter the Tribunal had held as under :- "7.We have carefully considered the rival submissions. We find that the assessee has been consistently canvassing before the lower authorities that Motilal Oswal Investment Advisors Private limited be excluded from the final set of comparables on the ground that its activities' are functionally incomparable to the activity of Provision of investment advisory services being rendered by the assessee to its Associated Enterprises. In fact, before the TPO, assessee pointed out that the said concern was engaged in providing comprehensive investment banking solutions and that it was rendering services across various products, viz. Equity Capital Markets, Mergers & Acquisitions, Private Equity Syndications and Structured Debt, etc. The appellant relied upon the decision of the Tribunal in the case of Carlyle India Advisors Private Limited (214 Taxmann 492), to ....
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....arable to an entity which is rendering non-binding advisory investment services alone. Thus, in our considered opinion, the assessee is justified in seeking the exclusion of the said concern from the final set of comparables on account of functional dissimilarities. In fact, in other precedents cited by the Id. Representative for the assessee,the said concern has also been excluded from the set of comparables under similar circumstances. 9. In conclusion, on the basis of the afore-said discussion and having regard to the precedents noted above, we hold that M/s. Motilal Oswal Investment Advisors Private Limited (supra) is liable to be excluded from the final set of comparables." Following the above orders,we hold that job profile of MOIAPL was different as compared to the activities undertaken by the assessee.It was rendering investment advisory services, specifically related with real estate business whereas MOIPAL is a merchant banker.So,we hold that MOIAPL is liable to be excluded from the final set of comparables. It is further found that the TPO selected two more comparables, besides MOIAPL, while determining the TP adjustments. We find that the assessee had objected ....