TaxTMI 
TaxTMI 
2014 (10) TMI 901
X X X X Extracts X X X X
X X X X Extracts X X X X
....t advisory support service to its Associate Enterprise (A.E) i.e., TPG Capital Services. The services rendered are in the nature of support service to its A.E. In the transfer pricing study report, the international transaction with the A.E. was reported as under:- Sr. No. Nature of Transaction A.Y. 2008-09 Method Used 1. Provision of non-binding investment advisory support services Rs.17,84,61,149 TNMM Total: Rs.17,84,61,149 4. The services rendered to the A.E. by the assessee were compensated with the services free of cost, plus 10% mark-up. For the purpose of bench marking its margin, the assessee adopted TNMM as the most appropriate method with PLI as OP/TC cost. The OP/TC of the assessee's margin was 9.4% which was worked out as under:- Particulars A.Y. 2008-09 Operating Revenue Rs. 17,89,82,136 Opening Cost Rs. 16,34,92,694 Opening Profit Rs. 1,54,89,442 OP/TC (%) Rs. 1,54,89,442 5. The assessee had bench marked its margin with six comparables and later on during the course of transfer pricing assessment proceedings, additional two companies were identified. The arithmetic means of updated set of eight comparable companies were as under:-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the assessee. Accordingly, upward adjustment of Rs. 2,39,28,647 was made in the following manner:- Sr.no. Particulars A.Y. 2007-08 A Operating Revenue Rs. 17,89,82,136 B Operating Cost Rs. 16,34,92,694 C Operating Profit Rs. 1,54,89,442 D ALP (%) 24.11 E Arm's length value of international transaction (B*124.11%) Rs. 20,29,10,783 F Amount of adjustment (E-A) Rs. 2,39,28,647 9. Before the learned Commissioner (Appeals), the assessee submitted that the details of various functions performed by it and services rendered to its A.E. and also the function performed by the A.E. Based on the functional profile, the assessee raised its objection as to why these two comparables i.e., Brescon Corporate Advisory Ltd. and Sumedha Fiscal Services Ltd., cannot be considered as comparable for the purpose of bench marking. These objections have been incorporated by the learned Commissioner (Appeals) from Page-6 to 9 of the appellate order. The learned Commissioner (Appeals) rejected the assessee's contention and held that these two companies have rightly been included as comparable by the Transfer Pricing Officer and also discus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o selection, acquisition and disposal of investments are exclusively made by TPG Capital L.P. Hence, it's functional profile is entirely different from Brescon Corporate Advisory Ltd. and Sumedha Fiscal Services Ltd. From the annual report of Sumedha Fiscal Services Ltd., he pointed out that these companies are mainly in investment banking and securities dealing. It is also involved in project consultancy services. The overall profile of the said company was enumerated as under:- "During the year under review your Company achieved new height in all areas and achieved highest ever income from both segments i.e. Investment Banking and Securities Dealing." Your Company continued its focus on fee based activities (Loan Syndication and Project Consultancy Services) and income there from was to Rs. 447.41 lacs as against Rs. 261.82 lacs during. the Previous year (70.88% increase) lncome from Capital Market Operation was Rs. 311.35 lacs as against Rs. 157.91 lacs during the previous year. (97.16% increase). INVESTMENT BANKING The Company continues to concentrate on its greatest strength arising out of loan syndication, equity placement and project consultancy services. SECURITY DEALING T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....going paragraph reflects that the role of the assessee is limited to providing information and making recommendation for the investment in India. Such advisory services are not binding on its A.E. which take its own call after analysing the details and information given by the assessee. From the functional profile of Sumedha Fiscal Services Ltd., it is seen that it is mainly engaged in investment banking and security dealing. Its main income is from loan syndication and project consulting services and also capital market operation. Its three main service segment are (a) capital market operations comprising of stock broking investment mutual funds and other products distribution; (b) consultancy which comprises of loan syndication merchant banking and re-structuring; (c) other related advisory services. Looking to such business profile and functions, it cannot be held that Sumedha Fiscal Services Ltd., is at at all comparable having regard to the services and functions performed by the assessee. Thus, in our opinion, Sumedha Fiscal Services Ltd. cannot be included as comparable for the purpose of bench marking the margins of the assessee. Further, the Tribunal in Carlyle India ....