TaxTMI 
TaxTMI 
2015 (11) TMI 1713
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....,32,08,017. 2. On facts and circumstances of the case and in law, the Ld AO/Learned transfer pricing officer ('Ld TPO') have erred in making transfer pricing adjustments of INR 117,680,799 to the transfer price of the international transaction pertaining to provision of non-binding Investment advisory and related support services of the Appellant, alleging that the same to be not at arm's length in terms of the provisions of sections 92(1) and 92C(2) of the Act, read with Rule 100 of the Income-tax Rules, 1962 ('the Rules'). In doing so, the Ld AO/Ld TPO erred as follows; 2.1 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. 2.2 Ignoring the provisions of Rule 108(4) the Rules and judicial pronouncements, which advocate usage of multiple year data of comparable companies for the determination of the arm's length price. 2.3 Rejecting objections raised by the Appellant in relation to selection rejection of comparable companies. 2.4 The Id AO has erred in g....
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.... Hongkong'). The appellant company belongs to the world-wide Carlyle group, which is primarily engaged in originating/structuring and acting as lend equity investor in management lead buyouts, strategic equity investments, equity private placements etc. and is primarily engaged in the business of managing investments of high net worth individuals/institutional investors. The Carlyle Group has also several individual funds and it is operating in more than 19 countries. Carlyle Hong Kong, which is the holding company of the captioned assessee, provides consulting services including investment advisory, technology support, management consultancy and other advisory services to the Carlyle Group concerns who are engaged in operating and managing of funds in the Asia Pacific region. The appellant-company, which is operating in India since 2000 as a subsidiary of Carlyle Hong Kong, provides Investment advisory related support services to Carlyle Honk Kong. It is further noticed from the order of the Transfer Pricing Officer (in short 'the TPO') that the assessee company houses six investment personnel who analyse investment opportunities in India. More particularly, the functi....
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....omparable concerns adopted by the T.PO i.e. ICRA Online Ltd from the final set of comparables in order to work out the arm's length price of the international transactions. The Id. Representative for the assessee had pointed out that the Assessing Offices passed the final assessment order u/s 143(3) r.w.s 144C(13) of the Act dared 13.01.2015 determining the transfer pricing adjustment at the originally proposed amount of Rs. 11,76,88,799/- without complying with the directions of DRP to re-work the adjustment by excluding the margin of ICRA Online Ltd from the final set of comparables. Be that as it may, it was brought out that subsequently the Assessing Officer has passed a rectification order u/s 154 of the Act dated 24.06,2015, whereby the arm's length price of the international transaction has been arrived at after excluding the margins of ICRA Online Ltd from the final set of comparables and accordingly the addition on this count has been scaled down to Rs, 11,59,32,559/- as against Rs. 11,76,88,799/- originally made. 7. In the above background, the substantive plea of the assessee is that the lower authorities have erred in considering some of the concerns as compa....
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....ii) Kshitij Investment Advisory Co. Ltd. from the final set of comparables. Secondly, it is canvassed that the income tax authorities have unjustly excluded IDC India Ltd from the final set of comparables. The Ld. CIT(DR) has opposed the aforesaid stand of the assessed and insofar as the Revenue's cross appeal is concerned the same is directed against the direction of the DRP to exclude ICRA Online Ltd from the final set of comparables. 10. First, we take up the appeal of the Revenue wherein, the short point involved is regarding the exclusion of ICRA Online Ltd. from the final set of comparables. The TPO had included ICRA Online Ltd as a comparable which has been directed to be excluded by the DRP. Before the TPO, assessee had canvassed for exclusion of ICRA Online Ltd on more than one ground, namely that the said concern was engaged in three lines of business viz, outsourced service, information services and software products and specialized services in back office software, etc.; that the said concern was a leading information services, outsourcing and technology solutions provider which was quite distinct from the activities of the assessee. The DRP considered the object....
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....hough the said concern was deriving income from four different business verticals but separate reportable segments have not been drawn out in the Annual Financial statements. In this regard our attention has been invited to the notes to accounts annexed to the financial statements, copy of which has been placed in the Paper Book. Therefore, it was contended that even if some of the activities performed by the said concern are similar to that of the assessee, but in the absence of any segmental reporting, it was not possible to cull out the financial results of the activity undertaken by the assessee. Apart from his aforesaid assertions, the Ld. Representative pointed out that the said concern has been held to be excludible from the final set of comparable in assessee's own case for assessment years 2008-09 and 2009-10 by the Tribunal, copies of the orders of the Tribunal dated 07.02.2014 & 22.08.2014 vide Carlyle India Advisors (P.) Ltd. v. Dy. CIT [2014] 43 taxmann.com 184 (Mum. - Trib.) for assessment year 2008-09 & ITA No. 2200/Mum/2014 for assessment year 2009-10 respectively have been placed on record. Further the Ld. Representative relied on the following decisions of the....
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....footing than the pure investment advisory services rendered by the assessee to its associate enterprise. The contents of the Directors report for year under consideration clearly establish that its activities are qualitatively distinct and much more diversified than what is being undertaken by the assessee for its associate enterprise. The plea of the Revenue before us that because it has "single reportable operational income segment" of advisory fee, therefore, the same is comparable with the asssessee's activity is devoid of any analytical support from the information available in the public domain. In fact, the aforesaid argument of the Revenue has already been considered by the Tribunal in the assessee's own case for assessment year 2008-09 vide Carlyle India Advisors (P.) Ltd. (supra), wherein, the Tribunal duly noted that though the said concern was declaring income from a solitary stream or advisory fee, but factually it was found engaged in diversified activities and financial data was not available for each segment. It was noticed that the said concern was registered with SEBI as a merchant banker that it was indeed carrying out merchant banking activities. The afo....
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....reby it is carrying out Portfolio Management Services envisaged under the SEBI (Portfolio Managers) Regulations, 1993. The detailed activities enumerated in the Directors Report show that it was offering Portfolio Management Services for the domestic retail investors in different fields. The aforesaid clearly establishes that it is engaged in managing of funds in its portfolio management platform. In fact, in notes to the accounts, annexed to the Annual Financial Statements, the narration about the nature of operations being carried out is quite significant. At page 506 of the Paper Book is placed a note on the nature of operations of the said concern which enumerates that IDFC Investment Advisors Limited does undertake investment advisory services for evaluating investment opportunities and to monitor the investments in Indian companies and that it had entered into an Investment Advisory Agreement with India Infrastructure Opportunities Fund Ltd. So however, it is also noticed that said concern receives 'advisory fee' computed on the basis of net assets of the fund plus a performance fee. The narration of business operations contained in the notes to accounts clearly estab....
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.... be relied upon for the purposes of carrying out the comparability analysis under the TNM method. Factually, the TPO did not differ with the assessee inasmuch as he accepted the realignment of investment advisory business but according to him such restructuring/realignment did not result in any change of business activities of said concern and, therefore, the same continued to be a good comparable for the purposes of carrying out comparability analysis under the TNM method. 19. Before us also, the Ld. CIT(DR) has reiterated the arguments put forth by the TPO in this regard. The Ld. CTT(DR) also referred to Schedule IX annexed to the Annual Financial Statement to assert that the said concern operates in a single segment of rendering investment advisory services and, therefore, it is a good comparable in the present case. The Id. DR also referred to the discussion in the order of the TPO to point out that the detail of revenues earned by the said concern from top four customers showed that the income was from investment advisory fees. Further Ld. CIT(DR) has vehemently emphasized that the said concern was indeed suo motu included by the assessee in its Transfer Pricing Study as a ....
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....that such concern was included by the assessee itself as a comparable in its Transfer Pricing Study. As per the Revenue, since the said concern has been adopted by the assessee as a comparable, it is impermissible for the assessee to raise a plea asking for its exclusion in the process of determination of average margins under the TNM method. In our considered opinion, the proposition being canvassed by the Revenue is not absolute, but it has to be considered in the facts and circumstances of each case. No doubt in a situation of the type before, us, the burden lies on the assessee to justify exclusion of Kshitij Investment Advisory Co. Ltd., considering the fact that initially assessee had taken it as a good comparable. Our aforesaid approach is founded on a well accepted proposition that in the course of determination of correct tax liability, it is impermissible for the Revenue to take advantage of an ignorance or mistake of the assessee in offering certain amount as income, which is more than the legally due amount. Notably, there cannot be a estoppel against the statute and it is a trite law that no tax can be levied or collected from a subject except by an authority of law. W....
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....nues to be in the business or rendering investment advisory services and, therefore, the restructuring does not impact the comparability of the concern. In our considered opinion, the approach of the Revenue in this context is quite flawed. Firstly, it is not disputed that the activity of investment advisory services has been realigned which included the transfer of all employees to Everstone Investment Advisory Pvt. Ltd. The averments in the Directors Report suggest that post-realignment, the concern is only evaluating its options to commence business operations either in some other line or in the similar line of investment advisory services. What we are trying to emphasize is that there is no averment in the Directors Report to suggest that the said concern has actually carried out any investment advisory services post-realignment w.e.f 1.1.2010. In fact, in the course of hearing before us, the Ld. Representative -for the assessee pointed out that a perusal of the Annual Report for subsequent financial year of 2010-11 showed no such operations by the said concern. Therefore, considering the aforesaid fact situation, the instant financial year of the said concern is containing pec....