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TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 239
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....O') under section 143(3) read with section 144C(13) of the Act in pursuance of the directions issued by the Dispute Resolution Panel - 2, Mumbai (Hon'ble DRP). Ground 1 On the facts and in the circumstances of the case and in law, the learned AO based on the directions of the Hon'ble DRP, erred in making an upward adjustment of INR 62,254,019 in determining the arm's length price (ALP) of the international transaction pertaining to the provision of non-binding investment advisory services by the Appellant to its Associated Enterprise. Ground 2 On the facts and in the circumstances of the case and in law, the learned A.O based on the directions of the Hon'ble DRP, failed to appreciate that the ALP as determined by the Appellant by applying the prescribed method in accordance with subsection (1) and (2) of section 92C of the Act, should have been accepted since the pre-condition in section 92C(3) of the Act, before the Deputy Commissioner of Income-tax, Transfer Pricing - 4(2)(1) (hereinafter referred to as 'learned TPO') could proceed to determine the ALP, was not fulfilled in this case. Further, the data used ....
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....llant regarding the comparability of these companies additionally included by the learned AO; and c. In computing the incorrect operating margin of Ladderup Corporate Advisory Private Limited, ICRA Techno Analytics Limited and CRISIL Limited, and in not sharing the basis of computation of arriving at the operating margins of the said comparable companies. Ground 5 On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in concluding that the Appellant is engaged in rendering, nondiscretionary portfolio management/ investment management services. Ground 6 The learned AO, based on the directions of the Hon'ble DRP erred, on facts and in law, in rejecting the use of contemporaneous and multiple year data available for computing the ALP as on the date of filing the return of income and relying only on single year data (i.e. for the year ended 31 March 2012) for the purpose of determining the ALP. In this regard, since the comparable data in respect of all the companies for the financial year (FY) 2011-12 was not available at the time of complying with the documentation requirements under the Act, ....
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....Limited. -2.92% -1.98% Arithmetic Mean 13.21% -0.13% 4. The A.O during the course of the assessment proceedings made a reference under Section 92CA(1) to the Transfer Pricing Officer (for short 'TPO') for computation of Arm's Length Price ('ALP') in respect of the Investment Advisory Services rendered by the assessee company, viz. Temasek Holdings Advisory India Pvt. Ltd. ('THAIPL') to its holding company, viz. Temasek Holdings Pvt. Ltd., Singapore ('THPL'). The TPO not being persuaded to subscribe to the contention of the assessee that multiple year averages were to be used for the purpose of benchmarking the ALP, thus being guided by Rule 10D, which as per him required that only contemporaneous data to be used, therefore, considered the current year data for the purpose of comparability while examining the international transactions of the assessee with its AE. That still further, the TPO in his order observed that the assessee was also performing nondiscretionary portfolio management services for its AE. The TPO rejected all the comparables selected by the assessee and substituted the same by a set of three new comparables, which were identified....
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.... thrown by the assessee to the inclusion of certain comparables in the final list of comparables by the TPO the DRP upheld the same and declined to issue any directions to the AO/TPO. The DRP observed that as the inclusion of the comparable, viz. Ladderup Corporate Advisory Pvt. Ltd. by the TPO was upheld by the DRP in the case of the assessee for the immediately preceding year, therefore, for the said reason the inclusion of the same as a comparable by the TPO during the year under consideration did not call for any interference on his part. That as regards the other two comparables selected by the TPO, viz. (i). CRISIL Ltd.; and (ii). ICRA Techno Analytics Ltd., the DRP observed that as their activities were functionally comparable to the assessee, therefore, their inclusion in the final list of comparables by the TPO was liable to be sustained. The DRP further upheld the observations of the TPO that the assessee was engaged in rendering portfolio management/investment Management Services. Thus, on the basis of his aforesaid observations the DRP upheld the order of the TPO and declined to issue any directions to the AO/TPO. 7. The A.O following the directions of the DRP, there....
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.... and AY 2011-12), dated 11.08.2017. It was submitted by the ld. A.R that the Tribunal after deliberating at length on the aforesaid two comparables, observing that as the same were good comparables had directed the AO/TPO to include the same in the final list of comparables. That as regards the comparables which had been included by the TPO and thereafter approved by the DRP, it was submitted by the ld. A.R that one of the comparable, viz. Ladderup Corporate Advisory Pvt. Ltd. was also included by the TPO in the case of the assessee for the immediately preceding year, viz. A.Y 2011-12 and approved by the DRP, but however, the same on appeal by the assessee was directed by the Tribunal to be excluded from the final list of comparables, for the reason that the same was functionally incomparable to the assessee company. That as regards the remaining two comparables, viz. (i) ICRA Techno Analytics Ltd., (Segment-Professional services); and (ii) CRISIL Ltd. (Segment Research Services), it was submitted by the ld. A.R that as in the case of the CRISIL Ltd, the related party transactions (for short 'RPT') were to the extent of 47.1%, therefore, the same could not have been taken as a comp....
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....n India (P) Ltd., Vs. ACITCircle- 2(2014) 48 taxman.com 248 (Delhi-Trib), to support his contention that as the assessee was providing services to its AE as a captive service provider, therefore, the TPO had rightly selected the comparables in the final list of comparables. The ld. D.R submitted that the appeal of the assessee was devoid of any merit and deserved to be dismissed. 9. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present case is sought to adjudicate as to whether the rejection of the comparables selected by the assessee in its TP study report, and substitution of the same by a fresh set of comparables by the TPO in the final list of comparables, is in order or not. We shall first advert to the comparables which were selected by the assessee in its TP study report for benchmarking its international transactions pertaining to provision of Investment advisory services rendered to its AE, viz. (i) ICRA Managing Consulting Services Ltd; (ii) ICRA Online Ltd; (iii) Informed Technologies Ltd; (iv) Integrated Capital Services Ltd; and (....
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....ecessor so passed in the case of the assessee for. A.Y. 2010-11, which as observed by us hereinabove had been set aside by the Tribunal, thus cannot be upheld and is liable to be vacated on the said count itself. We are further persuaded to subscribe to the contention of the ld. A.R that cherry picking of the comparables every year by the TPO, without pointing out that the facts in context of the comparables accepted in the preceding years had changed during the year under consideration, cannot be permitted. We further find that the aforesaid comparable, viz. ICRA Management Consultancy Services Limited had also been held to be a good comparable by the Tribunal in the case of the assessee for A.Y(s). 2007-08, 2008-09 and 2009-10, while for in the earlier years the TPO himself had accepted the said company as a comparable. Thus in the totality of the aforesaid facts, we find no reason to take a divergent view, and thus set aside the order of the AO/TPO rejecting the aforesaid comparable, and therein direct that the same be included in the final list of the comparables." We further find that the Tribunal in its aforesaid order had also concluded that Informed Technologies....
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....ibunal to be good comparables while disposing of the appeal of the assessee for the immediately preceding year, viz. A.Y. 2011-12, therefore, now when there is no change in the functional profile of the said respective comparables as in comparison to that of the assessee company, and the facts and circumstances involved therein remain the same, thus it can safely be concluded that the assessee had rightly included the said comparables in its TP study report for benchmarking its international transactions pertaining to provision of Investment advisory services rendered to its AE. We thus direct the AO/TPO to include the aforesaid comparables, viz. (i) ICRA management Consultancy Services Ltd.; and (ii) Informed Technologies Ltd. in the final list of comparables. We find that though the assessee had in its Ground of appeal No. 4 assailed the exclusion of the remaining three comparables which were selected by it for benchmarking its international transactions, viz. (i) Integrated Capital Services ltd; (ii) ICRA Online Ltd; and (iii) Cyber Media Research Ltd, from the final list of comparables by the TPO while determining the ALP of the international transactions of the assessee, howev....
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....he coordinate bench of the Tribunal in the case of Avenue Asia (supra) had therein averred that though the aforesaid comparable was planning to expand its wings by venturing into merchant banking activities and broaden its horizon, which revealed that during the year it was not engaged in merchant banking activities, had therein tried to drive home his contention that the aforesaid comparable was not involved in merchant banking activities. We are of the considered view that the aforesaid observations of the coordinate bench of the Tribunal were recorded in context of A.Y. 2009-10 involved in the case before them, while for the year before us in the present appeal is A.Y. 2011-12. Thus the case law relied upon by the Ld. D.R is distinguishable on facts, and as such for the foregoing reason would be of no assistance to him to support his aforesaid contention. That in the backdrop of the aforesaid facts as had been brought to our notice, and as such are irrebuttably supported by the records produced before us, we hold a strong conviction that now when the aforesaid comparable, viz. Ladder up Corporate Advisory Pvt. Ltd. is engaged in Merchant banking/Investment banking and other simi....
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.... had significant RPT of 47.1% during the year under consideration, therefore, it was wrongly included by the TPO in the final list of the comparables. We find that the DRP while passing the order had failed to take cognizance of the said specific objection of the assessee, and loosing sight of the said material fact had upheld the inclusion of the comparable on the ground that the same was functionally comparable. We are unable to persuade ourselves to subscribe to the said observation of the DRP. We further find substantial force in the contention of the ld. A.R that the assessee was not afforded any opportunity of being heard by the TPO at the time of including the said comparable, viz. CRISIL Ltd. in the final list of comparables. Rather, we find that the assessee in its objections filed before the DRP had raised a specific objection of having been divested of an opportunity of being heard at the time of inclusion of CRISIL as a comparable by the TPO (Page 39- Para 10.135 of the objections), but however, the DRP loosing sight of the same while passing the order, had allowed such serious infirmity on the part of the TPO to perpetuate. We are of the considered view that in all fai....