TaxTMI 
TaxTMI 
2018 (1) TMI 239
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....44C(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 by the Appellant in computation of ALP is taken from two widely recognised com....
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....ng 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, the Appellant has computed the arm's length nature of the international transaction of provision of non-binding investment advisory services using....
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....g 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 by him as comparable to the assessee, as under:- Name of the Company Operating Margin for F.Y. 2011-12 ICRA Techno Analytics Limited (Segment - Professional Services). 24.96% CRISIL Limited (Segment-R....
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....he 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, therein vide his order passed under Section 143(3) r.w. Section 144C(13), dated 30.01.2017, carried out an upward TP adjustment of Rs. 6,22,54,019/- to the total income of the assessee company and assessed its income at Rs. 14,79,82,450/- under the normal provisions and the 'book profit' u/s 115....
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....he 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 comparable. The ld. A.R to fortify his aforesaid contention took us through Page 41 - Para 10.151 of his objection filed before the DRP, which revealed that inclusion of the said comparable was assailed by the assessee before the DRP, in the backdrop of the fact that it had significant RPT of 47.....
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....ted 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 (v) IDC (India) Ltd. We find that as averred by the ld. A.R, the exclusion by the TPO of two comparables, viz (i) ICRA management Consultancy Services Ltd.; and (ii) Informed Technologies Ltd. in the case of the assessee for the immediate preceding year, viz. A.Y. 2011-12 was set aside by the Tr....
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....g 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 Ltd was rightly selected by the assessee as a comparable, and had directed the AO/TPO to include the same in the final list of the comparables, by observing as under: "11. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material pro....
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....ved 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, however, as no submissions had been advanced before us as regards the same, therefore, we refrain from adjudicating the same. 11. We shall now advert to the comparables which had been included by the TPO in the final list of the comparables and thereafter approved by the DRP. We find that the TPO had included three fresh....
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....ein 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 similar activities during the year under consideration, therefore the same cannot be considered as functionally comparable to the assessee company which is engaged in rendering non binding investment advisory services. We thus are persuaded to subscribe to the contention of the ld. A.R that the aforesaid comparable, viz. Ladder u....
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....he 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 fairness, now when the assessee was never afforded an opportunity of being heard at the time of inclusion of the aforesaid comparable by the TPO, and its objections before the DRP, both as regards such non-affording of opportunity of being heard and inclusion of the said comparable in the backdrop of its significant RPT of 47.1% du....