TaxTMI 
TaxTMI 
2017 (9) TMI 1620
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....ure of investment advisory services to its AE (D. E. Shaw & Co. Mauritius). The year wise facts are as under - 2.1 ITA 1681/Del/2015 - AY 10-11: For this year, the return of income was filed at a total income of Rs. 149,821,815/-. The Transfer Pricing Officer (TPO) made an upward adjustment of Rs. 241,095,763/- on account of advisory and consultancy services and Rs. 28,516,238/- on account of receivables, thus making a total adjustment of Rs. 2,69,612,001/-. The assessee approached the Hon'ble DRP who gave partial relief and directed the AO/TPO to allow working capital adjustment, thereby reducing the Transfer Pricing (TP) adjustment to Rs. 175,168,000/-. However, the Hon'ble DRP did not grant any relief in respect of the receivables. 2.1.1 In this year, the assessee had selected seven comparables for benchmarking in respect of transactions involving investment advisory services in its transfer pricing documentation and the TPO rejected four comparables out of the same and added six new comparables in the final set of comparables. The final list of comparables after the directions of the Hon'ble DRP are nine which are as under:- S.No. Comparable companies Adjusted....
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.... redetermination of the arm's length price of the international transaction. 3.2 That the learned TPO erred, on facts and in law, in changing the filters applied by the Appellant for selectionof the appropriate comparable companies for determination of the arm's length price of international transaction using the Transactional Net Margin Method ("TNMM") as the most appropriate method in the documentation maintained under section 92D of the Act read with Rule 10D of the Rules. 3.3 That the learned TPO erred, on facts and in law, in using single year financial data (i.e. data for FY 2009-10 only) as against multiple year financial data used by the Appellant for determination of the arm's length price of the international transaction pertaining to provision of financial and investment advisory services. 3.4 That the learned TPO erred, on facts and in law, in rejecting certain companies selected as comparable on the ground that it had different financial year end. 3.5 That the learned TPO erred, on facts and in law, in applying lower turnoverfilter of INR 5 crore to reject ICRA Online Limited, Informed Technologies India Limited, Integrated S....
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....ownward adjustment of 5%, as provided in the Proviso to section 92C of the Act, from the arm's length price determined for the impugned transaction. 4. The learned AO/ learned TPO/ Hon'ble DRP have erred, in law and on facts and circumstances of the case, in making the transfer pricing adjustment of INR 28,516,238 by erroneously re-characterizing the outstanding receivables from AE of the Appellant as unsecured loan and charging interest on alleged delayed payment in collection of receivables. 4.1.The learned AO/ learned TPO/ Hon'ble DRP have erred, in law and on facts and circumstances of the case, in charging arbitrary interest rate while determining the notional interest to be charged from the alleged delay in collection of receivables. 5. The learned AO/ DRP have erred on facts, on the circumstances of the case and in law by alleging that the Appellant has furnished inaccurate particulars of income, thereby proposing to initiate penalty proceedings under section 271(l)(c) of the Act. 6. The learned AO erred, on facts and in law, by proposing to levy consequential interest under section 234B and 234C of the Act mechanically and wit....
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....ge 33.34% 2.2.1 The assessee is accepting only two comparables viz. Cyber Media Research Ltd and ICRA Management Consulting Services Ltd and is contesting the remaining ten comparables. The grounds raised by the assessee are as under:- "1. That on the facts and circumstances of the case and in law, the order of assessment framed by the learned Deputy Commissioner of Income-tax, Circle - 7(1), New Delhi (hereinafter referred to as 'the learned AO') pursuant to the directions of the Hon'ble Dispute Resolution Panel - IV (hereinafter referred to as 'the Hon'ble DRP') under section 143(3) read with section 144C(5) of the Act, is a vitiated order having been passed in violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and void ab-initio. 2. That the Hon'ble DRP is bad in law to the extent the same are prejudicial to the Appellant. 3. That the learned AO/ learned Transfer Pricing Officer ("TPO") has erred on facts and in law in making the transfer pricing adjustment of INR 89,112,587 in respect of the international transaction relating to the provision of f....
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....ce brokerage, asset management and wealth management, merger and acquisition advisory, ESOP advisory, equity/debt placements and restructuring, syndication of finance, portfolio management and mutual fund distribution and do not satisfy the functional, assets and risks ("FAR") analysis test vis-a-vis the Appellant in relation to the international transaction pertaining to provision of investment advisory services. 3.6 That the learned TPO have erred, on the facts and in law, in selecting certain companies as comparables without appreciating that these companies have displayed exceptional profit during the relevant financial year (i.e. FY 2010-11) under consideration which was on account of exceptional circumstances and did not portray the correct operational profitability in the industry. 3.7 The learned TPO/ Hon'ble DRP have erred, on the facts and in law, by failing to include foreign exchange gains/ losses and bank charges as an operating income/ expenditure while computing the operating margins of the Appellant and the comparable companies for the application of the TNMM. 3.8. That the learned TPO/ Hon'ble DRP erred, on facts and in law, by no....
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....ent advisory services amounting to Rs. 54,702,378/- and Rs. 12,791,796/- on account of receivables, thereby making a total upward adjustment of Rs. 67,494,174/- but on the assessee approaching the Hon'ble DRP, the Hon'ble DRP did not grant any relief in respect of provision of financial and investment advisory services but gave partial relief to the assessee by directing the Assessing Officer to adopt SBI base rate on 30th June of the relevant previous year plus 300 basis points in respect of the receivables and also directed the Assessing Officer to limit the period under consideration to Assessment Year 2012-13. Consequent to the directions of the Hon'ble DRP, the TP adjustment stood at Rs. 16,699,310/-. In this year, the assessee had selected 5 comparables to benchmark the transaction involving provision of investment its TP documentation out of which 4 comparables were required by the TPO and thereafter the TPO added 6 new comparables for the final set of comparables. The final set of comparable companies after the Hon'ble DRP's directions are as under:- S. No. Comparable companies Adjusted OP/ TC Original TP Study /Added by TPO 1 Aditya Birla ....
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....aw and on facts, in using single year financial data (i.e. data for FY 2011-12 only) as against multiple year financial data used by the Appellant for determination of the arm's length price of the international transaction pertaining to provision of investment advisory services. 4.3. That the learned TPO erred, on facts and in law, in applying lower turnover filter of INR 1 crore for rejecting the independent companies. Without prejudice, the learned TPO erred, on facts and in law, in not applying an upper turnover filter to reject companies having significantly higher turnover vis-a-vis the Appellant. 4.4 That the learned TPO/ Hon'ble DRP erred, on the facts and in law, in rejecting Informed Technologies Limited, Integrated Capital Services Limited, ICRA Online Limited and Cyber Media Research & Services Limited (formerly IDC (India) Limited) as comparables for provision of investment advisory services to AE without appreciating the fact that the services provided by these companies are similar to the functional profile of the Appellant. 4.5 That learned TPO/ Hon'ble DRP have erred, on the facts and in law, in rejecting Cyber Media Research & Servic....
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....provided in the proviso to section 92C of the Act, from the arm's length price determined for the impugned transaction. 5. That the learned AO/ learned TPO/ Hon'ble DRP have erred, on the facts and in law, in making the transfer pricing adjustment of INR 1,66,99,310 by erroneously re-characterizing the outstanding receivables from AEs of the Appellant as unsecured loan and computing notional interest on alleged delays in realization of payment from the AEs against the invoices raised for provision of investment advisory services. 5.1. That the learned TPO/ Hon'ble DRP have erred, on the facts and in law, in applying arbitrary interest rate of 12.25 percent while determining the notional interest on the alleged delays in collection of receivables from the AEs against the invoices raised for the provision of investment advisory services. 5.2. Without prejudice, the learned TPO/ Hon'ble DRP have erred, on the facts and in law, in considering the SBI base rate instead of London Interbank Offered Rate ("LIBOR") while calculating notional interest on alleged delays in realization of payment from the AEs as the invoices were raised on the AEs in ....
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.... ITAT Mumbai Bench in the case of M/s Goldman Sachs (India) Securities Pvt. Ltd. vs DCIT in I.T.A. No. 222/Mum/2014 for assessment year 2009-10 wherein M/s Brescon Corporate Advisors Limited was excluded on the ground that it was engaged in debt resolution, debt syndication and financial restructuring advisory services which were functionally not comparable to investment advisory services. Reliance was also placed on an order of the ITAT Delhi Bench in the case of Xander Advisors India Pvt. Ltd. in I.T.A. No. 5840/Del/2012 for assessment year 2008-09 wherein M/s Brescon Corporate Advisors Limited had been excluded on the ground that merchant banking concern cannot be compared to investment advisory services. Reliance was also placed on the cases of Temasek Holdings Advisory(I) Private Limited in ITA No. 4203/Mum/2012 for assessment year 2007-08 and TPG Capital India Pvt. Ltd. in I.T.A. no. 880/Mum/2013 for assessment year 2008-09 wherein M/s Brescon Corporate Advisors Limited had been excluded by the ITAT on account of functional dissimilarity. ii) Keynote Corporate Services Limited Ld. AR submitted that this comparable had earned the entire revenue from non-comparable activi....
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....ort Compendium in support of the contention. It was also submitted that this company has not been included by the TPO in the subsequent two assessment years. The ld. AR also submitted that the company was also registered as 'merchant banker' with SEBI. Ld AR also submitted that there was no specific case law on which he was relying in support of the plea for exclusion of this comparable but was relying on the general principles regarding comparability of a merchant banking enterprises with a company providing investment advisory. v) Kshitij Investment Advisory Services Ltd. Ld. AR submitted that this company earned revenues from corporate and consumer lending and insurance advisory services and was accordingly functionally dissimilar. Ld. AR referred to page 152 of the Annual Report Compendium in support of his contention. It was also submitted that the TPO had not considered this company as a comparable in subsequent assessment years. It was also submitted that during the year under consideration, this company had realigned its business to Everstone Investment Advisors Pvt. Ltd. and accordingly the impact of the same was seen in assessment year 2011-12 wherein the company ha....
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....ct of service transaction, it would be deemed to cover all elements and consequences of such transaction. Appellant has placed reliance on: Pegasystems Worldwide India Private Limited (ITANo.1758/Hyd/2014) Det Norske Veritas A/S (ITA No.200/Mum/2014) M/s. Avnet India Pvt. Ltd. Vs DCIT (IT(TP)A No. 757(Bang)/2011); DCIT vs. Indo American Jewellery Ltd. [2012] 18 taxmann.com 303; Nimbus Communications (ITA NO. 6597/Mum/2009); Evonik Degussa India Private Limited (ITA NO. 7653/Mum/2011); and Bausch & Lomb Eyecare (India) Private Limited (ITA No. 6580/DEL/2013). 2. Outstanding receivables cannot be recharacterized as a loan. The TPO has not brought any material on record to suggest that this is a loan and therefore interest is to be charged. The TPO re-characterized the whole transaction pertaining to provision of service as that of a loan which is not permissible without any materials or evidence suggesting that such transaction is a loan. Reliance placed on: Essar Steel Orissa Ltd. Vs. ACIT (ITA 2289/Mum/2014) 3. Account receivables arising from an International Transaction are closely linked to....
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....India Pvt. Ltd vs. ACIT - 3(2) Mumbai (ITA No. 2024/Mum/2007 Sony India Private Limited (2008) 114 ITD 448 Abhishek Auto Industries Limited (2010) (136 TTJ 530) CIT vs. EKL Appliances Limited (2012) (345 ITR 241) 9. The Appellant follows a consistent policy with respect to the receivables and payables from/ to the AEs. Accordingly, no interest is charged or paid by the Appellant with respect to outstanding payable/ receivable with AEs. The average time taken by the appellant while making payment to AEs (i.e. 160 days) is more than average time taken by the AEs in making payment to the appellant (i.e. 121 days). 10. Further, the average realisation period in case of receipt of payment from D.E. Shaw & Co., Mauritius has been only 64 days. Hence the overall position has been in the favour of the appellant. The appellant thus in light of the above submission prays before your honours that the adjustment made on account of notional interest on outstanding receivables ought to be deleted in the interest of natural justice. Without prejudice to the appellant's contention above, in case it is held that adjustment on account of....
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.... regard, the Appellant places reliance on following rulings: Aztec Software and Technology Limited (2007) (107 ITD 141); and Genisys Intergrating Systems India Private Limited (2012) (15 ITR 475). 17. Since the billing by the Appellant to AEs was done in foreign currency and the amount is also received in foreign currency, the appropriate rate for determination of interest would be London Inter Bank Offered Rate ("LIBOR") subject to reasonable adjustments for tenor against the interest rate applicable on rupee denominated borrowings considered by the TPO. In this regard, reliance in placed on the following rulings: Transport Corporation of India Limited (ITANo.117/Hyd/2016); Agilisys IT Services India Private Ltd.(ITA No.1136/Mum/2014); M/s. S.B. & T International Limited (ITA No. 1054/Mum/2015); IndegeneLifesystems Private Limited (ITA No. 1504/Bang/2012); and Tech Mahindra Limited (ITA NO. 1176/Mum/2010) 18. Without prejudice to the above, the Appellant further submits that the TPO and the Hon'ble DRP have made computational errors while calculating the adjustment towards interest on outstanding receivables. In case it is ....
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....MM as the Most Appropriate Method and under TNMM, the parameters for comparability analysis are broadly relaxed and only a broad similarity of the functions is required. It was also submitted that as per the mandate of section 92(1) of the Income Tax Act, cherry-picking by either of the parties in respect of the comparables was not acceptable. Ld. CIT DR also submitted that even the comparables which had not been objected to by the assessee would not fall into strict functional similarity test but the same had been accepted by the assessee and, therefore, it was very much evident that the assessee was choosing comparables which were only suiting its purpose. It was also submitted by the Ld. CIT DR that if all comparables were to be excluded a de novo benchmarking exercise would be required. Ld. CIT DR read out extensively from the order of the TPO and vehemently argued that the final list of comparables as selected by the TPO should not be disturbed. 4.1 On the issue of interest on receivables, the Ld. CIT DR placed reliance on the order of ITAT Delhi Bench in Mckinsey Knowledge Centre Pvt Ltd Vs. DCIT in ITA No 154/Del/2016. 4.2 On the issue relating to foreign exchange gain....
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.... ( first sentence in the observations of TPO at P.l 12 of Appeal set and internal pages 87 & 88 under the heading Comments of TPO). c. TPO has not got into the verticals of the comparables as was also done by the Taxpayer. He has selected the comparables which are broadly engaged in the field of 'investment advisory services'. (For example see the paragraph just above Point No.14 at page- 113 of Appeal Set and internal page 88 of TPO's order in this regard). d. TPO has gone for broad functional comparability as is evident in all of his comments against the Taxpayers objections reproduced in the TP order. For example he has treated 'corporate financial advisory services' as broadly similar to the financial advisory services being given by the taxpayer, (may pi see first para under the heading 'comments of TPO' at page 110 of Appeal Set and internal page 85 of TPO's order). e. Similarly if one looks at the justification given by taxpayer for inclusion of 'Integrated Capital Services Ltd' at page 88 of the Appeal set (internal page 3 of TPO order) we can see that all of the following services rendered by that entity were propo....
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....;Market Research and Management consultancy'. (PI see point No.13 on page 19 of AR under Sch- 16). It may be noted here that the financial advisory services is (strictly speaking) different from 'management consultancy' or 'market research functions'. In this scenario, the said company needs to be excluded if we go by the strict functional comparability and by the position of law on the subject of nonavailability of segmental details as a disqualification for taking a company as comparable. 2. Ladderup Corporate Advisory Private Limited i. is engaged in fee based loan syndication, private equity and other similar services which according to the strict comparability criteria advocated by the Assessee is not comparable to 'investment advisory funtions' carried out by the taxpayer. As per the consolidated Annual Report of the Parent company the following facts have been mentioned about Ladderup Corporate Advisory Private Limited (Page-2 of Annual Report consolidated of Laddercup Finance Ltd): In FY 2009-10 your Company's subsidiary Company Ladderup Corporate Advisory Private Limited (LCAPL) which is engaged in the fee based services has su....
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....provided at page-5 of its parent company is relevant and reproduced herein below: iv. The company is into management consultancy and it executed over 1000 consulting projects that are management consultancy projects (and not investment advisory services) in the following practice areas (sectors). The same is evident from the Director's Report (page 119-120 of combined annual report of ICRA). * Government and Infrastructure Practice-significant growth in multilateral/bilateral agency funded work. * Energy Practice-consolidation and growth * Banking and Financial Services-on the road to recovery * Corporate Advisory Practice-a period of diversification and deepening relationships v. The relevant portions are reproduced below: Government and Infrastructure Practice-significant growth in multilateral/bilateral agency funded work. Your Company witnessed steady growth in all the three verticals, viz., Development Consulting, Transportation, and Urban Infrastructure, during the year under review. Your Company has made substantial progress in consulting projects that involve the concept of Public-Private Partnership (PPP) b....
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....e Assets". b) Softwares, developed in house and having commercial usage are capitalised as softwares and shown under "Intangible Assets". These are amortised over a period of 5 years. vii. The depreciation Schedule contains the intangible owned by the company namely IMaCS' Risk Scorer & IMaCS' C-Cube (may pi see Page 131 of Annual Report). viii. Some of its functions do relate to market analysis, but there are no segmental details available. The Notes to Accounts (point no.12 on page 140 of Annual Report) reads as under: 12. In accordance with the Accounting Standard - 17, "Segment Reporting" issued as per the Companies (Accounting Standards] Rules, 2006, the Company's business segment is Consulting Services and it has no other primary reportable segments. Accordingly, the segment revenue, segment results, total carrying amount of segment assets & segment liability, total cost incurred to acquire segment asset and total amount of charge for depreciation during the year ended March 31, 2010, is as reflected in the financial statements as of and for the year ended March 31,2010. The quantum of export services rendered on-site a....
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....ment Advisors Private limited ('ElAPL'), to realign Its Investment advisory activities with a view to having a focused and dedicated approach to the investment advisory business. The realignment agreement Is effective from January 1, 2010 wherein, EIAPL shall, in place of the Company: a. render all the investment advisory services to Indivision Capital Management ('ICW'); b. enjoy ail the rights In term of the Investment Advisory Agreement ('IAA') entered into with ICM c. assume, agrees and fulfill all duties and obligations conferred or imposed under the terms of IAA d.Pursuant to the above agreement the Company shall receive a consideration of Rs. 38,000,000. II . In support of the proposition that the comparables which meet the same criteria as pointed out in case of comparables sought to be excluded may also be excluded as otherwise the whole benchmarking process would remain faulty. The claim of assessee is that the wrong comparables on the basis of broad functional similarity have been included in the benchmarking process. If that is so, the principle / criteria should be applied uniformly across the whole set of compar....
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....ture. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer's case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer's " opponent", in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority's order of assessment is not strictly an arbitral tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so....
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....cer in the manner it has done. It is necessary to state that rules 12 and 27 are not exhaustive of the powers of the Appellate Tribunal, The rules are merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under section 33(4) of the Act. We are accordingly of the opinion that the Tribunal had jurisdiction to entertain the argument of the department in this case and to direct the Income-tax Officer to find whether any depreciation was actually allowed under the Industrial Tax Rules and whether such depreciation should be taken into consideration for the purpose of computing the written down value." C. CIT v Jansampark Advertising & Marketing (P.) Ltd. [2015] 56 taxmann.com 286 [Delhi) 35. Assessment proceedings under the Income Tax Act are not a game of hide and seek. The inquiry in the wake of a notice under Section 148 is not an empty formality. It must be effective and with a sense of purpose. There is an elaborate procedure set out which requires scrupulous adherence and followed up on. In the hierarchy of the authorities, the AO is placed at the bottom rung. The two layers of appeals, before the matter engages ....
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....n receivables, the Ld. Authorised Representative submitted that this ground was identical to the ground related to interest receivables in Assessment Year 2010- 11 and accordingly, the arguments made in respect to those grounds were identical and were not being repeated for the sake of brevity. 5.1 On the issue of comparables, Ld. Authorised Representative submitted that in this year, the final set of comparables had 3 new comparables picked up by the TPO viz. Aditya Birla Capital Advisors Pvt. Ltd. and Axis Private Equity Ltd. and Portfolio Financial Services Ltd. Ld. Authorised Representative also submitted that out of the comparables being contested, Brecson Advisors & Holdings Ltd., Keynote Corporate Services Ltd. and Motilal Oswal Investment Advisors Pvt. Ltd. had already been argued by the Ld. Authorised Representative in the appeal for Assessment Year 2010-11 and the arguments being similar, the same were not being argued again for the sake of brevity. Ld. Authorised Representative also reiterated that if these three comparables viz. Brecson Advisors & Holdings Ltd., Keynote Corporate Services Ltd. and Motilal Oswal Investment Advisors Pvt. Ltd. were excluded from the fin....
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.... also merchant banker with SEBI and it had shown abnormal growth of 154.98% increase in revenue and 472.68% increase in profits. iv) SREI Venture Capital Limited It was submitted by the ld. AR that this company was also functionally dissimilar. It was submitted that this company was also functionally dissimilar as it was into fund mobilization, merchant banking and underwriting services and, therefore, it should be excluded from the final set of comparables. v) Aditya Birla Capital Advisors Private Limited Ld. AR submitted that this company was also functionally dissimilar as it was engaged in asset management and investment in venture capital fund. It was further submitted that the TPO had used a non-reliable information source to substantiate the comparability by relying on the information as provided in red-erring prospectors of another company Trimax IT Infrastructure & Services Ltd. . It was also submitted that the company had earned super normal profits of 41.65% vi) Portfolio Financial Services Limited Ld. AR submitted that this company was functionally dissimilar as it was providing debt syndication services. It was also submitte....
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....elated party transactions filter. It had also earned super normal profit of 35.75%. 8. Ld. CIT DR also filed written submissions which were identical to the submissions filed for Assessment Years 2010-11 and 2011-12 and the same are not being reproduced for the sake of brevity. Ld. CIT DR also submitted that if all the comparables objected to by the assessee were to be excluded, nothing would remain and a de novo selection of the comparables would have to be done by the TPO. It was submitted that in such a case, all the three matters should be set aside to the file of the TPO for de novo selection of comparables. 9. In rejoinder, the Ld. Authorised Representative submitted that none of the comparables included by the TPO had investment advisory services as it primary function. It was also submitted that the transfer pricing study of the assessee had not been rejected by the TPO and, further, no defects had been pointed out by the department in the transfer pricing study and the dispute related only to comparables and not to the methodology adopted in the transfer pricing study. It was also submitted that minor difference in functionality were acceptable but the emphasis was o....
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....81/Mum/2014. The Bench observed in page 12 of the order as under:- "b) Brescon Corporate Advisors Pvt Ltd:- As stated by the Ld. Senior Counsel, this company is again rendering services of merchant banker and its income is mainly from financial restructuring and recapitalization and debts syndication. Equity related advisory and M&A Advisory services are also in the capacity of a merchant banker and as a corporate advisor company its main function is to assist the companies in special situation through resolution, re-capitalization, M&M, infusion of profit, equity or direct investment. Thus, like Motilal Oswal Investment Advisory Pvt. Ltd., this company also cannot be compared with companies rendering investment advisory services simplicitor. The reasoning given in the Motilal Oswal for exclusion will apply here also. The decisions relied upon by the Ld. Senior Counsel, especially in the case of Tamasek Holdings Advisors India Pvt Ltd (supra), we find that this company has been especially excluded from being considered while comparing with the companies giving investment advisory services. Accordingly, we direct the TPO/AO to exclude this company from comparabilit....
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....ng of Securities, Bridge Financing, Bought out Deals relating to Issue Management. Equity Research out of the above sendee can be compared with that of the Assessee's activity but segmental data is not available. The company's segment as reported are services, dealing in shares and other income. In the absence of specific data it is not possible to make comparison. It can therefore be safely said that that above is into Merchant Banking and cannot be considered as a comparable." 10.3 A perusal of the above clearly establishes that Keynote Corporate Services Ltd. is into merchant banking and accordingly it cannot be considered as a comparable with the investment advisory company. Respectfully applying the ratio of the ITAT Mumbai Bench, we direct the Assessing Officer/TPO to exclude this company also from the final list of comparables. (iii) Motilal Oswal Investment Advisors Pvt. Ltd. In the case of this company, it is the assessee's assertion that this company earns revenue from equity and derivatives, investment banking, mergers and acquisitions, portfolio management services, private wealth management and syndication and structured ....
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....vices where core functions is to give advice for making the investments in diversified fields. A company which is engaged in merger and acquisitions, private equity syndication, loan/credit syndication and performing most of the function as a Merchant Banker, then the entire functions and transactions affects the generation of revenue and margins. Such functions are entirely different from investment advisory services. Mere classification of revenue as 'advisory fees' will not put the company in a comparable basket sans functional similarity and transactional analysis. In case of Carlyle India Advisors Pvt. Ltd (supra), it has been held that, the merchant banking functions are entirely different from investment advisory services and this decision of the Tribunal has been upheld by the Hon'ble Bombay High Court. Thus, in view of plethora of judicial decisions as referred to by Ld. Counsel and in view of functional differences as discussed as above, we hold that Motilal Oswal cannot be put into the comparability list and is directed to be excluded." 10.4 The department also could not bring any new fact on record which could controvert the assertion made by the Ld. Authorised Repre....
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....omparables in Assessment Year 2011-12 also and direct the Assessing Officer/TPO to verify the adjusted OP/TC as submitted by the assessee before us after giving due opportunity to the assessee of being heard. (C) Assessment Year 2012-13 10.6 In Assessment Year 2012-13, it is seen that inclusion of Keynote Corporate Services Limited and Brescon Corporate Advisors Limited have been agitated by the assessee in this year also as in previous two Assessment Years. As these comparables have been excluded by us in the earlier appeals for Assessment Year 2010-11 and 2011-12 and no new fact has been brought on record by the department during the proceedings before us for inclusion of these comparables in this year, following our adjudication for Assessment Years 2010-11 and 2011-12, we direct the Assessing Officer/TPO to delete Keynote Corporate Services and Brescon Corporate Advisors Ltd from the final set of comparables. 10.7 During the course of the proceedings before us, Ld. Authorised Representative has submitted that he was not pressing for exclusion of the new comparable included by the TPO in this year namely Ajcon Global Services Ltd. 10.8 Almondz Global Securities Ltd. ....
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....ssee has been following a consistent policy with respect to the receivables and payables from/to the AEs. It is also seen that while making the adjustment, TPO has not calculated the notional interest by considering the average time taken by the AE for making the payment to the assessee. Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax vs Kusum Health Care Pvt. Ltd. in I.T.A. No. 765/2016 vide judgment dated 25th April, 2017 has laid down in Paras 10, 11 and 12 as under:- "10. The Court is unable to agree with the above submissions. The inclusion in the Explanation to Section 92B of the Act of the expression 'receivables' does not mean that de hors the context every item of 'receivables' appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, there has to ....