TaxTMI 
TaxTMI 
2019 (1) TMI 219
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.... I - Transfer Pricing Adjustment relating to international transactions of the Investment Banking Division of Rs. 342,133,208 I. On the facts and in the circumstances of the case, the learned Transfer Pricing Officer ('TPO') and the learned Assessing Officer ('AO') under the directions of the Hon'ble Dispute Resolution Panel (DRP') erred on facts and in law in making an addition of Rs. 342,133,208 in relation to Investment Banking Division transactions ('IBD Transactions') of the Appellant based on the provisions of Chapter X of the Income-tax Act, I961TiHe Ad). 2. The learned AO under the directions of the Hon'ble DRP erred in confirming the action of the 1 P0 of disregarding the transfer pricing methodology selected by the Appellant and its group companies globally to determine the arm's length price (ALP') of the IBD Transactions. The transfer pricing methodology selected by the Appellant is in fact the most appropriate transfer pricing method to determine the ALP of the IBD Transactions. 3. The learned AO / TPO under the directions of the Hon'ble DRP erred on facts and in law in upholding the action of the learn....
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.... the Hon'ble DRP erred in the facts of the case and in law by arbitrarily considering tile top JO third party clients for the purpose of determining the ALP of the Broking Transactions, instead of comparing the brokerage charged to all clients. 4. The learned TPO erred and the Hon'ble DRP further erred in upholding / continuing the action of the TPO of rejecting the without prejudice contention of the Appellant to provide the benefit I reduction of 5 percent from the arithmetic mean as provided in proviso to Section 92C(2) of the Act, while determining the ALP for the Broking Transactions. The Appellant prays that the adjustment in relation to transfer pricing matters made by the learned AO / TPO and upheld by the Hon'ble DRP in respect of the Broking Transactions be deleted." 4. Briefly stated facts are that the assessee was incorporated in FY 2005-06 and engaged in the business of providing of investment banking and equity broking services of oversea group companies. Lehman Brothers holding Inc (LBHI), the ultimate holding company of the assessee company was incorporated in the USA and LBHI filed a bankruptcy petition under USA Bankruptcy court in....
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....al. 6. At the outset, it is noticed that exactly on identical facts, the Tribunal in earlier year has set aside the matter back to the file of the AO/ TPO for fresh determination of the transfer pricing adjustment by observing in Para 4 as under: - "4. We have considered rival contentions and have perused material on record including orders of the authorities below and case laws cited before us . We have observed that the assessee is an entity which was part of Lehman Brothers group and had offered financing and advisory salutations to its clients in India in the field of Investment Banking Division. It is claimed that the Investment Banking Division (IBD) serve Corporate, Institutional and Government clients. It claimed to serve the clients capital-raising needs through specialized product groups in underwriting, private placements, leveraged finance and other activities associated with debt and equity products. With respect to its investment banking Division transaction with its AE, the assessee submitted its transfer pricing study wherein arm length price(ALP) of revenues from IBD was computed and offered for taxation by the assessee with respect to its international....
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....stretch of imagination, such functions be benchmarked with the non-binding investment advisory services proposed in the show cause issued by TPO. The TPO rejected this method as the assessee could not explain the basis of the same properly and applied TNMM method at entity level and comparables were drawn by TPO accordingly. The TPO could not find comparable from investment banking segment while the same were drawn from ITES/BPO segment, as under: It was also claimed by the assessee that it is the first year of operations in India and there are certain extra ordinary expenses such as start up cost and non-recurring expenses which were incurred by the assessee such as signup bonuses , relocation expenses, recruitment expenses etc. which need to be factored in and excluded while computing ALP. It was also claimed the assessee has not operated at full capacity during the previous year relevant to the impugned assessment year being the first year of operations as the assessee was in the process of employing new employees and costs were incurred for recruitment charges as also there are premises lying vacant for which heavy rents are paid but premises could not be utilised due ....
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....assessee 's base being setup in India which deserves to be seen by the authorities below on merits in accordance with law before arriving ALP of its international transactions with AE .The assessee has prayed and agreed for open set-aside to enable it to make effective representation before the authorities below in de-novo proceedings wherein necessary evidences and explanations could be furnished and authorities below can take view on issues which arises or may arise during de -novo assessment proceedings on merits in accordance with law after hearing the assessee. Ld. DR has also after considering the factual matrix of the case and concession granted by the learned counsel for the assessee fairly agreed for an open set aside wherein all the issues which arises or may arise in assessment are kept open and TPO/AO will be free to adjudicate all such issue's afresh on merits in accordance with law after hearing the assessee and considering the material placed on record . We have duly considered the factual matrix of this case and are of the considered view that keeping in view exceptional circumstances faced by the assessee during the period when the proceedings were under way with t....
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....nst the order of AO in not allowing claim of depreciation of goodwill. For this assessee has raised the following ground No. 3: - "Ground 3 - Claim for depreciation on goodwill On the facts and in the circumstances of the case and in facts, the learned AO has erred in disregarding the claim of the Appellant for depreciation on goodwill of Rs. 386,373,250. The appellant prays before the Hon'ble ITAT to direct the AO to allow deduction for depreciation on goodwill of Its. 386.373.250 for AY 2008-09 and consequently, to carry forward the same to subsequent years for set off." 10. We have gone through the orders of the lower authorities and noticed that there is no discussion about this issue and it seems that this issue has not been considered by the lower authorities. Hence, we are of the view that since above two issues are set aside to the file of the AO/ TPO, this issue can also be considered by the AO while adjudicating this assessment year. 11. The assessee has also raised the additional ground which is as follows: - "1.8 The learned AO/ TPO and the learned DRP erred in attributing the entire shortfall of Rs. 342,133,208/- to all the tra....