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2019 (5) TMI 402
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.... and in law, the learned AO has erred in assessing the income of the Appellant for the relevant AY at income of Rs. 23,03,13,353/-, as against returned income of Rs. 11,41,30,410/-. 2. On facts and circumstances of the case and in law, the learned AO / learned Transfer Pricing Officer ('TPO') have erred in making transfer pricing adjustments of Rs. 11,61,82,943/- to the transfer price of the international transaction pertaining to provision of non-binding investment advisory and related support services by the Appellant, alleging that the same to be not at arm's length in terms of the provisions of sections 92C(1) and 92C(2) of the Act, read with rule 10D of the Income-tax Rules,1962 ('the Rules‟). In doing so, the learned A.O learned 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 1013(4) of the Rules and judicial pronouncements, which advocate usage of multiple year data of comparable companies for the purpose of determination ....
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.... Enterprise (for short 'A.E‟) had used Transactional Net Margin Method (for short 'TNMM‟) for computing the ALP of the said international transactions. It was observed by him that the Profit Level Indicator (for short 'PLI‟) used by the assessee was Operating profit to Operating cost. Further, it was noticed by him that as per the TP Study Report the assessee for benchmarking its international transactions had selected three comparables viz. (i) ICRA Management Consulting Services Ltd; (ii) IDC (India) Ltd; and (iii) Mecklai Financial Services Ltd. On the basis of the average margin of 9.33% of the aforementioned comparables, it was claimed by the assessee that its margin of 15% was well within the arms length. The TPO rejected the aforesaid three companies as comparables by applying the export turnover filter. Apart therefrom, the TPO being of the view that the assessee was a high end ITeS/high end KPO service provider adopted the following three companies from the ITeS/KPO sector as comparables for benchmarking the ALP of the international transactions of the assessee : Sl. No. Name of the Company OP/TC 1. E-Clerx Services Limited 61.21% 2. Acropeta....
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....o identify comparables after considering that the assessee was a non-binding investment advisory service provider. The DRP also directed the TPO not to consider the export turnover filter as it was not a relevant filter since the services were rendered by the assessee for the AE in India and the investments were also to be made in India. 7. The TPO in his remand report selected the following company as a comparable: Name of the Company PLI (%) Ladder-up Corporate Advisory Pvt. Ltd. 38.38 The DRP did not find favour with the contention advanced by the assessee that as the aforesaid company viz. M/s Ladderup Corporate Advisory Pvt. Ltd. was engaged in the business of merchant banking/investment banking, it thus could not be considered as a comparable to a company engaged in rendering investments advisory services. Apart therefrom, it was observed by the DRP that the ITAT, Delhi 'I‟ Bench in the case of Avenue Asia Advisors Pvt. Ltd. Vs. DCIT, Circle 2(1), New Delhi (ITA No. 6638/Del/2013; dated 22.01.2016) had held that the said comparable viz. Ladderup Corporate Advisory Pvt. Ltd. was a good comparable in the case of a company engaged in the business of providing inve....
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....y different the ld. A.R took support of the fact that the TPO in his 'remand report‟ in the assesses own case for A.Y 2013-14 had rejected it as a comparable for the reason that it was carrying merchant banking activity. It was submitted by the ld. A.R that the TPO while concluding as hereinabove that Ladderup Corporate Advisory Pvt. Ltd. was functionally different as in comparison to the assessee had relied on the ITAT order passed in the assesses own case for A.Y. 2007-08, wherein the said company was rejected as a comparable. Further, it was submitted by the ld. A.R that the aforementioned company viz. Ladderup Corporate Advisory Pvt. Ltd. was rejected as a comparable by a coordinate bench of the Tribunal in the case of DCIT Vs. Temasek Holdings Advisors (P. Ltd.) (2014) 47 taxmann.com 311 (Mum). It was submitted by the ld. A.R that as the assessee was admittedly engaged in business of providing non-binding investment advisory services, therefore, the TPO/DRP had erred in selecting Ladderup Corporate Advisory Pvt. Ltd. which was engaged in merchant banking and investment banking activity as a comparable for benchmarking the international transactions of the assessee. In or....
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.... there was no justifiable reason on the part of the TPO/DRP to have excluded the said company from the final list of comparables. It was the contention of the ld. A.R that though the name of the aforementioned company viz. IDC (India) Ltd. was with effect from 28.02.2011 changed to Cyber Media Research Ltd., however there was neither any change in its functional profile nor any material was placed on record by the lower authorities to dislodge the said factual position. Apart therefrom, it was submitted by the ld. A.R that the aforementioned company viz. IDC (India) Ltd. was held by the Tribunal as a suitable comparable for benchmarking the ALP of an assessee which was providing non-binding investment advisory services while disposing off the appeal in the case of TPG capital India (P) Ltd. Vs. DCIT (2017) 79 taxmann.com 101 (Mum). On the basis of the aforesaid contentions it was the claim of the ld. A.R that the lower authorities had erred in excluding IDC (India) Ltd. from the final list of comparables. (B). MECKLAI FINANCIAL SERVICES LTD: The ld. A.R taking us through the functional profile of the aforesaid company viz. Mecklai Financial Services ltd. submitted that the said....
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....final list of comparables. 12. Per contra, the ld. Departmental Representative (for short 'D.R‟) at the very outset submitted that as the companies selected by the assessee as comparables were having different functional profiles, therefore, the TPO had rightly excluded the same from the final list of comparables. It was submitted by the ld. D.R that IDC (India) Ltd. which was a wholly owned subsidiary of Cyber Media (I) ltd. and was engaged in research and survey services and products was admittedly held by the Tribunal as a comparable in the assesses own case for A.Y 2007-08. However, it was submitted by the ld. D.R that the aforementioned company viz. IDC (India) Ltd. whose name was with effect from 28.02.2011 changed to Cyber Media Research Ltd. had thereafter remained no longer functionally comparable. It was thus averred by the ld. D.R that as the aforementioned company viz. IDC India Ltd. during the year under consideration i.e A.Y 2012-13 had a different functional profile as in comparison to the assessee, thus it was rightly rejected as a comparable by the TPO. In order to drive home his contention that the aforementioned company viz. IDC (India) Ltd. was functiona....
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....nt Consulting Services Ltd. It was further submitted by the ld. D.R. that unlike the assessee as there was substantial subcontracting of 24% work by ICRA Management Consulting Services Ltd. during the year, thus the same clearly revealed its different business model as in comparison to that of the assessee. Apart therefrom, it was averred by the ld. A.R that as in the case of the aforementioned company viz. ICRA Management Consulting Services Ltd. there were fluctuating profits during the period A.Y. 2007-08 to A.Y. 2012-13 while for in the case of the assessee there were stable profit margins, thus the said company could not have been feasibly taken as a good comparable for benchmarking the ALP of the international transactions of the assessee for the year under consideration. Further, the ld. D.R. submitted that as the aforementioned company viz. ICRA Management Consulting Services Ltd. had low export earnings of 9.3%, hence the same failed the export turnover filter of 75% and thus could not have been selected as a comparable. The ld. D.R also submitted that as the aforementioned company unlike the assessee had R&D functions and owned and developed intangibles (i.e IMaCS Risk Sc....
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....Range-8(1), Mumbai (ITA No. 7985/Mum/2010; dated 30.04.2013), it was submitted by the ld. A.R that in the said case the Tribunal had deviated from the position that was adopted by the TPO in the earlier years for the reason that the said view was found to be explicitly against the statutory provision. Further, the ld. A.R objected to the seeking of the application of employee cost filter by the revenue in the course of the appellate proceedings before the Tribunal. It was averred by the ld. A.R that a new filter cannot be sought to be applied in the course of the appellate proceedings before the Tribunal. Objecting to the application of the export turnover filter by the TPO for rejecting the comparables selected by the assessee in its TP study report, it was submitted by the ld. A.R that as rightly observed by the DRP, as the services were rendered by the assessee for the AE in India and the investments were also to be made in India, thus the export turnover filter was not relevant in its case. The ld. A.R adverting to the contention advanced by the revenue that the aforementioned company viz. IDC (India) Ltd. was into persistent loss making, submitted that the said view had been a....
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....the selection of Mecklai Financial Services Ltd. as a comparable by the assessee, submitted that the revenue itself had been using the aforementioned company viz. Mecklai Financial Services Ltd. as a comparable in the case of other assesses providing investment advisory services. 17. The ld. A.R rebutting the contentions advanced by the ld. D.R in for exclusion of ICRA Management Consulting Services Ltd. from the final list of comparables, submitted that the latter had failed to appreciate that the functional profile of the said company was similar to that of the assessee company. Insofar, the application of employee cost filter by the revenue was concerned, it was submitted by the ld. A.R that a new filter cannot be introduced at the stage of the appellate proceedings. Apart therefrom, it was submitted by the ld. A.R that merely because the value of employee cost was high would not mean that the functions performed by them were bound to be differently placed. Interestingly, it was submitted by the ld. A.R that the percentage of employee cost to total cost of the company which was selected by the TPO as a comparable viz. Ladderup Corporate Advisory was 53.28% while for that of IC....
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....ld. A.R. that as the percentage of employee cost was substantially high in the case of the aforementioned comparable viz. ICRA Management Consulting Services Ltd., hence no adverse inferences could validly be drawn by taking support of the aforementioned judicial pronouncement in the case of Rampgreen Solutions Pvt. Ltd. (supra). Insofar, support was drawn by the counsel for the revenue on the basis of the export turnover filter that was applied by the TPO for justifying exclusion of the aforementioned company same from the final list of comparables, it was submitted by the ld. A.R that as observed by the D.RP as the services were rendered by the assessee for the A.E in India and the investments were also to be made in India, therefore, the export filter was not relevant in its case. Further, the ld. A.R rebutted the contention of the counsel for the revenue that as ICRA Management Consulting Services Ltd. had fluctuating profits across the years i.e. from A.Y. 2007-08 to A.Y. 2012-13, thus it could not be held as a good comparable. It was submitted by the ld. A.R that admittedly in case the fluctuation of profits is drastic then one has to investigate into its comparability, howev....
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....er authorities and the material available on record. Admittedly, the assessee is rendering non-binding investment advisory and related support services to its parent/holding company, i.e Carlyle Asia Investment Advisors Ltd., Hong Kong. The services offered by the assessee are in the nature of identifying potential investment opportunities in India for its group. During the year under consideration the assessee had reported the following international transactions with its AE in its Form 3CEB : Sl. No. Nature of Transaction Amount of Transaction (INR) Method used by assessee to determine ALP AY. 2012-13 A.Y. 2012-13 1 Provision of investment advisory and related support services 57,12,61,546 Transactional Net Margin Method ('TNMM') The assessee had used TNMM analysis for computing the ALP of the investment advisory services provided to its AE during the year. The Profit Level Indicator (PLI) used by the assessee was operating profits to operating cost. The assesses margin was 15% and the arithmetic mean of the comparables selected by it in the TP Study report was computed at 9.33%. On the basis of the aforesaid analysis the assessee had co....
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.... the aforementioned company viz. IDC (India) Ltd. during the year under consideration i.e A.Y 2012-13 had changed as against that of A.Y. 2007-08. We find that there is neither any material available on the record of the lower authorities which would reveal that there had been any change in the functional profile of IDC (India) Ltd. during the year under consideration i.e. A.Y. 2012-13 as in comparison to A.Y. 2007-08, nor any such material has been placed on our record by the ld. D.R. to substantiate his said claim. Rather, a perusal of the 'Annual reports‟ of the aforementioned company viz. IDC (India) Ltd. for A.Y. 2007-08 and A.Y. 2012-13 reveals that the company in both of the said years was engaged in research and survey services. On the basis of our aforesaid deliberations we are of the considered view that the TPO/DRP in the absence of any shift in the functional profile of IDC (India) Ltd. during the year under consideration as in comparison to A.Y. 2007-08, were thus in error in excluding the same from the final list of comparables. Insofar, reliance placed by the ld. D.R on the decision of the ITAT, Mumbai, bench, "K", Mumbai in the case of M/s Onward Technologies ....
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....on the contention advanced by the ld. D.R that as IDC (India) Ltd. was a persistent loss making company, hence the same had rightly been excluded from the final list of comparables and are unable to persuade ourselves to accept the same. We find that the ld. D.R has based his aforesaid claim by taking support of data of the aforementioned company viz. IDC (India) Ltd. for the next two succeeding years i.e. A.Y. 2013-14 & A.Y. 2014-15. As per the proviso to Rule 10B(4), in order to decide the comparability the data for the current year and the previous two financial years of a company can only be considered. We thus are of the considered view that as the aforesaid observations of the ld. D.R are not supported by the mandate of law, thus the same cannot be accepted. Our aforesaid view that the data for a subsequent cannot be used to decide comparability finds support from the order of the ITAT, Mumbai in the case of Vodafone India Services (P) Ltd, Vs. DCIT (2014) 146 ITD 78 (Mum). Further, we find that the Hon'ble High Court of Bombay in the case of CIT Vs. Goldman Sachs (I) Securities Pvt. Ltd. (2016) 240 taxmann.com 736 (Bom) not finding favour with the claim of the revenue that a....
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.... international transactions of the assessee after including IDC (India) Ltd. as a comparable in the final list of comparables. (B). MECKLAI FINANCIAL AND COMMERCIAL SERVICES LTD. We shall now advert to the exclusion of Mecklai Financial and Commercial Services Ltd. that was selected by the assessee as a comparable in its TP study report from the final list of comparables by the TPO/DRP. We find that the aforementioned company viz. Mecklai Financial and Commercial Services Ltd. is engaged in rendering Forex Advisory Services and earns income from consultancy services. In our considered view a forex advisor undertakes multiple functions viz. (i) research; (ii) analysing; (iii) presenting information by way of report; (iv) making recommendations based on the analysis and report; and (v) monitoring the solutions/advice given. As the aforementioned services rendered by the aforementioned company viz. Mecklai Financial and Commercial Services Ltd. in the course of its forex advisory services are similar to those rendered by an assessee engaged in the business of providing non-binding investment advisory services, hence the same in our considered view can safely be adopted as a compar....
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.... new filter cannot be introduced in the course of the appellate proceedings is supported by the orders of the Tribunal in the case of viz. (i) Ness Technologies (I) Pvt. Ltd. Vs. DCIT (2016) 76 taxmann.com 289 (Mum); and (ii) Dialogic Networks (I) Pvt. Ltd. Vs. DCIT (2017) 78 taxmann.com 349 (Mum). We thus not being persuaded to subscribe to the contentions advanced by the ld. D.R in the backdrop of the employee cost filter, decline to accept the same. We have deliberated on the contentions advanced by the ld. D.R that as the aforementioned company i.e. ICRA Management Consulting Services Ltd. had incurred substantial expenses on subcontracting of work during the year, thus the same as per him clearly revealed a difference in the business model as against that of the assessee. Further, the ld. D.R had in support of his aforesaid contention relied on the order of the Hon'ble High Court of Delhi in the case of Rampgreen Solutions Pvt. Ltd. Vs. CIT (2015) 377 ITR 0533 (Delhi), wherein it was observed by the High Court that where the expenditure incurred by the company on employment cost during the relevant period was substantially low for the reason that it had outsourced most of its ....
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....asis of the aforementioned revised ratio of employee cost to total cost the aforementioned company i.e ICRA Management Consulting Services Ltd. can safely be selected as a comparable in the case of the assessee. As regards the contention of the ld. D.R that the aforementioned company i.e ICRA Management Consulting Services Ltd. had low exports earning which justified the exclusion of the same from the final list of the comparables, the same does not find favour with us. We are of the considered view that as observed by the DRP that as the services were being rendered by the assessee to its AE in India and the investments also were to be made in India, thus the export filter would not be relevant in its case. We thus in terms of our aforesaid observations decline to accept the aforesaid contention of the ld. D.R that as the abovementioned company i.e. ICRA Management Consulting Services Ltd. had low export earnings, thus the same was justifiably excluded from the final list of comparables. Insofar, the support drawn by the ld. D.R from the fact that as ICRA Management Consulting Services Ltd. had fluctuating profits across the year i.e. from A.Y. 2007-08 to 2012-13, thus it was not ....
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....t that as unlike the assessee the aforesaid company viz. ICRA Management Consulting Services Ltd. had R & D functions and owned and developed intangibles (i.e IMaCS Risk Scorer & IMaCS C-Cube Software), therefore, the same was rightly rejected as a comparable in the case of the assessee, we have perused the records and are unable to subscribe to the said claim of the revenue. We find from a perusal of the 'Annual report‟ that though ICRA Management Consulting Services Ltd. had internally used the aforementioned tools (IMaCS Risk Scorers & IMaCS C-Cube Software) to render consulting and advisory Services, however, it did not earn any product income by using such tools. We thus are of the considered view that the aforesaid contention of the assessee to justify the exclusion of ICRA Management Consulting Services Ltd. as a comparable also cannot be accepted. We have given a thoughtful consideration to the contentions advanced by the authorized representatives for both the parties as regards the inclusion/exclusion of ICRA Management Consulting Services Ltd. from the final list of the comparables and after necessary deliberations in terms of our aforesaid observations are of the ....
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....stment advisory services. We further find that the Hon'ble High Court of Delhi in the case of Avenue Asia Advisors Pvt. Ltd. Vs. DCIT (2017) 85 taxmann.com 311 (Del) had rejected Ladder up Corporate Advisory Pvt. Ltd. as a comparable in the case of the assessee which was providing non-binding investment advisory services to its A.E. We thus in terms of our aforesaid observations being of the considered view that as the aforementioned company i.e. Ladderup Corporate Advisory Pvt. Ltd. which was carrying on merchant banking and investment banking activity was functionally different from the assessee that was providing nonbinding investment advisory services and thus could not have been selected as a comparable for benchmarking the international transactions of the assessee during the year under consideration had wrongly been selected as a comparable for benchmarking the nonbinding investment advisory services provided by the assessee to its A.E during the year under consideration. Our aforesaid view that a company carrying on merchant banking activity cannot be selected as a comparable in the case of a company which is providing investment advisory services is fortified by the judgme....
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....ter Private Limited (2018-TIOL-471](Bang). Per contra, the ld. D.R objected to the aforesaid contentions raised by the counsel for the assessee. 24. We have given a thoughtful consideration and are of the considered view that now when the comparables selected by the TPO/DRP have been excluded by us from the final list of comparables, hence the seeking of risk adjustment by the assessee in the backdrop of the fact that the comparables selected by the TPO/DRP unlike the assessee are entrepreneurs and undertake full range of economic risks does no longer subsists and for the said reason is rejected. 25. The Appeal of the assessee is partly allowed in terms of our aforesaid observations. A.Y. 2013-14 ITA No. 6321/Mum/2017 26. We shall now advert to the appeal of the assessee for A.Y. 2013- 14. The assessee being aggrieved with the order passed by the A.O under Sec.143(3) r.w.s 144C (13) of the I.T. Act, dated 07.09.2017 for A.Y. 2013-14 has carried the matter in appeal before us. The assessee has assailed the order passed by the A.O under Sec. 143(3) r.w.s. 144C(13) of the I.T. Act on the following grounds of appeal: "1. On the facts and circumstances of the case and in law,....
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....TPO have erred in disregarding the use of multiple year data of comparable companies for the purpose of determination of the arm's length price of the international transactions entered into by the Appellant. 10. On facts and circumstances of the case and in law, the learned AO has erred in levying interest under sections 234B and 234C of the Act. The Appellant claims relief on the above grounds and thereby deleting the adjustments made by the learned AO in the final assessment order. The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law. For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the Appellant requests that the appeal be allowed as prayed." 27. Briefly stated, the assessee company had e-filed its return of income for A.Y. 2013-14 on 30.11.2013, declaring total income at Rs. 16,62,89,590/-. Subsequently, the assessee filed a revised return of income on 26.03.2015, declaring total inc....
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....om, the TPO re-characterised the assessee as a high end ITES/high end KPO entity and on the basis of his said view short listed 5 companies from the ITeS sector as comparable to the assessee, as under: Sl. No. Name of the company OP/TC 1. Accentia Technologies Ltd. 13.90 2. eClerx Services Ltd. 50.84 3. Hartron Communications Ltd. 30.37 4. MPS Ltd. 29.71 5. IRIS Business Services Ltd. 27.29 Arithmetic Mean 30.42 The objections raised by the assessee as regards selection of the aforementioned comparables did not find favour with the TPO. Accordingly, by adopting the arms length margin of the comparables at 30.42% (operational profits/total cost) the TPO reworked the ALP of the international transactions of the assessee at Rs. 99,14,57,885/- and suggested a consequential adjustment of Rs. 11,72,24,575/- in the hands of the assessee. 28. The A.O on the basis of the order passed by the TPO under Sec. 92CA(3), dated 19.10.2016 proposed an addition of Rs. 11,72,24,575/- and assessed the income of the assessee at Rs. 30,33,13,505/-, vide his draft order passed under Sec.143(3) r.w.s. 144C(1), dated 31.10.2016. 29. Aggrieved, the assessee filed objecti....
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.... high end ITeS/KPO entity was without any basis and was liable to be vacated. It was submitted by the ld. A.R that as in the preceding years the assessee during the year under consideration also was rendering its services as a sub-advisor to its AE, and the ultimate decision with respect to the investments was taken by the General Partners of the fund who managed and operated the funds. In sum and substance, it was the contention of the ld. A.R that the assessee as in the earlier years was providing non-binding investment advisory and related support services during the year under consideration. In order to buttress his aforesaid contention it was submitted by the ld. A.R that the assessee had entered into a "service agreement" effective from 01.04.2006 to render non-binding investment advisory to its Associate Enterprises (for short 'A.E‟) viz. Carlyle Hong Kong. It was the contention of the ld. A.R that the aforesaid "service agreement" continued from year to year and as such remained in force for the year under consideration i.e. A.Y. 2013-14. It was further submitted by the ld. A.R that the Tribunal in the case of the assessee for A.Y. 2007-08 had analysed the aforementio....
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....certain reasons viz. (i) high salary cost of the employees; (ii) Mr. Neeraj Bhardhwaj joining Carlyle India in the current year and the press release in this regard; (iii) purported non availability of comparables (due to application of export filter); and (iv) that the ITAT/High Court had not critically examined the functional characterisation of the assessee. It was submitted by the ld. A.R that in A.Y. 2012-13 it was on the basis of the salary details that the TPO had sought to draw adverse inference and had re-characterised the assessee as a KPO service provider, which however was set aside by the DRP for the reason that the TPO had failed to substantiate that such salaries were not being paid to the employees in the earlier years or that the employees in investment advisory segment were not being paid similar levels of salaries. It was thus the contention of the ld. A.R that now when the point of high salary was comprehensively dealt with by the DRP in A.Y. 2012-13, wherein it was observed by him that the assessee on the said count could not be held to be a KPO service provider, hence the inconsistent approach adopted by him on the same issue during the year under consideratio....
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....tmental Representative (for short 'D.R‟) submitted that as the facts for the year under consideration had witnessed a change in comparison to the preceding years, thus the view taken by the TPO/DRP in the said earlier years would not assist the case of the assessee for the year under consideration. Further, it was submitted by the ld. D.R that the fact that the assessee was a KPO service provider could safely be gathered from the T.P study report wherein it was mentioned that the remuneration paid to the directors was dependant on the functions that were performed by them. The ld. D.R submitted that such fact was not reported in the T.P study report of the assessee for the earlier years. On the basis of his aforesaid contention it was claimed by the ld. D.R that the high salary which was paid by the assessee to its employee revealed that they were highly qualified professionals who were rendering high value added services. It was further submitted by the ld. D.R that a perusal of the FAR given in the T.P. study report of the assessee clearly revealed that all critical functions were being carried out by the assessee and on the basis of the same decisions were arrived at by it....
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....e ld. A.R further assailed the application of the export turnover filter in the case of the assessee by taking support of the view that was taken by the DRP in the assesses own case for A.Y. 2012-13. It was submitted by the ld. A.R that the DRP had directed the TPO not to apply the export filter for the reasons viz. (i). services were rendered by the assessee for its A.E in India; (ii). that though the location of the A.E was outside India the investments were to be made in India; and (iii). that the case of the assessee was not as that of a software or ITeS companies where the exports were made outside India and the revenue was generated from such exports. It was thus submitted by the ld. A.R that now when in A.Y. 2013-14 there had been no change in facts as in comparison to the immediately preceding year i.e A.Y 2012-13, therefore, the DRP was in error in upholding the application of export turnover filter as the same clearly militated against its directions for A.Y. 2012-13. In order to buttress his contention that in absence of any change in the facts the principle of consistency should be followed, support was drawn by him from certain judicial pronouncements viz. (i) Radhasoa....
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....facts it was submitted by the ld. A.R that as the aforementioned company alike the assessee was purely into research based investment advisory during the year under consideration, hence it was rightly selected as a comparable for benchmarking the international transactions of the assessee for the year under consideration. 38. Insofar, the exclusion of Crisil Risk and Infrastructure Solution ltd. as a comparable by the TPO/DRP was concerned, it was submitted by the ld. A.R that the said company was a leading advisor to regulators and governments, multilateral agencies, investors and large public and private sector firms. In support of his contention that Crisil Risk and Infrastructure Solution Ltd. could safely be selected as a comparable to a company providing investment advisory services, the ld. A.R relied on the orders of the Tribunal viz. (i) Kitara Capital Pvt. ltd. Vs. ITO [ITA No. 130/Mum/2014]; and (ii). General Atlantic (P) Ltd. Vs. DCIT (2015) 64 taxmann.com 423 (Mum), wherein in both of the said cases the TPO himself had selected the aforementioned company viz. Crisil Risk and Infrastructure Solutions Ltd. as a comparable in the case of the said assesses which were eng....
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.... Technologies Ltd. It was submitted by the ld. A.R that on a similar footing Hartron Communication ltd. was also liable to be rejected from the final set of comparables for fair benchmarking of the ALP of the international transactions of the assessee for the year under consideration. The ld. A.R in order to fortify his claim that the aforementioned company had a different functional profile, therein submitted that though the website of the said company revealed that it was offering a wide range of BPO, LPO, I.T and back office services, however the segmental information of the aforementioned company was available only in respect of the "office back up operations" provided by it. In sum and substance, it was the claim of the ld. A.R that as the aforementioned company viz. Hartron Communication Ld. was functionally different from the assessee and its segmental data was not available, hence the same was liable to be rejected as a comparable in the case of the assessee. 40. The ld. A.R further assailed the inclusion of e-Clerx Services Limited as a comparable by the TPO/DRP during the year under consideration. At very outset, it was submitted by the ld. A.R that the DRP in the asses....
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.....e. in excess of the RPT filter of 25% that was applied by the TPO, hence on the said count also it was liable to be excluded from the final list of comparables. 41. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the maintainability of the exclusion of certain companies which were selected by the assessee as comparables in its TP study report, but the same not finding favour with the TPO/DRP were excluded from the final list of comparables, as under: (A) CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD: We find from a perusal of the 'notes‟ to the financial statements of Crisil Risk and Infrastructure Solutions Ltd. that it is a leading advisor to regulators and governments, multilateral agencies, investors and large public and private sector firms and is providing a comprehensive range of risk management tools, analytics and solutions to financial institutions, banks and corporates. In our considered view the provision of advisory services by the aforementioned company can safely be held to be comparable to the investment advisory services that wer....
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....r consideration. (B) ALMONDZ GLOBAL SECURITIES LTD: We have perused the 'Annual report‟ of the aforementioned company and find that the business of the assessee during the year comprised of providing consultancy in the financial areas. The assessee has taken the margin earned by the aforementioned company under the segment of Corporate Finance and Advisory Fee segment. As per the 'annual report‟ of the company the SEBI had passed two ad interim ex-parte orders on 28.12.2011 (which were confirmed vide interim orders dated 11.09.2012 and 21.09.2012), as per which the company was prohibited from taking new assignment or involvement in any new issue of capital including IPO, follow-on issue etc. from the securities market in any manner whatsoever, from the date of the order till further directions. In sum and substance, the aforementioned company having been debarred had not undertaken any merchant banking activities during the under consideration viz. A.Y. 2013-14. We find substantial force in the contention advanced by the ld. A.R that in the backdrop of the aforesaid facts as the aforementioned company i.e. Almondz Global Securities ltd. which during the year under c....
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.... A.Y 2012-13 shall apply mutatis mutandis in the present appeal of the assessee for A.Y 2013-14. We thus in terms of our aforesaid observations are of the considered view that the assessee had rightly included the aforementioned company viz. ICRA Management Consulting Services Ltd. as a comparable in the case of the assessee and the same had wrongly been excluded by the TPO/DRP. In terms of our observations recorded while disposing off the appeal of the assessee for A.Y 2012-13 i.e in ITA No. 2366/Mum/2017, we herein direct the A.O/TPO to include ICRA Management Consulting Services Ltd. in the final list of comparables for benchmarking the ALP of the international transactions of the assessee during the year under consideration viz. A.Y 2013-14. 42. We shall now advert to the contentions advanced by the authorized representatives for both the parties in context of the companies which had been selected by the TPO/DRP as a comparables for benchmarking the international transactions of the assessee for the year under consideration viz. (i) e-Clerx Services ltd.; and (ii) Hartron Communications Ltd. We shall deliberate on the sustainability of the observations of the lower authoritie....
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....same could not have been selected as a comparable in the case of the assessee. We thus in terms of our aforesaid observations are of the considered view that the TPO/DRP had wrongly included the aforementioned e-Clerx Services Ltd. as a comparable in the case of the assessee. In terms of our aforesaid observations we direct the AO/TPO to exclude e-Clerx Services Ltd. from the final list of comparables for benchmarking the ALP of the international transactions of the assessee during the year under consideration viz. A.Y 2013-14. (B). HARTRON COMMUNICATIONS LTD.: We shall now advert to the contentions that were advanced by the ld. A.R for exclusion of Hartron communications Ltd. that was selected by the TPO/DRP as a comparable for benchmarking the international transactions of the assessee for the year under consideration from the final list of comparables. On a perusal of the 'Annual report‟ of the aforementioned company it had stands revealed that the latter is a leading offshore business process service provider in the medical billing and health care sector. As compared to the said BPO Services rendered by the aforesaid company the assessee on the other hand is providing....