2018 (8) TMI 1902

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....fer pricing adjustment of Rs. 2,94,32,651 by re-computing the arm's length price (ALP) of the international transaction pertaining to provision of non-binding investment advisory services by the Appellant to its overseas associated enterprise (AE) using Transactional Net Margin Method (TNMM) as the most appropriate method, inter alia, on the following grounds: a) Rejecting the documentation maintained by the Appellant for the international transaction entered into by the Appellant with its AE without giving any cogent reasons; b) Not sharing the search process conducted by the learned transfer pricing officer (TPO) to arrive at the final set of comparable company; c) Identifying a new comparable company without following a scientific search process, namely, Ladderup Corporate Advisory Private limited, which is functionally not comparable to the non-binding investment advisory services provided by the Appellant; d) In arbitrarily selecting a company as a comparable, namely, Ladderup Corporate Advisory Private Limited which earned super-normal profits (38.38%) during the FY 2011 -12 relevant to AY 2012-13. e) Rejecting the following companies selected as comparables by ....

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...., financial advisory, underwriting, trading and principal investment, asset management, securities, banking and financial services. The assessee before us had entered into certain international transactions within the meaning of Sec. 92B of the Act with its associated enterprise as detailed in para 5 of the order of the Transfer Pricing Officer (TPO) passed u/s 92CA(3) of the act dated 29.01.2016. One of the transactions was of providing non-binding investment advisory services to its associated enterprise for which assessee had received a consideration of Rs. 21.92 crores. Since Sec. 92(1) of the Act requires computation of income from international transactions having regard to the arm's length price, the Assessing Officer referred the matter of determination of arm's length price of such international transactions to the TPO. Before the TPO, assessee pointed out that its margin on providing investment advisory services was 22% on Operating Costs. Assessee benchmarked the transactions by choosing the Transactional Net Margin Method (TNMM) as the most appropriate method. It identified four comparable concerns as detailed in para 6.2 of the TPO's order and the average margin of suc....

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.... learned representative for the assessee pointed out that for the instant assessment year, under identical circumstances, in the case of Temasek Holdings Advisors (India) Pvt. Ltd. (ITA No. 1429/Mum/2017 dated 03.01.2018), the said concern stood held to be functionally dissimilar to the activities similar to that of the assessee. Reliance has also been placed on the case of Temasek Holdings Advisors (India) Pvt. Ltd. (ITA No. 477/Mum/2016 dated 11.08.2017) and Wells Fargo Real Estate Advisors Pvt. Ltd. (ITA No. 1520/Mum/2016 dated 17.01.2018). 6. Apart therefrom, it is pointed out that in the following decisions, it has been held that a concern engaged in merchant banking activities could not be compared with a concern which was rendering investment advisory services:- i) CIT vs Temasek Holdings Advisors (India) Pvt. Ltd., ITA No. 1051 of 2014 (Bombay High Court); ii) Goldman Sachs (India) Securities Pvt. Ltd. vs DCIT, ITA Nos. 927/Mum/2016 and 902/Mum/2016; iii) Goldman Sachs (India) Securities Pvt. Ltd. vs ACIT, ITA No. 7724/Mum/2011; and, iv) Goldman Sachs (India) Securities Pvt. Ltd. vs DCIT, ITA No. 222/Mum/2014 7. On the other hand, the ld. CIT-DR appearing for the ....

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....Management Consulting Services Ltd. ii) IDC (India) Ltd. iii) Informed Technologies India Ltd. 11. Insofar as Informed Technologies India Ltd. is concerned, the assessee contended before the TPO that the said concern is a good comparable because the said concern collects and analyses data on financial fundamentals, corporate governance and capital market and offers a range of data management services in the financial services sector. It was, therefore, canvassed by the assessee that functionally it is comparable to the activities undertaken by the assessee in its activity of providing investment advisory services. 12. However, the TPO did not accept the pleas of the assessee as, according to him, the said concern was engaged in IT-enabled knowledge based back office operations, which are distinct from investment advisory and support services undertaken by the assessee. According to the TPO, every kind of advisory service would not be comparable to assessee's investment advisory services and, therefore, he excluded the said concern from the list of comparables. 13. In this context, the learned representative had pointed out that for the assessment year under consideration, in....

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....nformed Technologies India Ltd. corresponding to the period under consideration before us also and, therefore, following its decision, it is directed that the said concern be considered as a good comparable in order to arrive at the arm's length price of the international transaction of providing investment advisory services. 16. Another aspect in relation to inclusion of Informed Technologies India Ltd. is that for Assessment Years 2013-14 and 2014-15, the TPO has himself accepted the said concern as a good comparable. This aspect was asserted by the learned representative at the time of hearing and it is also canvassed that the functional profile of the assessee as well as of the said concern, namely, Informed Technologies India Ltd. continues to remain the same in the subsequent assessment year. These aspects have not been controverted by the ld. CIT-DR before us and, therefore, on this point too, it is appropriate that the said concern is included as a good comparable. 17. At the time of hearing, the learned representative for the assessee had pointed out even if one of the three concerns, namely, ICRA Management Consulting Services Ltd., IDC (India) Ltd. and Informed Technol....