AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1733
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....essee is conducting business in various segments such as merchant banking, investment advisory services, provisions of information technology enabled services (ITES) and securities business. For the assessment year under dispute, the assessee filed its return of income on 29th November 2012, declaring income of Rs. 437,63,20,560. During the assessment proceedings, the Assessing Officer noticing that in the previous year relevant to the assessment year under dispute, the assessee has entered into international transactions with its overseas AE, made a reference to the Transfer Pricing Officer for determining the arm's length price of the international transaction. In the course of proceedings before him, the Transfer Pricing Officer noted that the assessee has bench marked the international transaction pertaining to investment advisory segment adopting Transactional Net Margin Method (TNMM) as the most appropriate method with operating profit/operating cost (OP/OC) as the profit level indicator (PLI). By applying certain filters, the assessee has selected four companies as comparables with average mean margin of -4.32%. Since, the profit margin shown by the assessee at 22.00% is muc....
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....omparable to a non-binding investment advisory service provider. He submitted, the aforesaid principle has also been laid down by the Hon'ble Jurisdictional High Court in various decisions. He submitted, in case of one of the group companies of the assessee viz. Goldman Sachs Asset Management India Pvt. Ltd., which is for the very same assessment year, the Tribunal has held that this company cannot be a comparable to a non-binding investment advisory service provider. In this context, he drew our attention to the order passed by the Tribunal in ITA no.1427/ Mum./2014, dated 31st August 2018. He also relied upon the following decisions:- i) Temasek Holdings Advisory Services Pvt. Ltd. v/s DCIT, ITA no.477 and 816/Mum./2016, dated 11.08.2017; ii) Temasek Holding Advisory Services Pvt. Ltd. v/s ITO, ITA no.1429/Mum./2017, dated 03.01.2018; and iii) Wells Fargo Real Estate Advisory Pvt. Ltd. v/s DCIT, ITA no.1520/Mum./2016, dated 17th January 2018. 5. Proceeding further, the learned Authorised Representative submitted, Informed Technologies Ltd. was wrongly rejected as a comparable, though, it is functionally similar to the assessee. He submitted, in case of assessee's siste....
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.... Departmental Representative relied upon the following decisions:- i) Mphasis Ltd. v/s ACIT,, ITA no.14/Bang./2012, dated 19.05.2017; ii) H&S Software Development v/s DCIT, ITA no.6455/ Del./ 2012, dated 18.01.2016; iii) Services India Pvt. Ltd. v/s DCIT, IT(TP)A no.2315/Bang./ 2016, dated 13.04.2017; iv) Vishay Components Pvt. Ltd. v/s ACIT, ITA no.341/Pun./ 2013, dated 31st May 2017; v) XM Software Solution Private Ltd. v/s ACIT, dated 07.02.2018; vi) Cengage Learning India Pvt. Ltd. v/s ITO, ITA no.5926/ Del./2010, dated 11.05.2018; vii) Dialogic Networks India Pvt. Ltd. v/s DCIT, TS-2-ITAT-2017(Mum.)-TP; and viii) Magma Design Automation India Pvt. Ltd. v/s DCIT, ITA no.1279/Bang./2014, dated 28.02.2017. 9. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions cited before us. Insofar as Ladderup Corporate Advisory Pvt. Ltd. is concerned, no doubt, the assessee has objected to selection of this company primarily on the ground that the company is engaged in merchant banking activity unlike the assessee which is engaged in providing non-binding investment advisory services. As could be seen from fa....
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....mself has accepted this company as a comparable in assessment year 2013-14 and 2014-15. Even, in the other decisions cited by the learned Authorised Representative it has been held that this company is a comparable to a non-binding investment advisory service provider. The decisions relied upon by the learned Departmental Representative appears to be factually distinguishable since in those decisions, this company has been rejected by application of certain filters. However, in case of the present assessee, the Transfer Pricing Officer and the DRP have not rejected this company by applying those filters. In any case of the matter, as per the accepted legal principle, in case of divergent views on a particular issue the view favourable to the assessee has to be taken. In view of the aforesaid, we direct the Assessing Officer to compute the arm's length price of non-binding investment advisory service segment by including Informed Technologies India Ltd. as a comparable. Since, in course of hearing it was submitted by the learned Authorised Representative that inclusion of any one of the comparables selected by the assessee and exclusion of Ladderup Corporate Advisory Pvt. Ltd. woul....
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.... which resulted in reduction of transfer pricing adjustment to Rs. 5,20,09,149. 14. The learned Authorised Representative submitted, R. Systems Ltd. being functionally similar to the assessee has to be included as a comparable. He submitted, only because this company has a different financial year ending, the Transfer Pricing Officer and the DRP have rejected this company. The learned Authorised Representative submitted, before the Transfer Pricing Officer and the DRP the assessee has furnished quarterly financial results from the audited accounts of this company from which the profit margin of the company for the relevant financial year can easily be ascertained. To demonstrate that the financial result of the company in the relevant previous year can be ascertained from the quarterly figures, learned Authorised Representative drew our attention to the objections raised before the DRP showing the margin of the company for the relevant previous year. Thus, he submitted, it cannot be rejected as a comparable. In support of his contention, the learned Authorised Representative relied upon the following decisions:- i) CIT v/s Mercer Consulting India Pvt. Ltd., ITA no.101/2015 (O&M)....
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....ic filters by the Transfer Pricing Officer, it cannot challenge the selection of the comparable. In support, he relied upon the following decisions:- i) Aegis Ltd. v/s DCIT, ITA no.7694/Mum./2014, ITA no. 1209/Mum./2015, dated 08.02.2017; ii) Vishay Components Pvt. Ltd. v/s ACIT, IT(TP)A no.341/ Pun./2013, dated 31.05.2017; iii) XL Health Corporation India Pvt. Ltd. v/s ACIT, IT(TP)A no. 2311/Bang./2016, dated 09.02.2015; iv) DCIT v/s Ocwen Financial Solutions P. Ltd. v/s ITA no.511/ Pn./2016 and C.O. no.01 and 14/Pun./2018, dated 14.05.2018; v) Hopag Lloyd Global Services Pvt. Ltd., IT(TP)A no.8499/ Mum./2010, dated 28.02.2013; and vi) Wills Processing Services India Pvt. Ltd. v/s DCIT, IT(TP)A no.4547/Mum./2012 & ITA no.4429/Mum./2012 dated 01.03.2013. 17. We have considered rival submissions and perused the material on record. It is evident from the facts on record that the assessee objected to selection of Excel Infoways Ltd., primarily on three grounds. Firstly, it fails the persistent loss making / diminishing revenue filter applied by the Transfer Pricing Officer; secondly, the BPO segment of the company does not satisfy the condition of a going concern since it....
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....by the Transfer Pricing Officer. Though, we have examined the principle laid down in the decision cited by the learned Departmental Representative, however, we prefer to follow the decisions expressing view favourable to the assessee. In course of hearing, it was submitted by the learned Authorised Representative that in case R. System International Ltd. (supra) is included and Excel Infoways Ltd. is excluded, assessee's profit margin would be within the acceptable range of average margin of the rest of the comparables. In view of the aforesaid submission of the learned Authorised Representative we desist ourselves from dealing with the acceptability or otherwise of all other comparables disputed before us and the issue relating to the comparability aspect of the rest of the comparables are left open. Ground no.2, is partly allowed. 18. In ground no.3, the assessee has challenged the disallowance of amortization of cost relating to employee's stock option plan (ESOP). 19. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has debited cost pertaining to ESOP to employees, called upon the assessee to explain why it should not be dis....