TaxTMI 
TaxTMI 
2020 (9) TMI 1099
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.... u/s 143(3) r.w.s. 144C(13) of the Act, the Appellant submits that the AO erred in passing the order on the following grounds: 1. In making an upward transfer pricing adjustment of Rs. 5,99,98,350/- by re-computing the arm's length price (ALP) of the international transaction pertaining to provision of nonbinding 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 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, engaged in providing merchant banking/ investment banking services, which is functionally not comparable to the nonbinding investment advisory services provided by the Appellant; d. In arbitr....
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....nvestment Advisors Pvt. Ltd. and New Berry Advisors Ltd., selected as comparable by the TPO, thus retaining only Ladderup Corporate Advisory Pvt. Ltd. as the sole comparable with operating margin at 52.43%. Accordingly, the AO passed an order u/s 143(3) r.w.s. 144C(13) determining an adjustment of Rs. 5,99,98,349/- in the case of the assessee for the impugned assessment year. 4. Before us, the Ld. counsel for the assessee submits that the comparable selected by it viz. (i) ICRA Management Consulting Services Limited, (ii) Informed Technologies India Ltd. and (iii) IDC (India) Ltd. be included. Explaining further, it is stated by him in respect of ICRA Management Consulting Services Ltd. that the same is accepted as comparable by the Tribunal in assessee's own case in AY 2010-11 (ITA No. 6989/Mum/2014) and also by the TPO in assessee's own case for AY 2013-14 and AY 2014-15. Further, the Ld. counsel submits that ICRA Management Consulting Services Ltd. is accepted as a comparable in the following orders for AY 2011-12 : • Goldman Sachs (India) Securities Private Limited v. DCIT (ITA No. 927/Mum/2016 & ITA No. 902/Mum/2016), • Principal CIT-14 v.....
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....require that the orders of the Tribunal passed earlier for the same assessment year should be followed. In this regard, reliance is placed by him on the decision by the Supreme Court of India in the case of Bharat Sanchar Nigam Ltd. v. UoI (2006) 282 ITR 273 (SC) and the order of the Tribunal in the case of Thomas Cook (India) Ltd. (ITA No. 1261 & 1238/Mum/2015). The Ld. counsel further submits that it is not open to the Revenue to challenge a comparable which has been held by the Tribunal as comparable in another case for the same year as it certainly cannot be said that a company is comparable to one company rendering non-binding investment advisory services but not with another company rendering same services. Finally the Ld. counsel submits that (i) even if a company is accepted as comparable in earlier year or a different year, the same should be accepted as comparable in the relevant year unless it is shown that there is change in the functional profile of the comparable company, (ii) unless there is change in the functional profile of the comparable company, the same company should not be re-considered merely because some new arguments are raised by the Revenue, as the....
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....d to IMCSL. The company IMCSL provides consulting services and was set up to take over the management consulting division of ICRA Ltd. We find merit in the contentions of the Ld. counsel that in order to identify companies which are providing services in the nature of investment advisory services as rendered by the assessee, the search criteria was widened to a more general industry criterion in order to identify companies engaged in providing management consultancy support and advisory support services earning fee based income and carrying limited risks and accordingly IMCSL was considered as a comparable given that it is engaged in provision of management consulting and business advisory services. We also find that IMCSL has been accepted by the Tribunal in ITA No. 6989/Mum/2014 in assessee's own case for AY 2010-11. Also it has been accepted as a comparable by the TPO in assessee's own case for AY 2013-14 and AY 2014-15. Further, we find that IMCSL is accepted as comparable for AY 2011-12 in (i) Goldman Sachs (India) Securities Private Limited v. DCIT (ITA No. 927/Mum/2016 & ITA No. 902/Mum/2016), (ii) Principal CIT-14 v. AGM India Advisors Private Limited (ITA No. 1377 of....
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....ered by the assessee. We also find that IDC (India) Ltd. is accepted as comparable in assessee's own case for AY 2013-14. Further, it is accepted as a comparable for AY 2011- 12 in the case of (i) Goldman Sachs (India) Securities Private Limited v. DCIT (ITA No. 927/Mum/2016 & ITA No. 902/Mum/2016), (ii) Principal CIT-14 v. AGM India Advisors Private Limited (ITA No. 1377 of 2017) (Bombay High Court decision) and (iii) Carlyle India Advisors Pvt. Ltd. v. Asst. CIT (ITA No. 2410/Mum/2016 and ITA No. 2506/Mum/2016). In view of the above factual scenario, we direct the TPO/AO to include IDC (India) Ltd. as a comparable during the year under consideration. 6.4 Finally, we come to the issue of comparability of Ladderup Corporate Advisory Pvt. Ltd. (in short 'LCAPL'). The TPO selected LCAPL on the ground that (i) it is engaged in the business of financial advisory services; it offers various types of services such as equity investments, business and equity valuations, project and acquisition financing, (ii) it has earned revenue of Rs. 11.18 crores from the business of financial and management advisory and consulting fees. The Ld. counsel submits that as per the web portal of....
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....t advisory services to its group company. During the AY 2011-12 the assessee entered into international transaction with its AEs for providing investment advisory services. To benchmark its transaction, the assessee selected TNMM is the most appropriate method. The Tribunal observed that the DRP has upheld inclusion of Ladderup Corporate Advisory Pvt. Ltd. merely on the ground that the said company has not reported segment wise breakup of income and no income has been reported from merchant banking advisory activities. The Tribunal further found that Ladderup Corporate Advisory Pvt. Ltd. has been excluded by the Coordinate Bench in the case of SUN Ares Real Estate Pvt. Ltd., vs. DCIT (ITA No. 621/Mum/2016) for AY 2011-12. Similar view has been taken by the Tribunal in the DCIT vs. General Atlantic Pvt. Ltd., (91 taxmann.com 406) (Mum Trib) for AY 2011-12. Thus following the above two decision of Coordinate Bench, the Tribunal directed the TPO/AO to exclude LCAPL from the list of comparables. The relevant paragraphs of the above order of Tribunal are produced below: 7. The DRP has upheld inclusion of 'Ladderup' merely on the ground that the said company has not report....
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....orporate Advisory Pvt. Ltd. is concerned, it is seen that the comparability of this company to an investment advisory service provider came up for consideration before the Tribunal, Mumbai Bench, in Temasek Holding Advisors India Pvt. Ltd. (supra). The Bench after considering the submissions of the parties having found that the company is registered as a Category-1 Merchant Banking Company with SEBI and is engaged in Merchant Banking service w.e.f. July 2010 held that the company cannot be treated as comparable to non-binding investments advisory provider. Respectfully following the aforesaid decision of the Co-ordinate Bench, we exclude this company from the list of comparables." 8. Therefore, in view of the finding of the Tribunal excluding Ladderup from the list of comparables, in the case of companies engaged in Non-binding investment advisory services, we direct the Assessing Officer /TPO to exclude the said company from the list of comparables being functionally different. The grounds of appeal by the assessee are thus, allowed." 6.6 Facts being identical, we follow the order of the Coordinate Bench in Kitra Capital Pvt. Ltd. and Wells Fargo Real Estate Advisors P....
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.... investors, rendering strategic financial advisory services, (ii) the analysis of these services shows that the strategic and financial advisory services rendered by this company are comparable with the high quality, investment advisory services rendered by the present assessee-company, (iii) MOAIPL has single reportable operating income segment and it is advisory fees of Rs. 40.04 crores, (iv) MOAIPL is engaged in providing mergers and acquisition services, which in fact are the advisory services which involve skills sets which are comparable to the other investment advisory services to that of the assessee's and none of the activities are in the nature of merchant banking services, (v) the assessee's claim of exclusion on the basis that the company has earned super normal profits, is not acceptable as a company cannot be eliminated just because it has earned high profits or has made huge losses. 9.2 Regarding the comparables selected by the TPO, the Ld. counsel submits that MOAIPL is rejected as comparable by the Tribunal in assessee's own case in AY 2010-11 (ITA No. 6989/Mum/2014) and also rejected as comparable by the DRP in assessee's own case in AY 2011-12. Further, it is ....
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....ed in distribution and marketing of financial products it is not functionally similar to the assessee company. From the website of the company, it appears that the company is boutique investment bank and a PCG equity broking house based out of Mumbai, focused on Indian and other emerging markets backed by veterans in the investment banking and capital market space in India. Its focus areas are: • Corporate Advisory • M&A and Private Equity • IPO Advisory and Planning • Structured Finance • India Entry Strategy • Sri Lanka Advisory • PCG and Institutions equity broking • HNI Wealth advisory • FII advisory • Stock Market Investment Strategy 2.31 In view of the fact that the activities of the company are functionally different from the activities of the assessee company, the A.O. is directed to exclude this company from the list of comparables to be used for application of TNMM." 10.1 The Ld. DR supports the order of TPO and submits that NBAL is rightly selected as a comparable on the reason that (i) as per the financials of the company....