TaxTMI 
TaxTMI 
2020 (1) TMI 1233
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....he assessee without giving any reason as to why the TNMM is not a suitable method in the case of the assessee." 3. "On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred the holding that the loss of Rs. 39,631/- in derivative segment is not speculation loss without appreciating the fact the assessee being a share broker and not a share trader, case of the assessee does not fall under any of exceptions enlisted in Section 73(1) of the Act." 4. "On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred the holding that the loss of Rs. 39,631/- in derivative segment is not speculation loss without appreciating the rationale laid down by the decision of the Hon'ble Delhi High Court in the case of CIT v. DLF Commercial Developers Limited." 5. "On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred the trading expenses of Rs. 17,07,026/- are not attributable to speculative business of the assessee of trading in derivative segment, without appreciating the rationale laid down by the decision of the Hon'ble Delhi High Court in the case of CIT v. DLF Commercial Developers Limited".....
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....sp;CUP 2 Elara India Opportunities Fund Ltd., Mauritius Stock Broking 2,58,79,835 CUP 3 Elara Global Funds Elara Emerging Markets Fund, Mauritius Stock Broking 64,774 CUP 4 Rajendra Bhatt, UK Stock Broking 10,739 CUP 5 Elara Absolute Return Fund, Mauritius Stock Broking 4,09,127 CUP Total: 3,05,24,457 The Assessing Officer issued notice to the assessee seeking certain details. In the notice the Assessing Officer inter alia asked as to why CUP method is the most appropriate method and why TNMM cannot be applied as the most appropriate method (MAM) with arithmetic mean of following companies :- Sr.No. Name of Company 1 Motilal Oswal Investment Advisors Ltd 2 Kshitij Investment Advisors Ltd 3 IDFC Investment Advisors Ltd 4 Ladderup Corporate Advisory Pvt. Ltd. 5 ICRA Online Ltd. 6. Assessing Officer noted the following response from the assessee for CUP as the MAM (Most Appropriate Method) :- The assessee submitted details of comparable uncontrolled transactions considered as CUP for benchmarking the international transaction of....
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....y factor such as date, volume are not explained. Hence the said CUP has been rejected.  In Annexure 53A(C) although the type of account is same, but other comparability factors such as date, volume are not explained. Hence the said CUP has been rejected.  In Annexure 53A(D) the type of account with AE is "Reissuance A/C of FII" and with comparable uncontrolled transaction it is "FDI of overseas corporate body". Further the country is different from that AE. The date, volume and other comparability factors are also not explained. Hence the said CUP has been rejected.  In Annexure 53A(E) the type of account with AE is "NRI" and with comparable uncontrolled transaction it is "Retail" The date, volume and other comparability factors are also not explained. Hence the said CUP has been rejected.  In Annexure 53B the type of account with AE is "FII" and with comparable uncontrolled transaction it is "Mutual Fund". The date, volume and other comparability factors are also not explained. Hence the said CUP has been rejected. In view of the above the CUP provided by the assessee has been rejected." 8. Thereafter ....
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....hosen as the most appropriate method since it is the most direct method. Where it is possible to locate the comparable uncontrolled transactions, the CUP method is adopted as it provides the most direct evidence of an arm's length price. 2.10 Further the AR of the appellant relied on DCIT Vs. M/s 3 Global Service Private Limited (ITA No. 1812/MUM/2009), Mumbai, the ITAT held that companies operating in different segment of the industry cannot be selected as comparable for applying the TNMM. 2.11 It is thereafter explained by the AR of the appellant that the companies which are stated by the AO in the assessment order are not comparable. 2.12 Further AR of the appellant explained that Without Prejudice even if TNMM is considered, Operating cost in proportion to the transaction with the associated enterprises instead of total operating cost should only be considered for the purpose of calculation of Arms Length Price. 2.13 Therefore on going through the facts of the case and on the basis that there is no precedent addition with regards to said matter in the case of the appellant company, I am of the view that the CUP method followed by the appe....
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....een rejected. 12. Thereafter he adopted TNMM and made arm's length price adjustment similar to earlier assessment year. On similar line as per earlier year, learned CIT(A) deleted the adjustment by concluding as under :- '2.12 Further AR of the appellant explained that during the course of assessment proceedings in response to the show cause notice it had been specifically explained that the segment of the comparable Companies were totally different than that of the appellant's business operations however the comparable companies stated in the assessment order were also totally different for A.Y. 2012-13. It is submitted that such addition on the basis of which the show cause notice provide some different-details as compared to the details shown in the assessment order is against the basic rule of natural justice and bad in law. Further Without Prejudice even if TNMM is considered, Operating cost in proportion to the transaction with the associated enterprises instead of operating cost stated by the AO should only be considered for the purpose of calculation of Arms Length Price. 2.13 Therefore on going to the facts of the case and on the basis that there i....
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....nternational transaction. The assessee's claim has been that the transactions with the third party have been documented with transfer price analysis. That the comparable-companies are also into investment advisory/portfolio management and the assessee is also in stock broking business. Further, the assessee is providing stock broking services to the AEs and the third party. The assessee's claim is that nature of services provided to the AEs and third party into stock broking is the same as is comparable and in such circumstances the assessee's claim that CUP method for determination of ALP is the most appropriate method. These pleas of the assessee are duly supported by the OECD TP guidelines and UN TP manual for the proposition that internal comparable exists, the same should be considered over external comparable. We note that the Assessing Officer has rejected the CUP method adopted by the assessee without brining any cogent material on record as to why the same is not appropriate. The Assessing Officer has made general observation that the assessee has not been able to prove that uncontrolled transaction was comparable to the assessee with regard to address like date of transac....
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....ulation activity. Besides assessee has demonstrated that expenditure disallowed represent institutional fees and other incidental expenses, which has not be factually disallowed by the authorities below. In view thereof, both the disallowances are deleted and the assessee's grounds are allowed. Accordingly, he deleted the disallowance." 18. Against this order, the Revenue is in appeal before us. 19. We have heard both the counsel and perused the records. The learned Departmental Representative relied upon the order of the Assessing Officer and also the decision of Hon'ble Delhi High Court in the case of DLF commercial developers (supra). 20. Per contra, learned Counsel of the assessee submitted that assessee's case does not fall under the realm of speculative transactions. He submitted that the decision of Hon'ble Delhi High Court referred by the Revenue was not with reference to a member of stock exchange. He submitted that in the present case exceptions listed in section 73(1) are fully relevant. In this regard he placed reliance upon Hon'ble Karnataka High Court decision in the case of CIT Vs. First Securities (P) Ltd. (56 Taxman.com 137). 21....