TaxTMI 
TaxTMI 
2019 (9) TMI 1599
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....of R&I services and IT support services. 2. On the facts and in the circumstances of the case, the learned TPO/AO/Hon'ble DRP have erred in not accepting the economic analysis undertaken by the Appellant in accordance with provisions of the Act read with the Income-tax Rules, 1962 ('the Rules5) and modifying the same for determination of arm's length price ("ALP") of the impugned transactions to hold that the same are not at arm's length. 3. On the facts and in the circumstances of the case, the learned TPO/AO/Hon'ble DRP have erred in not accepting the use of multiple year data, as adopted by the Appellant in its transfer pricing documentation and determining the arm's length margins/prices using data pertaining only to financial Year ('FY') 2013-14 which was not available to the Appellant at the time of complying with the Indian TP documentation requirements. 4. On the facts and in the circumstances of the case, the learned TPO/AO have erred by wrongly rejecting certain companies from and adding certain companies to the final set of comparables for the impugned international transactions on an ad-hoc basis, thereby resorting to cherry picking of comparables for benchmarking....
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....pital employed by the assessee vis-a-vis the comparable companies while benchmarking the impugned internaTional transactions. 12. On the facts and in the circumstances of the case, the learned TPO/AO/Hon'ble DRP have erred by not making suitable adjustments to account for differences in the risk profile of the assessee vis-a-vis the comparable companies while benchmarking the impugned international transactions. 13. On the facts and in the circumstances of the case, the learned TPO/AO/Hon'ble DRP have erred in holding inter-company receivables arising from provision of R&I services and IT support services provided by the Appellant to constitute a separate international transaction under section 92B of the Act. 14. On the facts and in the circumstances of the case, the learned TPO/AO/ Hon'ble DRP have erred in not appreciating that the R&I services and IT support services (from which the intercompany receivables have arisen) were benchmarked by undertaking working capital adjustment which takes into account the difference in credit terms of the Appellant vis-a-vis the comparable companies. 15. Without prejudice to the above, on the facts and in the circumstances of the case,....
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....7 incorporating the transfer pricing adjustment. Aggrieved with the additions proposed, the assessee filed objection before the learned DRP. The learned DRP issued directions to the transfer pricing officer on 06/08/2018. In compliance to the direction of the learned DRP, the learned TPO revised the transfer pricing adjustment from Rs. 28,46,65,233/- to Rs. 33,11,82,383/-. Pursuant to the direction of the learned DRP, the Assessing Officer issued the final assessment order incorporating the transfer pricing addition of Rs. 33,11,82,383/-. 4. Before us, the learned Senior counsel of the assessee submitted that out of the Ground No.1 to 12 in relation to the transfer pricing adjustment in respect of provision of research and information services, the Ground No. 6 challenging inclusion of Aditya Birla Capital Advisors Private Limited in the final set of the comparables, was only pressed and remaining grounds were not pressed. Accordingly, the relevant grounds are dismissed as not pressed. 4.1 The learned Senior Counsel filed a paper-book containing pages 1 to 157 and submitted that the 'McKinsey India' has entered into a master service agreement dated 01/04/2010 with 'McKinsey' unde....
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....page 9 of the paper book containing Director's report which reads that the company focused on managing generic growth, Private Equity assets, excluding real estate and infrastructure. The learned senior counsel referred to profit and loss account of the company available on page 22 and 28 of the paper book, where revenue from operations has been shown from management fees. The learned counsel also referred to clause 1 of Note No. 17, available on page 31 of the paperbook, which reads that the main object of the company was to provide financial advisory services in management services and to carry on business of advising and managing venture capital funds. 4.4 The learned senior counsel further submitted that company has been excluded by the Tribunal in assessment year 2011-12 and 2012-13 in the assessee's own case, and further appeal filed by the Revenue against the order of the Tribunal has been dismissed by the Hon'ble Delhi High Court in both the assessment years. In view of the submission, the learned senior counsel requested to exclude the company from the final set of the comparables selected for benchmarking the transaction of provision of research and information services.....
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....e investments. At the current activity levels, the Company has raised and managements two sector-agnostic domestic funds, namely, Aditya Birla Private Equity Fund-I and Aditya Birla Private Equity - Sunrise Fund', Break-up of "Revenue from Operations" given on page 253 of the paper book gives the description of the nature of its revenues, namely: "Management Fees." Thus, it is apparent that the nature of business of this company, being raising of funds and deploying the same, is entirely different from what the assessee is doing in this segment, namely, rendering services in the nature of Knowledge on call, Practice research and Analytics. This company is, therefore, directed to be excluded from the list of comparables." 4.7 Similar finding has been given by the Tribunal in assessment year 2012-13 in ITA No. 6648/Del/2016 in the case of the assessee. The Hon'ble Delhi High Court in order dated 09/08/2018 while disposing of ITA No. 461/2017 and 526/2017 filed by the assessee for assessment years 2011-12 and 2012-13 and also ITA No. 590/2017 and ITA No. 82/2018 filed by the Revenue for assessment years 2011-12 and 2012-13, upheld the finding of the ITAT on the issue of exclusion of....
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.... the Hon'ble Delhi High Court in order dated 7/02/2018, while reserving the judgment in ITA 461/2017, ITA 526/2017; ITA 590/2017 and ITA 82/2018 remitted the matter to the ITAT for deciding in view of the decision of the Hon'ble Delhi High Court in the case of Pr. CIT Vs. Kusum Healthcare Private Limited (ITA No. 765/2016 vide order dated 25/04/2017). In the judgment dated 09/08/2018, the Hon'ble Delhi High Court in para-32 to 33 upheld that finding of the Tribunal that interest on outstanding receivables is an International transaction. The assessee filed review petition against the order dated 09/08/2018 of the Hon'ble Delhi High Court. The Hon'ble Delhi High Court in order dated 16/04/2019, reviewed the order dated 09/08/2018 and recalled the order dated 09/08/2018 with the finding that Hon'ble High Court did not propose to disturb order dated 7/02/2018 and matter would be considered by the Tribunal on its own merits. 5.3 The learned senior counsel submitted that the learned TPO has followed the finding of the Tribunal for assessment year 2012-13 in ITA No. 6648/Del/2016, which is no longer in operation in view of the order of the Hon'ble Delhi High Court dated 16/04/2019. 5.4....
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....reduced the rate of interest from 12% LIBOR plus 2.5 points. It was submitted that Assessee was a debt free company, AE takes care of funding, no interest was charged and there is no liability of interest and therefore, notional interest income cannot be brought to tax. Assessee relied on the principles laid down by Co-ordinate Bench at Mumbai in the case of Lintas India Pvt. Ltd., in ITA No. 2024/Mum/2007 dt. 09-11-2012 and also Mastek Ltd., Vs. ACIT in ITA No. 3120/Ahd/2010 then referring to the provisions of the Act the explanation brought by amendment in 2012 Finance Act. It was submitted that even though retrospective, it does not cover Assessee's transaction as the word 'capital financing' used there particularly refers to loans or advances given for capital financing, whereas in Assessee's case, these are outstanding services rendered but not capital financing. The words are to be interpreted invoking the principles ejusdem generis and so the outstanding receivables cannot be equated to capital financing as amended by the provisions of the Act. It was further submitted that working capital adjustments are being made while analyzing the operational performance....