TaxTMI 
TaxTMI 
2020 (7) TMI 816
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..../ TPO under the directions of the Hon'ble DRP have erred in arbitrarily rejecting the economic analysis / transfer pricing study undertaken by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1961('Rules'), for the determination of the arm's length price of the international transactions entered into by the Appellant. 3. On facts and circumstances of the case and in law, the learned AO / TPO under the directions of the Hon'ble DRP have erred in re-characterising the Appellant as a Knowledge Process Outsourcing service provider, and not appreciating that it was providing non-binding investment advisory and related support services to its associated enterprises. 4. On facts and circumstances of the case and in law, the learned AO / TPO under the directions of the Hon'ble DRP have erred in not following decisions of the coordinate bench of the Tribunal in Assessee's own case, which have been affirmed by the Bombay High Court confirming that the Assessee is providing non-binding investment advisory services. 5. On facts and circumstances of the case and in law, the learned AO / TPO under the directions of th....
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....ith the return of income the assessee furnished report in Form 3CEB reporting international transactions with its Associated Enterprises (AE). Consequent of reporting international transactions of more than Rs. 15 crores the AO made reference to the Transfer Pricing Officer (TPO) for computation of arms length price of international transactions reported by the assessee. The TPO noted that besides other international transactions the assessee reported transactions with its AE with regard to provision of investment advisory and other related support services of Rs. 88,03,72,349/-. The assessee adopted the transaction net margin method (TNMM) as most appropriate method. The assessee selected 3 comparable companies namely, Almondz Global Securities Ltd., Crisil Risk & Infrastructure Solutions Ltd. and ICRA Management Consulting Services Ltd. The assessee has shown profit level indicator by using operating profit / operating cost (OP/OC). The assessee has shown its margin based on the data for financial year 2013-14 at 15%. The arithmetic mean of comparables was at 9.51%. Accordingly the assessee claimed that its transaction with the AE is at arm‟s length. The TPO rejected all th....
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....(KPO) in place of non-binding investment advisory and related services and (ii) exclusion/inclusion of various comparable companies. The learned A.R. of the assessee submitted that on similar set of facts in assessee's own case for A.Y. 2012-13 and A.Y. 2013-14 the assessee was held as non-binding investment advisory and related services and cannot be compared with merchant banking, investment banking or KPO‟s. The learned A.R. for the assessee submits that the Tribunal, while deciding the assessee‟s case for A.Y. 2012-13 and A.Y. 2013-14 followed the decision in assessee's own case for earlier years and the order of the Tribunal for A.Y. 2007-08, which is affirmed by the Hon'ble Jurisdictional High Court. In AY 2007-08 the Tribunal after analysing the "service agreement‟, which is effective from 01.04.2006 held that the assessee is engaged in providing non-binding investment advisory and related support services. The said service agreement is still continuing. 6. On the other hand, the learned D.R. for the Revenue supported the order of the lower authorities and submitted that there is no clear finding of the Tribunal on re-characterisation of assess....
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....ubsistence of "service agreement‟ which is in existence since 01.04.2006, till the period under consideration, is not disputed by the lower authorities. No contrary law is also brought to our notice. More over the international transaction related with provision of non-binding investment advisory and related supported services, reported by the assessee in its Form3CEB, was identified and examined by TPO for computation of ALP. Thus, in absence of any contrary law or fact and respectfully following the decision of earlier years wherein the assessee was held as engaged in providing non-binding investment advisory and related support services. With the aforesaid observation, we hold that lower authority was not correct in re-characterizing the assessee as KPO in place of providing non-binding investment advisory and related support services of the year under consideration. In the result, this ground of appeal is allowed. 10. The broad issue No. 2 relates to exclusion and inclusion of comparables. The learned A.R. of the assessee submits that the TPO has wrongly rejected the three comparables selected by the assessee namely, Almond Global Securities (Almond), Crisil Risk and Inf....
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....e unable to persuade ourselves to subscribe to the exclusion of the aforementioned company viz. Crisil Risk and Infrastructure Solutions Ltd. as a comparable for benchmarking the international transactions of the assessee for the year under consideration. We find that the DRP had in the assesses own case for the immediately preceding year viz. A.Y. 2012-13 directed the TPO not to consider export filter as it was not a relevant filter in the case of the assessee, since the services were rendered by the assessee for the A.E in India and also investments were to be made in India. In our considered view as there is no change in the facts during the year under consideration as against that of the immediately preceding year viz. A.Y. 2012-13, therefore, upholding of the application of the export filter by the DRP by adopting an inconsistent approach cannot be accepted. Our view that in absence of any change in the facts the principle of consistency has to be followed finds support from the judgments of the Hon'ble Supreme Court in the case of (i). Radhsoami Satsang Vs. CIT (1992) 193 ITR 321 (SC) and (ii). CIT Vs. Excel Industries ltd. (2013) 358 ITR 295 (SC) and the judgment of the Hon'....
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....y as a comparable by the TPO/DRP is concerned, we find that the same is for the reason that the said company had failed the export filter. We are unable to subscribe to the aforesaid view so taken by the lower authorities and for the reasons discussed at length by us hereinabove, that as observed by the DRP in the case of the assessee for A.Y. 2012-13 the export filter was not relevant in the case of the assessee, thus do not find any favour with the said observations so drawn by the lower authorities and are of the considered view that the TPO/DRP had wrongly rejected the aforementioned company viz. Almondz Global Services Ltd. as a comparable in the case of the assessee. In terms of our aforesaid observations, we direct the AO/TPO to include the abovementioned company viz. Almondz Global Services ltd., in the final list of comparables for the purpose of benchmarking the international transactions of the assessee for the year under consideration. (C) ICRA MANAGEMENT CONSULTING SERVICES LTD: We find that ICRA Management Consultancy Ld. is into advisory and management consultancy, while for the assessee is into providing non-binding investment advisory services. In our consider....
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....he rival submissions of the parties and have gone through the orders of the TPO/DRP. During TP adjustment proceedings the TPO after characterising the assessee as KPO, the TPO issued show cause notice date 09.10.2017 as to why this comparable company should not be included. The assessee filed its reply dated 17.10.2017, which is extracted by TPO in para 5.6 of his order. The assessee objected for inclusion on the ground that this company is in the different business, it is in BPO and IT enabled services and development infrastructure facilities, low employee cost, different in asset and unusual business year. The contentions of the assessee were not accepted by TPO. The TPO held that the contention of the assessee is not correct and that the annual report of this company clearly mentioned that it was industry effect and not company specific. The industry scenario affects all the business at the same time so it cannot be considered as unusual to reject the comparable. The DRP affirmed the action of the TPO by taking view that they have not find much difference in the function profile of this comparable and that it is engaged in the business of providing customer care services. 17. ....