TaxTMI 
TaxTMI 
2016 (11) TMI 1769
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....DRP. The AO, after receiving direction of DRP made an adjustment of Rs. 3, 91, 74, 434/- to the total income of the assessee. 2. Effective Ground of Appeal is about including Motilal Oswal Investment Advisors Pvt. Ltd. (MOIAPL), IDFC Investment Advisors Limited(IDFC)and ICRA Online Ltd. (ICRA-O)as comparables for determining the Arms Length Price (ALP). During the Transfer pricing proceeding, the TPO found that the assessee was providing investment advisory services, pursuant to the advisory agreement entered into with its Mauritius AE, that the AE belonged to the Mount Kellet Group based in New York, that AE would provide non-binding investment advisory services to fund and asset management company located outside India, that assessee was a sub-advisor for providing non-exclusive and non-binding services to the AE located at Mauritius, that during the year under consideration the assessee entered into International Transaction worth Rs. 26. 59 crores with its AE. s, that it used TNMM for bench marking and PLI was based on OP/OC. The assessee identified following six comparables with three year average margin of 15. 6%. 1. Future Capital Advisors Private Ltd., 2. Kshitij Inve....
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....ly included by the TPO in the list of comparables, that it was functionally not comparable, that it was engaged in Investment Merchant banking activities, that It had super normal profits. Reliance was placed on the decisions in the cases of Carlyle India Advisors Private Limited(ITA/2200/M/2014)and Carlyle India Advisors Private Limited (ITA/7367/ MUM/ 2012), Maersk Global Centres(India)Private Limited(ITA/7466/M/12), Sonata Software Ltd. (ITA /3514/Mum/2010) and Adobe Systems India Pvt. Ltd. (ITA/5043/ Del/ 2010). With regard to IDFC, the assessee argued that its segmental information was not available, that it was functionally not comparable, that it was engaged in Portfolio management service. It relied upon the cases of Roche Diagnostics India Private Limited (ITA/ 4127/Mum/ 2009) and Carlyle India Advisors Private Limited. (ITA/7901/MUM/2011). About ICRA-O, it was argued that it had been wrongly included in the final list, that it was functionally not comprab -le, that the company as well as its Outsourced Service Segments were engaged in providing diversified services, that it's bench marking in regard to the provision of research, advisory and other ancillary support se....
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....complete, that the assessee had failed to produce the necessary documentation to justify true nature of transactions within the meaning of Rule10D(1) and 10D (3), that the provisions of section 92C(3) were attracted in the case under consideration. Finally, the DRP rejected the objections filed by the assessee. 4. Before us, the Authorised Representative(AR)stated that MOIALP, IDFC and ICRA were not valid comparables, that MOIALP was not in investment advisory services, that it was engaged in the business of merchant banking, that segments were not available in case of the comparables collected by the TPO, that such comparables were to be rejected. He referred to the cases of Carlyle India Advisors Pvt. Ltd. (ITA/1268 of 2012), Bain Capital Advisors (I) Pvt. Ltd., Tata Power Solar Systems Ltd. and Carlyle India Advisors Pvt. Ltd. (ITA 1040 & 1517/Mum/2015 dt. 18. 11. 15-AY10-11). The Departmental Representative(DR)argued that the TPO had considered one of the segments, namely outsourced services for the purpose of benchmarking in the case of ICRA-O, that he had not considered the entity level margin of the comparable, that the order of the Tribunal in the case of Carlyle was dist....
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....duly noted that though the said concern was declaring income from a solitary stream of advisory fee, but factually it was found engaged in diversified activities and financial data was not available for each segment. It was noticed that the said concern was registered with SEBI as a merchant banker that it was indeed carrying out merchant banking activities. The aforesaid factual aspects exist during the year under consideration also and, in our view, the same makes the concern as incomparable with assessee's international transaction of Provision of investment advisory related support services. Therefore, considering the precedent in the assesse's own case as also the fact position for the year under consideration, the assessee company is justified in seeking exclusion of the said concern from the final set of comparable account of its functional dissimilarities. Thus, on this aspect assessee succeeds . 17. We have carefully considered the rival submissions on this aspect. A perusal of the Directors report of IDFC Investment Advisors Ltd for the instant year reveals that it is registered as a Portfolio manager with SEBI whereby it is carrying out Portfolio Management Se....
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.... the Tribunal in the case of Bain Capital Advisors (India) Private Ltd (supra) also supports the plea of the assessee for exclusion of IDFC Investment Advisors Limited from the final set of comparables. In view of the aforesaid discussion, in our view, IDPC Investment Advisors Limited deserves to be excluded from the final set of comparables for the purposes of computing arm's length price of assessee's international transaction of Provision of investment advisory related support services to associate enterprise. Thus, on this aspect also, assessee succeeds. " 5. 2. We would also like to quote the relevant portion of the order of the Tribunal in the case of Sparlkes Dhando Advisors Pvt. Ltd. (ITA/1047/M/2015-AY. 2010-11, dt. 31. 12. 2015), wherein the Tribunal has excluded MOIALP and IDFC from the list of the comparables. The relevant portion of the Tribunal order reads as follow: "5. We have heard both the parties on the issue of inclusion of Motilal Oswal Investment Advisors Private Ltd and also perused the cited orders of the Tribunal in this regard. On perusal of the orders of the Tribunal (supra), we find, in the case of Lehman Brothers Advisors Private Limited (su....
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....me, the liquidity crunch and re-valuation of assets across the board globally has opened up opportunistic buying and selling possibilities for our clientele in the industry and financial markets. The team has a good combination of skill set and knowledge to address the change in the market conditions. The Company expects a larger flow of transactions in the product areas of business and financial restructuring, private equity have-offs shareholder value creation through buy-back/sell-outs and mergers. " 5. From the above it is evident that the said company MOIAPL has undertaken 23 assignments successfully in the year under consideration. Major portion of the income is earned by MOIAPL out of cross border activity services and related financial services. The capital market business is one of the sources of the advisory fees earned by the assessee. Assessee has also earned fees out of assessee's capability of the structured finance teams, financial markets, ie both equity and credit market, is another source of income for the assessee. These functions of the assessee were analyzed by the Tribunal during the proceedings in the case of Carlyle India Advisors (P) Ltd (supra). The detail....
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...., we find the MOIAPL is functionally dissimilar and therefore, the same should be excluded for benchmarking the international transactions. Accordingly, AO / TPO is directed to exclude the same. Thus, Ground no. 1 raised by the assessee is allowed in favour of the assessee. 6. From the above, it is evident that Motilal Oswal Investment Advisors Pvt Ltd is held as a "merchant banker and investment banker", which is functionally not similar to that of function of non-binding advisory services. Therefore, after hearing both the parties in this regard, we are of the opinion that Motilal Oswal Investment Advisors Pvt Ltd is not a good comparable in this case. Accordingly, AO is directed to exclude the same from the comparables. " "7. Regarding IDFC, it is demonstrated before us that the said company is engaged in rendering of services as Portfolio Manager, whose functions are intimately different from that of the functions of non-binding advisory services rendered by the assessee to its AEs. The fact of rejection of the same as a good comparable to a case of similar services as in the case of the assessee, assessee was also demonstrated by relying on the decision of the Tribunal i....