TaxTMI 
TaxTMI 
2022 (2) TMI 1506
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....ion 144C(13) of the Act, the Appellant respectfully submits that the learned AO erred in passing the order on the following grounds: 1. In making an upward transfer pricing adjustment of Rs. 4,36,18,542 in determining the arm's length pricing (ALP) of the international transaction pertaining to investment advisory/support services provided by the Appellant to its overseas associated Enterprises(AE), inter alia, on following grounds: a) Rejecting the search process adopted and documentation maintained by the Appellant for the international transaction; b) Rejecting the following companies selected as comparables by the Appellant in the transfer pricing documentation: * IDC (India) Limited; * Access India Advisors Limited; * ICRA Management Consulting Services Limited; * Informed Technologies Limited; and * Kinetic Trust Limited. c) Not sharing the search process conducted by the learned transfer pricing officer (TPO) to arrive at the final set of comparable companies: d) Accepting the following additional companies which are functionally not comparable to the investment advisory services pr....
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....ifference in risks assumed by comparable companies selected by the learned TPO vis-à-vis the Appellant; f) Not granting an adjustment on account of differences between the working capital of the Appellant and the comparable companies; g) Rejecting the use of contemporaneous and multiple year data available for computing the ALP as on the date of filing of return of Income and relying only on the single year data (i.e. for the year ended 31 March 2010) for the purpose of determining the ALP. 3. In making an upward transfer pricing adjustment to the extent of Rs. 4,97,37,603 for the international transact pertaining to broking services to its AE and in re-computing the arm's length price under the Comparable Uncontrolled Price (CUP), inter alia, on following grounds: a) Making an upward adjustment to commission earned from AEs under the CUP method, by considering only top 10 offshore clients as comparables and disregarding commission from other foreign and on shore clients in the absence of any dissimilarity in the nature of functions performed for the securities broking services rendered to onshore and offshore clients in respect of sec....
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....ee company and hence it is not allowable u/s. 37(1)." 5. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 4. These appeals came up for hearing on 22nd November, 2021. On the said date, noticing from the record that all along the assessee in its written requests had sought exemption from the virtual platform and opportunity to argue the appeal in a physical Court. The ld. AR, accordingly was required to address whether he was ready to argue his case on a virtual platform. 4.1. The ld. AR Mr. Madhur Aggarwal submitted that ITA 1115/Mum/2015 is a stay granted appeal wherein on the extension of Stay granted by the ITAT the Revenue had invoked the Writ jurisdiction of the Hon'ble High Court, the assessee consequently is now ready to argue these appeals on a virtual platform itself. Copy of the order dated 13.09.2021 in Writ Petition No. 666 of 2020 was filed. The relevant extract of the decision is extracted hereunder for completeness: "2. Mr. Agarwal states that main Appeal before the Income. Tax Appellate Tribunal had come up for hearing sometime in last week at which time the departmental representative ....
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....Sachs (Mauritius) LLC. 6.1. The present appeals are against the final assessment order dated 28.01.2015 passed by the AO u/s. 143(3) read with Section 144C(13) of the Income Tax Act passed in pursuance to the directions of DRP. 6.2. The assessee in the year under consideration declared a taxable income of Rs. 166,13,33,314/-. In Form No. 3CEB the assessee has reported the following international transactions with its Associated Enterprises: 1. International Transactions During the year under consideration, the company has entered into the following international transactions with its Associated Enterprises: 1 Provision of Investment banking services Rs. 149,429,101 (Receipt for services) Rs. 34,450,732 (Payment for services) TNMM 2 Investment advisory and support services in respect of strategic investments into India Rs. 511,629,884 TNMM 3 Securities broking services in respect of securities traded in the cash equity segment on NSE and BSE Rs. 399,170,671 CUP 4 Securities broking and clearing services in respect of contracts entered in the derivatives segment on NSE and BSE Rs. 630,021,886 CUP 5 Pr....
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....e grievances posed on the above issues including the grievances posed in Ground No. 1(a) & Ground No. 1(i) challenging the order on the grounds of non-sharing of the search process conducted by the TPO [Ground No. 1(c)]; Rejection of contemporaneous multiple year date on facts challenged vide Ground No. 1(g); not granting adjustment on account of difference in risks assumed by comparable companies selected by TPO [Ground No. 1(h)]; using information u/s. 133(6) without providing copy of the questions sent and answers received; and denial of opportunity of being heard thereon [Ground No. 1(i)] all these grounds raised may be considered to be vehemently agitated by the assessee and are not being given up. Maintaining the challenge posed in the grounds raised, it was submitted that the assessee would first seek adjudication on the issue of exclusion of Moti Lal Oswal Investment Advisors Pvt. Ltd. challenged on various grounds before the TPO and the DRP also. It was submitted that the assessee is confident on the basis of facts and precedents available in assessee's own case that the assessee has a binding precedent in its favour and hence must succeed in the absence of any contrar....
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....ttention was invited to the objections posed on this ground before the TPO and the DRP also. Attention was invited to Chart at page 2 of Additional Paper Book (II) contrary a selection of some cases relied upon were referred to: Judicial Precedents A.Y. 1. PCIT - 7 v. Goldman Sachs (India) Securities Private Limited [ITA No.30/Mum/ 2017] (Bombay High Court) 2009-10 2. PCIT v. NVP Venture Capital India Private Limited [ITA No. 406/Mum/2016] (Bombay High Court) 2010-11 3. Goldman Sachs (India) Securities Private Limited v. DCIT, Circe- 7 (1)(1) [ITA No. 927/Mum/2016] 2011-12 4. Goldman Sachs Asset Management India Pvt Ltd. v. DCIT [ITA N . 6989/Mum/2014] 2010-11 5. Goldman Sachs (India) Securities Private Limited v. DCIT, Range 3(1)[ITA No. 222/Mum/2014] 2009-10 6. NVP Venture Capital India Private Limited v. DCIT - 3(2)(2) [ITA No.1564/Mum/2015] 2010-11 7. Bain Capital Advisors (India) Private Limited v. DCIT - 3(3) [ITA N0. 413/Mum/2015] 2010-11 8 3i India Private Limited v. DCIT [ITA No. 581/Mum/2015] 2010-11 9 AGM India Advisors Private Limited [ITA No. 4757/Mum/2015] 2010....
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....cific attention to documents available in the public domain made available to the TPO as well as the DRP which constituted the Directors' Report at specific page 292 of the Paper Book were referred to. Copy of the Annual Report obtained from the Website extracts available in the public domain available at pages 291 to 316) it was submitted, mentions the activities of the said comparable. Referring to the same, it was submitted that it is mentioned that there are four different business verticals of Moti Lal Oswal Investment Advisors Pvt. Ltd. therein thus, the segmentals allegedly obtained by the TPO have no relevance. The specific extract from the Director's Report page 292 of the Paper Book highlighting the activities referred to is reproduced hereunder: "During the year ended 31st March, 2010 the revenue of your company have increased from Rs. 468.47 million to Rs. 655.26 million and the Profit After Tax (PAT) have increased from Rs. 149.38 million to Rs. 216.60 million-an increase of 40% and 45% respectively over the previous year. The company derives its business income from four different business verticals viz Equity Capital Markets, Mergers & Acqui....
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....ring the facts as available and relied upon, we are unable to see how these can be said to be supporting a case of the Revenue. The information referred to, we have seen and considered. On a careful reading of it, we find that it leads to many self contradictory instances of multiple, arbitrary conclusions and infact demolishes the claim of the Revenue. We find that for the purposes of the present proceedings in support of the claim of the Revenue, it is a worthless exercise in futility as it neither illustrates nor evidences a compatibility of the said company with the assessee. The reference to these following facts fails as an evidence to establish comparability with the assessee. The specific para is extracted hereunder for completeness: "'8.10 Further, the assessee has also submitted reasons for rejecting the additional comparables mentioned in the notice as under: * Motilal Oswal Investment Advisors Private Limited: The TPO used information collected u/s. 133(6) from the said company. The assessee has furnished its explanation on the proposal of the TPO to reject this comparable, as under: The assessee has contended that the functions p....
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....t has also rendered strategic financial advisory services to Vuppalamritha Magnetic Components Ltd., to enhance its banking facilities fund base limit. It has acted as a lead manager to Jai Balaji Industries Ltd., in connection with proposed placement of equity shares to QIBs. Further, it has rendered strategic financial advisory services to Ind Bharat Power Infra Ltd., for proposed placement of equity I convertible instruments with financial investors. It has also rendered advisory services to Bessemer Venture Partners Trust and rendered exclusive strategic financial advisory services to Sequoia Capital India Operations LLC for its proposed investments in Bharat Power Infra Ltd., It has also rendered advisory services to Citigroup Venture Capital. The compensation of Rs. 53.67 crores has been received from these 10 clients for rendering the advisory services mentioned above. These top 10 clients account for 82.64% (53.67/64.94 crores) of the total advisory fees received by the said company during the year under the proceedings. (c) On going through the Balance Sheet of Motilal Oswal Investment Advisors Pvt. Ltd., it is seen that the company has single reportable operation....
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....ture of investment banking or merchant banking activities. Thus the contention of the assessee on this point cannot be accepted. Further, there is no concept like super profit as claimed by the assessee. Thus the company is considered as a comparable as it is functionally similar to the assessee and rendering investment advisory services. (emphasis supplied) 12.2. On considering the facts on the other hand we find that there is a binding legal precedent on the issue in the orders of the ITAT not only in assessee's own case in the preceding and subsequent assessment years but also in the orders of similarly situated assessees for the specific year under consideration which have been cited before us. 12.3. We find that the assessee in the facts of the present case qua the Investment advisory segment has all along opposed the inclusion of the said comparable on the reasoning that it is engaged in merchant banking and acquisition and mergers, thus, cannot be compared to assessee's investment advisory services. Infact, on a reading of the orders of the ITAT right from 2008-09 assessment years and earlier as noted in order dated 22.07.2016 in ITA ....
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....tment Advisory Services rendered by it to its AEs. The companies selected by the TPO were identical to one selected in Carlyle India Advisors (P) Ltd., The aforesaid decision of the TPO in Carlyle (I) Advisors (P.) Ltd. v. Asstt. CIT [2012] 24 taxmann.com 176 (Mum.) was a subject matter of consideration by the Tribunal in ITA No. 7901/Mum/2011. The Tribunal after examining the business of each of the individual comparable concluded that they were different from that of the services provided by Carlyle India Advisors (P.) Ltd. (supra). This is so as the comparable used were in the merchant banking business while M/s. Carlyle India (supra) just like the Respondent-Assessee were in Investment Advisory Services. The Revenue carried the issue from the order of the Tribunal rendered on 4th April, 2012 in Carlyle India Advisors (P.) Ltd. (supra) to this Court in appeal. The appeal being (CIT v. Carlyle India Advisors (P.) Ltd. [2013] 32 taxmann.com 23 (Bom.)) -wherein this Court refused to entertain the Revenue's appeal as is reflected in the order dated 22nd February, 2013. Thus, we see no reason to interfere with the impugned order of the Tribunal; (b) In the circumstance, ....
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....the facts of the instance case, was the Tribunal right in directing the AO to exclude Motilal Oswai Investment Advisory Pvt. Ltd.. from the list of comparables, when the DRP has in this years found that the major source of revenue came from financial Advisory services and not from any activity of merchant banking. Assessee company itself has reported in its annual report income from operations under the head Advisory fees a fact that has not been controverted by the Respondent company? (emphasis supplied) 12.7.1. The issue raised was considered by the Hon'ble Court in the following manner: 3. All these questions arise out of transfer pricing adjustment in case of the respondent-assessee. In so far as question No. i is concerned, the Tribunal excluded the instance of one Motilal Oswal Investment Advisory Private Limited on the ground that the said company was carrying on business of mergers and acquisitions and other related activities as well as, as a merchant banker, whereas the assessee was providing Investment Advisory Services. Learned counsel for the revenue however contended that the Transfer Pricing Officer had recorded that during the year under con....
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....ision of the Co-ordinate Bench given in the case of Carlyle India Advisors Pvt. Ltd. in ITA No. 2200/M/2011, it was held that Motilal Oswal Investment Advisors Pvt. Ltd., is functionally not comparable with an investment advisory company. In the case of Bain Capital Advisors (India] Pvt. Ltd. in ITA No. 1360/M/2014, the Co-Ordinate Bench of the Tribunal are taking a consistent view that Motilal Oswal Investment Advisors Pvt. Ltd. has to be excluded from comparables on the plea that it was engaged in diversified activities. Respectfully following the findings of the Co-ordinate Benches, we direct for the exclusion of Motilal Oswal Investment Advisors Pvt. Ltd. from the list of comparables in the case of investment advisory services. It would not be out of place to refer to the decision of the Tribunal in the case of General Atlantic Pvt. Ltd. in ITA No. 1019/M/2014 wherein the same combination have excluded Motilal Oswal Investment Advisors Pvt. Ltd. from the list of final comparables. 12.9. It has been seen that this view on challenge before the Hon'ble High Court has been upheld by their Lordships. The legal precedent on facts namely that merchant banking companies cannot b....
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....ate equity investment. The wide range of activities include portfolio management, credit syndication, counseling on M&A, etc. This whole range of functions and activities carried out by Motilal Oswal is definitely are far wider and much different from investment advisory services where core functions is to give advices for making the investments in diversified fields. A company which is engaged in merger and acquisitions, private equity syndication, loan/credit syndication and performing most of the function of a Merchant Banker, then the entire functions and transactions affects the generation of revenue and margins. Such functions are entirely different from investment advisory services. Mere classification of revenue as 'advisory fees' will not put the company in a comparable basket sans functional similarity and transactional analysis. In case of Carlyle India Advisors Pvt. Ltd. (supra), it has been held that, the merchant banking functions are entirely different from investment advisory services and this decision of the Tribunal has been upheld by the Hon'ble Bombay High Court. Thus, in view of plethora of judicial decisions as referred to by Ld. Counsel and in vie....
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....which is placed at page 282 of the paper book. On perusal of the said order of the Tribunal, we find that it is decided in favour of the assessee vide ITA No. 7367/Mum/2012(AY 2008-2009), dated 7.2.2014. On perusal of para 12 of the said order of the Tribunal, which contains the operational part, we find the same is relevant and the Tribunal has given its finding under the facts which are similar to that of the AY under consideration. The MOIAPL, which has engaged in the business of merchant banking is not a good comparable for determining the ALP. Relevant contents of the said para 12 are reproduced here for the sake of completeness of this order which read as under: "12. ......The only dispute is whether Motilal Oswal Investment Advisors Pvt. Ltd. can be considered as a comparable for determination of ALP.A perusal of three comparables considered by the TPO shows that M/s. Future capital Investment Advisors Ltd., has operating profit at 21.79% whereas OPM of Motilal Oswal Investment Advisors Pvt. Ltd. is 72.33%. The comparables used by the TPO themselves are showing extreme OPM.A perusal of the Directors report of Motilal Oswal Investment Advisors Pvt. Ltd. shows that du....
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.... of Carlyle India Advisors Private Limited (214 Taxmann 492), to support its plea for exclusion of the said concern from the final set of comparables. The TPO rejected the aforesaid plea on the ground that the Profit and Loss account of the said concern for the year under consideration showed that the only stream of income was from advisory services and not from any activity of merchant banking and, therefore, the said concern was carrying out only advisory services and, according to him, the said concern was includible in the final set of comparables. The DRP also accepted the position that the said concern was engaged in advisory services which are broadly comparable to the assessee's activities under test. 8. We have perused the relevant material on record. It is starkly evident that the said concern M/s. Motilal Oswal Investment Advisors Private limited is engaged in qualitatively different and diversified business activities, whereas the activities of the assessee are confined to rendering non-binding investment advisory for its Associated Enterprises. No doubt, both the concerns may be in the business of rendering advisory services, so, however, it would also be ....
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.... wrongly included in the list of valid comparables. Both are functionally different from the assessee. Activities carried out the assessee for the year under appeal are distinct and quite separate from the activities of those companies. So, reversing the order of the FAA, we decide first effective ground of appeal in favour of the assessee." Respectfully, following the above, we hold that the DRP was not justified in excluding ICRA and IDCL from the list of the valid comparables. We also hold that the DRP had rightly excluded MOIALP from the list of comparables." 12.10. Although we have addressed the specific information relied upon in para 12.1 of this order and have held that on merits it is of no relevance however, even procedurally we are of the view that the manner in which the information has been selectively used vitiates the procedure. 12.10.1. We have examined the arguments of the Revenue that since information u/s. 133(6) has been obtained from the comparable, hence, the decisions of the Hon'ble High Court and the ITAT in assessee's own case do not constitute a valid binding legal precedent. On examining the same, we hold that this argument is clear....
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....me to the assessee need be provided is non negotiable. Reliance placed on the selectively gathered evidence not fully made available either to the assessee or made available for judicial scrutiny has no credibility as it is a case of arbitrary exercise of power appointing ones own self as Judge, Jury and Advocate which position can neither be permitted nor tolerated. 12.11. For the exclusion of the said comparable, we further find support from the decision of the jurisdictional High Court in the case of Eight Road Investment Advisors Pvt. Ltd. (formerly known as (FIL Capital Advisors Ltd. (2020) 424 ITR 563 (Bombay). 12.12. Accordingly, considering the judicial precedent available leaving all the other issues open for considering the assessee's prayer for seeking exclusion of Moti Lal Oswal Investment Advisors Pvt. Ltd. on facts is allowed. ITeS SEGMENT 13. Addressing ground No. 2 ld. AR submitted that in the ITeS section, multiple issues have been agitated by the assessee wherein apart from challenges posed to the order passed on the grounds of incorrect application of filters; selection of companies with super normal profits not allowing risk adjustments and adjus....
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....rgued that the legal precedent is that companies which have persistent loss for three years in a row applying the filter are rejected and companies which are making loss in any two out of three years, they cannot be termed as persistent loss making companies. Sufficient precedent was relied upon to show that CG VAK Software and Exports Ltd. having two segments, software services and BPO Services and the BPO Services is considered as comparable to the services provided by the assessee. Referring to the OP/OC ratios, it has incorrectly been termed as a loss making company. 16. The ld. DR relies upon the orders of the TPO and the DRP. 17. A perusal of the record shows that submissions of the assessee in regard to the two companies have been extracted at page 24 para 1.1.3 to para 1.1.5 page 27. For CG VAK Software and Exports Ltd., the reason has been persistent loss for the last 3 years which position of fact, we find is incorrect on the basis of record made available. The assessee has taken us through the relevant pages in the Paper Book which have been the basis of submissions extracted in page 25 and 26 of the DRP's order. On considering the same, we find that the said c....
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....mparable companies has been objected to by the assessee. INFOSYS BPO 21. Addressing Infosys BPO first, referring to the TPO's order page 35 to 37 it was submitted that the TPO himself agreeing with the objections of the assessee agreed to exclude the said comparable. However, it was still included as a comparable without giving any contrary reason possibly by mistake. This issue was agitated before the DRP but no specific finding has been given. For seeking its exclusion, the detailed arguments remain extracted in the TPO's order. Accordingly, without repeating these objections on facts which had been agreed with by the TPO himself, appropriate directions were requested. 22. The ld. CIT-DR considering the TPO's order and the objections of the assessee before the DRP did not object to the prayer of the assessee. 23. Accordingly, on considering the record, Infosys BPO for this specific reason is directed to be excluded as having been included wrongly. The facts seeking its exclusion argued before the TPO which have been taken into consideration by him we find in peculiar facts of the present case require no repetition. The comparable is directed to be excluded....
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....holding that proper opportunity had been given by the TPO. 28. The ld. DR has relied upon these observations. 29. We find on considering the facts that reliance placed on the so called opportunity provided by the TPO is misplaced and misdirected. The adjudicating authority, it goes without saying giving an opportunity of being heard is required to give a fair hearing, pass a speaking order addressing the objections. Otherwise, it becomes a meaningless exercise if facts, submissions and legal precedence relied upon remain unaddressed. Providing an opportunity is not a mechanical exercise where after confronting the conclusions, the authority has a free reign to act arbitrarily. The box cannot be claimed to be ticked by the so called opportunity where the decision to include the comparable does not address the objections posed. The arguments and evidences placed on record seeking its exclusion are required to be addressed. Considering the precedent on facts where FAR of the two companies is entirely distinguishable in as much as software solutions and Engineering design services are being performed by Acropetals Technologies, we have no hesitation in directing its inclusion. Th....
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.... a wide spectrum of services that use information technology based delivery. Such services could include rendering highly technical services by qualified technical personnel, involving advanced skills and knowledge such as engineering, design and support. While on the other end of the spectrum ITeS would also include voice based Call Centres that render routine customer support for the clients". Thus the Court held that the characteristics of the service and the functions of the wide range of ITeS companies their business environment, assets and capital employed would all have material bearing on their profitability and would be entirely distinguishable across this spectrum. 30.2. Accordingly, Eclerx is directed to be excluded. 31. The other issues agitated by the assessee in ground No. 2 in sub-grounds (c)(ii)(g) are left open. 32. Addressing the issues agitated in ground No. 3, it is seen that in order to determine the arm's length price for broking services rendered by the assessee to its AE, CUP method has been accepted by both the parties. The issue, it is seen has been discussed by the DRP at pages 18 to 23 in para 3 to 3.2. In the year under consideration, the a....
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.... assessment year i.e. 2011-12 assessment year placed in the additional Paper Book were relied upon wherein the TPO's order supported by the TP Study and Form 3CEB is available at page 116 and 143 and for 2013-13 assessment year, the TPO's order at page 161 to 185 relying upon the TPSR and Form 3CEB was relied upon. Thus, it was submitted that the same approach as in earlier years and subsequent years may be followed. 33.1. Referring to these facts, it was argued that there is no change in facts over the years, it was his prayer that a direction to the Revenue may be given to follow the same methodology. The said action, it was submitted is supported by the following legal precedent to name a few: * Principal Commissioner of Income-tax, New Delhi v Maruti Suzuki India Private Limited (Civil Appeals nos. 5409 of 2019) (Supreme Court) * Radhasoami Satsang v Commissioner of Income-tax (Civil Appeals nos. 10574 to 10583 of 1983) (Supreme Court) * Commissioner of Income-tax v Gopal Purohit (IT Appeal No. 1121 of 2009) (High Court of Bombay) * Principal Commissioner of lncome-tax-4, Pune v. Vishay Components India (P.) Ltd. (IT Appeal No. 164....
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.... view that there are certain differences which exist between the services rendered by the assessee to its third party clients and the service rendered by the assessee to its AE, then appropriate adjustments need to be made to the arm's length price in order to make it comparable to the international transaction, then the following adjustments to the average commission rate charged by the assessee to the third party clients, it was his prayer should be made; namely adjustments for significantly higher volume of transaction that the AE has compared to other clients and adjustment for difference in risks assumed for AEs versus third party clients. 34. The ld. DR has relied upon the orders of the tax authorities. The relevant discussion from the DRP's order at pages 22 & 23 relied upon by the Revenue is extracted hereunder: "3.2 Discussion & Direction to the DRP The assessee has provided security broking services in respect of securities traded in the cash equity segment on NSE and BSE. In the TPSR assessee had benchmarked the transactions using CUP as MAM. The broking services were rendered by the assessee to it's AE which are Flls. Therefore, the TPO ....
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....nd to be in order. The total turnover of the AE clients during the year was 19,500.45 crores. Since almost 50% of the turnover came from the top 10 AE clients we found the average brokerage charged from top 10 Fll as comparable is also found to be in order. 3.2.2 In view of the above discussion, no interference is called for with regard to the rejection/selection of comparable by the assessee. Therefore the adjustment made by the TPO is found to be in order and no interference is called for. 35. We have heard the submissions and perused the material available on record. We find on facts that there is no discussion whatsoever as to why the methodology only in the year under consideration has been changed by the Revenue. Considering the past precedent available on the issue, which has been followed in the subsequent assessment year also which position of fact is not contested by the ld. CIT-DR, we direct the TPO to consider the issue in the light of the past accepted method followed by the department. All the other submissions advanced by the assessee, accordingly, become academic in nature and do not require any specific adjudication in the year under consideration. Whil....
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....egal precedent and the nature of the payments, we have seen that these are not charges for any Statutory violations. The payment we have seen are charges where the facility provided to rectify the errors committed at the time of placing the order are exceeded beyond a limit. The charges are levied to encourage the broker to make fewer errors and consequently fewer modifications. It is seen that in terms of the Rules/conditions for trading at the Stock Exchanges all transactions in respect of institutional trades executed are required to be settled by the custodian of the institutional client at the Stock Exchange within the prescribed time limit. At times the custodian may reject the institutional trade after the cut off time prescribed by the Stock Exchange for settlement. The obligation for settlement is then passed on by the Stock Exchange to the Broker. The payments made for such non-acceptance of settlement by a custodian results into "non custodial settlement" which attracts a charge in the hands of the broker. We have seen that these are not instance of violations of statutory requirements inviting penalty. Circular No. NSCCL/SEC/2007/0102 dated 26.07.2007 issued by NSCCL in....
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....d in law the Tribunal was justified in deleting the disallowance made by the Assessing Officer of claim of the Assessing Company for a deduction of payment of Rs. 6,51,240/- towards penalty paid to Stock Exchange even though the penalty payment was clearly disallowable under Explanation to Section 37(1) of the Income Tax Act? 12. The question raised by the revenue was rejected making following observations:- "3. As regards question (C) is concerned the finding of fact recorded by the ITAT is that the amount paid as penalty was on account of irregularities committed by the assessee's clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such a case the explanation to section 37 would not apply. Accordingly question (C) raised by the Revenue cannot be entertained." * In that view of the matter, this question is also not entertained. 38.3. Accordingly, respectfully following the precedent, the addition is directed to be deleted. Ordered accordingly. 38.4. Ground No. 5, it is seen is consequential in nature. ADDITIONAL GROUND 39. The assessee before the ITAT has also raised the foll....
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....or admission of the said additional Ground at this stage. 41. In the light of the submissions of the parties before the Bench admission of the above ground at the time of hearing via virtual platform was directed. Accordingly, in terms of the pronouncement made at the time of hearing considering the judicial precedent cited, we deem it appropriate to admit the ground and restore the same back to the file of the AO with the direction to allow the claim in accordance with law. 42. Accordingly, the appeal of the assessee is partly allowed for statistical purposes. REVENUE'S APPEAL 43. Proceeding to the issues agitated in the Revenue's appeal it is seen that vide ground No. 1, the AO has challenged the direction of the DRP in holding that Integrated capital services be excluded as a comparable. 44. The ld. DR referring to the TPO's order submitted that the said comparable does not clear the one crore filter and is also functionally different from that of the assessee. It was submitted that no doubt the said comparable was selected by the TPO, however, on noticing that it was functionally dissimilar and did not clear the filter, its exclusion was directed. The....
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....nd no infirmity with the said direction. The arguments now advanced on the so called average high salaries paid to the assessee's employees, we find on facts is misplaced. Reference has been made to page 5 & 6 of the TPO's order. We find that by itself it means nothing. For the purposes of completeness, the facts as set out in the show cause notice are attached hereunder: Sr. No. Name of Employee Designation Educational Qualification Work experience (years) 1 RadhikaSinha VicePresident Masters of Business Administration 13.8 2 Vijay M Karnani Managing Director Masters of Business Administration 18 3 SumerJuneja Associate Bachelors of Science Degree in Politics & Economics 5.7 4 Alok Nitin Sheth Associate Masters in Systems Engineering 5 5 Rupen Jhaveri Associate Bachelors of Science 5.8 6 Pooja Tyebjee Associate Masters in Technology 12.5 7 PrakeetDhawan VicePresident Masters in Technology 14.5 8 Vishal Bakshi Managing Director Masters of Business Administration 17.3 9 AnantJalan Associate Bachelors in ....
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.... Rs. 7 Crores in salary and they have rendered concentrated and intensive research related services of these many opportunities in the entire year. So, in selecting the comparables, the nature of services rendered by the comparables will have to be scrutinized in detail to evaluate which of the comparables are broadly similar to that of the assessee company. With this in view, the TPO now proceeds to analyse the comparables relied upon by the assessee. 46.2. On a reading of the above without any comparative analysis with the salaries and the qualifications of the employees of Integrated Capital Services, we find that it is a meaningless exercise. The argument that it is very high has no basis available for comparison and hence at best can be termed to be a suspicion, surmise or conjecture. Unless some rationale basis for concluding that employing MBA personnel etc. by itself means that education and skill set is not commensurate with advisory services. We are unable to consider these observations in the manner ld. CIT-DR would want to argue. We find that these facts on a stand alone basis mean nothing. It is further seen that this has not even been the basis or the rationale of ....
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....ssessment year wherein on similar facts and circumstances in regard to ESOP cost incurred by the assessee in respect of Restricted Stock Units (RSUs) granted to the assessee stood confirmed by the DRP. The AO accordingly proceeded to make a similar addition as per discussion in the order at pages 3 to 11 vide paras 5 to 5.6. The AO noticed that it is a recurring issue. He, accordingly, disallowed the net amount on account of amortization of RSU expenses. The DRP relying upon the judicial precedent as available in the case of PVP Ventures Ltd. (2012) 211 taxman 554 of the Madras High Court, decision of the Special Bench, Bangalore in Biocon; and Delhi Bench in Ranbaxy Laboratory 124 TTJ 771 etc. considering the specific facts deleted the addition. Revenue is aggrieved. 48. The ld. CIT-DR relies upon the order of the AO. 49. The ld. AR relies upon the impugned order. 50. In the light of the submissions of the parties before the Bench we find that the specific findings of facts have not been upset by the Revenue. The facts as enumerated and the position qua the specific plan as appreciated by the DRP in para 5.2.1 we note remains unrebutted. Considering the judicial precedent....