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2018 (6) TMI 1821 - ITAT DELHITP Adjustment - comparable selection - high percentage of related party transactions entered - HELD THAT:-Crisil Limited (Research Segment) - It is now almost settled by various judicial precedents that for carrying out comparability analysis RPT filter should be around 25%. Since this issue has not been examined from this perspective, therefore, we are of the opinion that for examining the percentage of related party transactions matter should be remanded back to the file of TPO, who shall examine this point and in case the RPT is more than 25%, then this comparable cannot be included in the comparability list and hence should be excluded. With this direction issue of Crisil Limited (Research Segment) is remanded back to the file of the TPO. Brescon Corporate Advisors Ltd. are not only into advisory services but also into merchant banking, financial restructuring and syndication of debt. Whereas the assessee company as discussed above is purely providing investment advisory services and none of its activities are into merchant banking. Brescon Corporate Advisory is also assisting company in special situations through recapitalisation, mergers and acquisition, infusion of private equity or direct investment etc. The company which is mainly carrying out merchant banking, restructuring and syndication of debt cannot be held to be functionally comparable with a company which is purely into investment advisory services. There is no segmental information with regard to various streams of fees, i.e., financial restructuring and re-capitalisation, syndication of debt equity related advisory, M & A Advisory, etc. In the absence of such segment information, it would be very difficult to carry out in benchmarking analysis with the assessee, because none of such activities are carried out by the assessee. Accordingly, we direct exclusion of said comparable from the list of the comparables. Khandwala Securities Ltd. - Only few activities undertaken by it under the corporate advisory services which can said to have some similarity with those carried out by the assessee. However in totality if we take the overall streams of revenue and function carried out by this company then it would be very difficult to include such a company into a basket of comparability list and therefore, at entity level and in absence of any overall segment of corporate advisory services, we do not find that it should be included in the comparables. Accordingly, we direct the exclusion of such comparable. India Venture Capital - We find that the principal products of this company are software product and services, whereas the assessee company is purely into ITeS which is in the nature of business and investment research services. When a company is into Software development companies then ostensibly it cannot be held to be comparable with ITeS Company and on this ground alone we direct the exclusion of the said company. Disallowance on account of provision made during the year for leave encashment by the assessee u/s 43B (f) - HELD THAT:- We do not find any merits in the contentions raised by the assessee that since the entire income of the assesses is exempt and, therefore, corresponding expenses are also exempt, because from the perusal of the assessment order it is seen that no deduction u/s 10A has been claimed by the assessee and if the provision of leave encashment has not been paid, then in terms of section 43B(f) such amount cannot be allowed as deduction. Accordingly, the addition as confirmed by the AO in pursuance of the DRP direction is upheld. Thus, on this issue the assessee’s ground is dismissed.
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