TMI Blog2013 (9) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... erminated by the either party and the salary which is borne by the employer company i.e., Singapore company, the entire cost of salary would be reimbursed by the assessee company as per the advice raised from time to time - disallowance under section 40(a)(ia) on account of these expenses stands deleted - Decided in favour of assessee. Disallowance of professional fee - Held that:- Expenditures have been incurred for the purpose of Indian company for its operation in India and these payments were made by the Singapore company which has been reimbursed by the Indian company. We have already held that the payment of professional fee does attract with holding of tax under the provisions of the Act and that this issue has not been properly dealt with either by the Assessing Officer or by the learned Commissioner (Appeals) because both these authorities were dealing mostly with the reimbursement of salary issue, therefore, issue of reimbursement of expenditure towards the payment of professional fee is set aside and the matter is restored back to the file of the Assessing Officer to examine it afresh and in accordance with the provisions of law - Decided in favour of assessee. Pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been taken. He has also not established that by entering the key phrase investment advisory service , the selection of the functionally similar companies are available from the data - The companies selected as comparable by TPO are engaged in the asset management are basically responsible for mobilizing the funds from the investors by marketing the scheme. Their main functions are sales and marketing, investment and management of the funds mobilized under various schemes. They are responsible for providing management and administrative services mostly to the mutual funds and to deploy such funds. The risk is also assumed by such companies in the form of service liabilities, regulatory and reputational risk. Moreover, the asset management companies are also regulated entities which are required to be licensed by SEBI. Thus, these companies also fail the test of FAR analysis with the investment advisory companies - all the six companies shortlisted by the assessee are quite good comparables looking to the over all functions and also that the same have been found to be so by the Department in the preceding and succeeding years. Accordingly, the entire adjustment made by the TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these services are provided by the assessee company to the Singapore company and not vice-versa. For rendering these services, the Singapore company is paying mark-up of 21%, besides reimbursement of certain expenses on actual basis. During the relevant previous year, the assessee has received sum of Rs. 19,99,69,794, as 21% mark-up for rendering investment advisory services and reimbursement of cost aggregating to Rs. 3,93,03,905, the break-up of which is given hereunder:- Sr. No Particulars Amount (Rs. ) 1. Salaries of seconded employees 3,42,08,892 2. Expenses of seconded employees (i.e., meals, travelling, accommodation, training, etc.) 10,14,273 3. Business promotions, information technology expenses, professional fees, etc. 40,80,740 3,93,03,905 4. Since, the aforesaid payments were in the nature of international transaction, the Assessing Officer, had referred the matter to the Transfer Pricing Officer (for short "TPO"), under section 92CA(1), wherein the TPO, after analyzing the transfer pricing study report submitted by the assessee and after calli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onded employees stating that they have provided services to the assessee company in India for their Indian Operations, during the assessment year 2007-08; and (iv) a copy of Form- 16 and Form-12BA in respect of these two employees issued by the THPL. Based on these documents, it was submitted that the tax has already been deducted by the THPL under section 192, the same should not be subject to double taxation i.e., when the reimbursement is made by the assessee to THPL. Besides this, it was also submitted that the provisions of section 195 will not apply in this case for the reason that the sum reimbursed by the assessee to the THPL is not in the nature of income chargeable under the provisions of the Act and it is mainly a reimbursement of expenses and the same cannot be subject to TDS provisions u/s 195. In support of this contention, a catena of case laws were also relied upon which has been elaborated in the letter dated 1st September 2010, filed before the Assessing Officer. Various replies of the assessee have also been summarized by the Assessing Officer at Page-3 and 4 of the assessment order. 6. The Assessing Officer, rejected the entire contention raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its business in India as services by the employees are provided to assessee company in India. It appears that assessee company is making the payments as mentioned in the above table through THPL with the intention of surpassing and avoiding the provisions of Income Tax Act. By such provisions of the Act, the assessee company itself is bound to deduct taxes at sources and deposit the same in Govt. treasury." 7. Based on his aforesaid conclusion, he held that the said payments made by the assessee, clearly attracts provisions of Chapter-XVII-B of the Act and admittedly the assessee has neither deducted the tax nor deposited the same to the Government treasury; therefore, entire expenditure claimed on these reimbursement of expenses has to be disallowed u/s 40(a)(ia). He also placed reliance on the decision of the Hon'ble Supreme Court in Kanchan Ganga Sea Foods v/s CIT, [2010] 325 ITR 540 (SC), wherein it was held that non-resident company having received the charter fee of fishing vessels from the assessee in the shape of 85% of the fish catch in India as per the terms and conditions of the agreement between them, the income earned by the non-resident company was chargeable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant at actual basis without any markup (refer pare 2.1 of page 2 of the agreement). The decision of the Hon'ble Supreme Court in Kanchan Ganga Sea Foods (supra) was also analysed and distinguished besides relying upon various case laws, which has been incorporated by the CIT(A) also. 9. The learned Commissioner (Appeals) took note of the following documents which were filed by the assessee for arriving at his conclusion:- (i) Letter of appointment of Mr. Anuj Maheshwari and Mr. Manish Kejariwal, by the Singapore company; (ii) Copy of secondment agreement of both these employees; (iii) Copy of Form-16 wherein tax was deducted by Singapore company under section 192, in case of both the seconded employees; (iv) Copy of affidavit of both the seconded employees filed before him; (v) Copy of bank account of the assessee company with DBS Bank for the period from 1st October 2007 to 30th October 2007, wherein the entire remittance of Rs. 7,81,71,354 made to Singapore company was reflected; and (vi) Copy of 22 tax invoices raised by Singapore company in the name of the assessee company; relating to these expenditures. 10. From these details, the learned Commissioner (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been noted by him is the discrepancy in the figure of debtors as on 31st March 2006, 31st March 2007 and 31st March 2008. From these facts, he has noted certain inferences which has been elaborated in Para-4.7 to Para-4.11 of the appellate order. The sum and substance of his inference drawn for taking adverse conclusion against the assessee as elaborated inpara 4.7 are (i) that the assessee has failed to prove or substantiate that the aforesaid payments are actually reimbursement of expenses; (ii) that the monthly payments have not been done in accordance with the tax invoice raised from time to time; (iii) the major thrust has been given by the learned Commissioner (Appeals) on the discrepancy in the figures under the head 'debtors', which as per the audited balance sheet as on 31st March 2007, THPL Singapore has been shown debtor of Rs. 8,22,01,415, whereas as per the audited balance sheet as on 31st March 2008, THPL has been shown debtor of Rs. 14,48,17,685. Payment made to related parties covered under section 40(a)(2)(b) has been shown to have been made to THPL Singapore of Rs.99,20,022, as on 31st March 2006, Rs. 8,22,01,415 as on 31st March 2007 and Rs. 6,38,77,79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon him. In his conclusion, he has also justified the Assessing Officer's reliance for following the decision of the Hon'ble Supreme Court in Kanchanganga Sea Foods (supra). 14. Before us, the learned Sr. Counsel, Mr. Porus Kaka, after referring to the various facts and contentions raised before the authorities below, along with the material placed on record, submitted that it is not a case where Singapore company has rendered any services to India for which payment has been received by the Indian subsidiary. Here, the services has been rendered by the Indian company to the Singapore company for which it has received payment with a mark-up of 21% along with the cost. The main issue here is that the two seconded employees who are the employees of the Singapore company have been seconded to Indian company on the terms and conditions mentioned in the secondment agreement. These two employees are working exclusively for the Indian company under the supervision and control of the board of Indian company. Being employee of the Singapore company, the salary and the reimbursement of the expenses has been paid by the Singapore company for which invoices has been raised for being reimb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the figures of debtors and current liability in the audited balance sheet as on 31st March 2007 and 31st March 2008, he pointed out that in fact there is no discrepancy at all and he pointed out to reconciliation given at Page-91 of the paper book. Based on this reconciliation statement, he pointed out the respective figures in both the balance sheets and submitted that there is no discrepancy at all. If such reconciliation is taken a note of, then the entire basis of the Commissioner (Appeals)'s conclusion becomes nonest. 15. Drawing our attention to the secondment agreement, Mr. Porus Kaka submitted that as per the terms of the agreement, these employees continued to be employees of the Singapore company and they were seconded to India for such period of time as understood by the parties and were under the supervision and control of the board of directors of the, Indian company. As per the terms of payment, Indian company was obliged to reimburse the Singapore company, the portion of compensation and other benefits incurred by the Singapore company from time to time on the seconded employees. There was a specific condition in clause 10, that, either of the party can termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ITO v/s CMS (I) Operations Maintenance Co. P. Ltd. ITA no.1264/Mds./2012; iv) ITO v/s Ariba Technologies (I) Pvt. Ltd., ITA no.616/Bngl./2011; v) DIT v/s HCL Infosystem Ltd., 274 ITR 261 (Del.); vi) HCL Infosystems Ltd. (HCL), 76 TTJ 505 (Del.); vii) Dolphin Drilling Ltd. v/s ACIT, 29 SOT 612 (Del.); viii) Cholamandalam MS General Insurance Co. Ltd. Re (AAR) 309 ITR 356; ix) DDIT v/s Tekmark Global Solutions LLC (Tekmark), 38 SOT 7; x) CIT v/s Karistorz Endoscopy India P. Ltd., ITA no.13 of 2008 (Del.); xi) ACIT v/s Karistorz Endoscopy India P. Ltd., ITA no.2929/Del./2009 (Del.); and xii) IDS Software Solutions (I) P. Ltd. (IDS India) v/s ITO (IT), 32 SOT 25 (Bngl.). 17. Regarding reimbursement of other expenses, he submitted that apart from reimbursement of expenses, as per the details raised by these seconded employees, there were two other expenses which were incurred by the Singapore company for the Indian operation, one was information technology expenses which consisted of subscription of factiva which is for access of data base and equinix charges which is for e-mail system. The other part consisted of professional fees made to Luthra Luthra Law Fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, for which the payment is being made to the Singapore company. In the absence of any employee employer relationship, the assessee company does not have any liability to pay the salary to these employees and, therefore, there is no question of reimbursement. He referred to the appointment letter of both the employees and submitted that the privity of contract is between the Singapore company and the employee and the right of termination also lies with the Singapore company. By way of secondment agreement, these employees have been placed in India for rendering services for the Indian company. In support of his contention that in case there is no employer-employee relationship between the seconded person and the assessee company then the payment made to them cannot be treated as salary, he strongly relied upon the decision of the Tribunal, Mumbai Bench decision in ACIT v/s Petroleum India International, ITA no.8086/Mum./2003 and C.O. no.6/Mum./2009, order dated 28th September 2012, wherein the Tribunal has referred to the decision of the Hon'ble Supreme Court in Emil Webber v/s CIT, [1993] 200 ITR 483 (SC). He further submitted that the nature of duties in the secondment agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and managerial service, for the Indian company which in turn are providing services to Singapore company is nothing but rendering of services. The phrase in Explanation (2) "including the provisions of service of technical or other personnel", is meant for the employees sent to render service only. This will include the seconded employees because it is through these personnel services have been rendered, therefore, it is a clear cut case of fee for technical services. 19. Similarly, he submitted that the said payment is taxable under the treaty also, because the Article 12(4)(b) of the India Singapore DTAA takes into consideration the payments to any person in consideration for services of a managerial, technical or consultancy nature. Even the make available clause is also attracted in this case. In the course of rendering advisory services, these two persons are making available the expertise to the Indian company and also to the other employees of the Indian company. In support of this contention, he has strongly relied upon the following decisions:- i) Shell India Markets Pvt. Ltd. AAR no.833/2009 ii) Mersen India Pvt. Ltd. AAR no.1074/2010 iii) Perfetti Van Mille Hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income accrues in India and there is no employee-employer relationship, then it is income from other sources. He further analysed the judgment of the Hon'ble Supreme Court and submitted that it is not applicable at all for the issue involved here. 23. Coming to the AAR ruling in Verizon (supra), he submitted that, on a perusal of Page-8 of the order, it is not clear as to who was rendering the service, whether the employee or the U.S. company. There is an inherent contradiction with regard to the rendering of services. In the present case, no service was rendered by way of secondment agreement. He further submitted that the Madras High Court has not affirmed the decision of the AAR, rather it was a case of Writ Petition and not appeal wherein the scope is entirely different and the Court has itself clarified that it is not sitting as a Court of appeal and the said case was based purely on facts. The High Court has not expressed any view, therefore, it cannot be held that any law has been laid down by the AAR which has been affirmed by the High Court. Regarding other decisions of the AAR cited by the learned Departmental Representative, he submitted that some of the decisions h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India. For rendering these services, the THPL, pays a mark-up of 21% besides reimbursement of certain expenses on actual basis. The services are being provided by the Indian company to the Singapore company and not vice- versa. This aspect has to be kept in mind in the present case. The Singapore company has seconded two employees one, Mr. Anuj Maheshwari and other Mr. Manish Kejariwal to the assessee company in India to assist the assessee to render investment advisory service to THPL, Singapore. As per the secondment agreement entered into the THPL and the assessee company, the salary of these two employees was to be paid by the THPL, and the assessee company had to reimburse the cost of salary and other expenses relating to their employment which has been paid by the THPL. Since the salary was paid by the THPL, it has deducted tax under section 192, and has deposited the same in the Indian Government treasury. In support of this, Form-16 and other details have been placed in the paper book which has been extensively referred by the learned Sr. Counsel. Being an international transaction i.e., reimbursement of the expenses to the THPL by the assessee company, this issue was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the provisions of section 192 of Indian Income tax Act and such a payment of salary has been reimbursed as per the secondment agreement only. The basic condition under the law for deducting the tax on such payment (which is nothing but salary) and depositing the same in the Government of India treasury stands fulfilled. Hence, this reasoning given by the Assessing Officer has no relevance at all. The third reasoning given by the Assessing Officer was that the assessee company is beneficiary of such expenditure as it has inherent character of salary and by expending the said amount, the assessee has earned its business income and, accordingly, the same is business expenditure of the assessee. First of all, the assessee company is not a beneficiary of this expenditure because the seconded employees have been paid salary by THPL who are working in India for the assessee company and the assessee is merely reimbursing the same. By rendering this service to the THPL, the assessee is earning business income and salary paid is certainly a business expenditure on which TDS has already been deducted as the liability to withhold the tax on salary falls within the purview of section 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which has been reimbursed. The very nature of the payment shows that they are for rendering professional services, for which TDS provisions are attracted under the Act. It does not make any difference whether the payment was made by THPL and reimbursed by the assessee as the withholding of tax was required under the law on these payments. However, this aspect has not been examined at all either by the Assessing Officer or by the learned Commissioner (Appeals), therefore, we are of the opinion that to the extent of examining the professional payments, the matter needs to be restored back to the file of the A.O. for deciding the issue afresh in accordance with law. We order accordingly. 27. Thus, most of the reasons given by the Assessing Officer as highlighted above are either irrelevant or unsustainable on the facts and in law specifically with regard to reimbursement of salary and other expenses. The decision of the Hon'ble Supreme Court in Kanchan Ganga Sea Food (supra) also, is not applicable as the issue involved in that case was entirely different. It was more on the accrual of income by non-resident and whether it was chargeable to tax under section 5(2) or not and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,817,685 64,646,762 82,201,415 2030492 144,817,685 64,646,762 From the above, it is amply clear that the difference is mainly on account of presentation of financial statement only, as for the year ending 31st March 2007, the assessee has shown the figure on net basis whereas for the year ending 31st March 2008, it is on gross basis. This cannot be a subject matter of adverse opinion for the issue involved. It is not understood as to how this, in any way, strengthens the case of the Department or has an adverse effect on the assessee's case. 29. The other main reservation of the learned Commissioner (Appeals) had been that the THPL had been raising the tax advise on monthly basis whereas the assessee has been reimbursing the same after a gap of long time. This again, does not make any sense so long as the assessee has reimbursed the payment based on advise raised by the THPL, which is mostly on account salary paid to the seconded employees and other expenses. The learned Commissioner (Appeals) has also made observations about the letter of appointments and discrepancy in the dates and the secondment agreement. In this respect, we have already held that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Indian company is rendering service for Singapore company on a mark-up and the Singapore company was not rendering any service in India through the Indian company. It was on this background, the AAR held that the services which are rendered by the GTE-OC are liable to be taxed in India. In this case, Singapore company is not rendering any service in India either through seconded employees or through Indian company. This distinction itself makes this decision inapplicable on facts of the present case. The AAR held that such a nature of rendering of managerial services by the seconded employees comes within the ambit of Article 12(4) of the DTAA wherein the managerial and consultancy services are also included in the Fees for Included Services. Thus, this decision at the very threshold cannot be applied here. The Madras High Court in the Writ Petition filed by the assessee against the AAR ruling has categorically held that they are agreeing with the contention of the Revenue on the factual findings rendered and in the Writ jurisdiction, the Court does not sit as court of appeal. It was in this background that the High Court has dismissed the Writ Petition filed by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor they are making available any kind of technical knowledge, experience, skill or proceeds to the Indian company. None of the judgments relied upon by the learned Departmental Representative can be made applicable on the facts of the assessee's case. Also there is no merit in the contention of the learned Departmental Representative that it is a case of service P.E. firstly, it is neither the case of the Assessing Officer nor of the Commissioner (Appeals) and secondly, the service P.E. would be applicable only when Singapore company is rendering any kind of services in India through its seconded employees. Thus, none of the arguments of the learned Departmental Representative is tenable either on the facts or in law. 32. We reiterate that in the present case, the Singapore company is availing the services rendered by the Indian company i.e., the assessee, for which it has been making payment at a mark-up of 21%. The Singapore company has sent two seconded employees under the secondment agreement who are under the control and supervision of the Indian Company for the purpose of rendering services in India for the Indian company and for the Indian operation. Since the seconded p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act and that this issue has not been properly dealt with either by the Assessing Officer or by the learned Commissioner (Appeals) because both these authorities were dealing mostly with the reimbursement of salary issue, therefore, we set aside the issue of reimbursement of expenditure towards the payment of professional fee and the matter is restored back to the file of the Assessing Officer to examine it afresh and in accordance with the provisions of law. 34. We are not discussing the various judgments relied upon by the either party because insofar as the judgments relied upon by the learned Departmental Representative are concerned, on a perusal of these judgments, it is seen that they are not applicable on the facts of the present case at all and in case of judgments relied upon by the learned Sr. Counsel, they are not required in view of our above conclusion. Hence, we confine our decision sans the judgments relied upon by the either party. Thus, ground no.1, as raised by the assessee is treated as partly allowed for statistical purposes. 35. Ground no.2, deals with the disallowance made under section 14A. 36. Learned Counsel for the assessee contended before us tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the latter's employees, which are purely Fees for Technical Services as per Article 12 of the India- Singapore DTAA. The deputed employees have worked for the assessee (exclusively) and have rendered investment advisory services to THPL. Hence, effectively the payments have been made by the assessee for taxable services received from THPL, Singapore. Hence, the assessee was required to withhold TDS while making the impugned payments to foreign company THPL. 40. The DRP has also distinguished the judgments relied upon by the assessee and has relied upon the same set of decisions which were relied upon by the Assessing Officer and the Commissioner (Appeals) in the assessment year 2007-08. 41. After carefully considering the rival submissions and the directions of the DRP, we are of the opinion that the payment of salary by the Singapore company to the seconded employees who were employed and working for the assessee company and the cost of salary and expenditure that have been reimbursed by the Indian company to the Singapore company, do not fall within the realm of "fees for technical services" either under Article-12(4) of the DTAA or under section 9(1)(vii) of the Act. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hheld under section 195. Since the tax has already been deducted under section 192 and the same has been deposited to the Government of India treasury, therefore, there is no further requirement for deducting tax under section 195 in the present case. Thus, ground no.1, as raised by the assessee is treated as allowed. 42. The second issue involved here in this appeal is transfer pricing adjustment of Rs. 8,02,32,972, on the international transactions relating to investment advisory services. 43. As stated earlier in the appeal for the assessment year 2007-08, the assessee is providing investment advisory service to THPL, Singapore, which includes identifying and analyzing potential investment particulars in India, evaluating political and economic scenario for the investment in India and monitoring and making recommendation to THPL for making specified investment here in India. For rendering the investment advisory service, the Singapore company is paying mark-up of 21% and reimbursement of cost. The working of the PLI (Profit Level Indicator) was as under:- 1. Sales (Rs. ) Income from advisory Services 286546335 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 112.21 8. Twenty First Century Shares Securities Ltd. 40.06 66.84 Mean 29.78 54.88 46. Accordingly, the upward adjustment was made by the TPO in the following manner:- "3.5 As the assessee's PLI at 21% is way below the average PLI of the comparables at 54.88%, the ALP is determined as under:- The value of the transaction including the reimbursement =Rs. 28,65,46,335 Total cost = Rs. 23,68,15,152 The ALP value of the transaction @ 54.88% = Rs. 36,67,79,307 105% of the transaction value = Rs. 30,08,73,651 95% of the transaction value = Rs. 27,22,19,018 As the ALP lies outside the +/- 5% limit of the value of transaction, therefore, an adjustment of Rs. 8,02,32,972 (difference between Rs. 36,67,79,307 and Rs. 28,65,46,335) is made to the transaction." 47. The DRP has affirmed the entire adjustment made by the TPO and also the comparables shortlisted by him. 48. The learned Sr. Counsel, Mr. Porus Kaka, submitted that there is no dispute about the functional analysis but only the comparables rejected by the TPO as selected by the assessee and in place fresh co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata particularly in this year. First of all, the TPO has to have some basis for rejecting the assessee's comparables and then only he can proceed for carrying out fresh search of comparables. In support of this contention, Mr. Kaka, strongly relied upon the decision of the Delhi High Court in CIT v/s Mantor Graphics Pvt. Ltd., ITA no.1114/2008 order dated 4th April 2013 and also the decision of the Tribunal, Mumbai Bench, in Carlyle India Advisories Pvt. Ltd. v/s ACIT, ITA no.7901/Mum./2011, order dated 4th April 2012. He informed before us that this decision has also been affirmed by the Bombay High Court, vide order dated 22nd February 2013. One by one, he discussed all the 6 comparables adopted by the assessee and how they are functionally comparable for the purpose of comparability analysis in this case vis-a-vis the documents placed in the paper book. He submitted that in the case of Carlyle India Advisories (supra) one of the comparables IDC India Ltd. was found to be functionally comparable in the case of investment advisory services and it was held that merchant bankers and investment bankers cannot be compared with the investment advisory services. The most important thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t comparable to the assessee. 50. Thus, without prejudice, even if out of six comparable companies chosen by the assessee company, only two companies are included in the comparability analysis then the average margin comes to 30% as the margin of Access India Advisories India Ltd. is 45.96% and the margin of IDC Ltd. is 13.88%. Going by the assessee's own comparables which can be said to be some functionally comparable, then also the difference comes to 9% and the upward adjustment to the tune of 9% in the assessee's margin should be made. Regarding inclusion of most of the comparables in the subsequent years, he submitted that the annual reports of such companies are not available before us and, therefore, the same cannot be said to be comparable in this assessment year. 51. In the rejoinder, the learned Sr. Counsel, submitted that insofar as the ICRA Management Company is concerned, this company is mostly into investment advisory services for various sectors and, therefore, the same is liable to be accepted. Moreover, the TPO in the assessment years 2007-08 and 2009-10, has himself accepted the said comparable for comparability analysis then for the assessment year 2008-09, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not carried out search by using the key phrase "investment advisory services". He was of the opinion that the data should have been accessed from the "capital line data base". No proper reasoning has been given by the TPO as to why data from "Prowess" is not reliable and the "capital line data" should have been taken. On a perusal of his own search for selection of comparables, it is seen that he himself has selected the comparables using the "Prowess data" which is evident from the financials taken by the TPO of his comparables which are appearing from Page-555 to 564 of the paper book submitted before us. He has also not established that by entering the key phrase "investment advisory service", the selection of the functionally similar companies are available from the data. Be that as it may, the selection of eight comparables by the TPO, as have been incorporated in the forgoing paragraphs, it is seen that these companies are either engaged as a broking company or merchant banker or asset management company. In case of stock broking companies, the main functions are marketing and prospecting for new clients, execution and settlement of the transaction and trading of shares w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparables as selected by the TPO can be said to be comparable on FAR analysis and, therefore, none of the comparables can be included for the comparability analysis for bench marking the transactions carried on by the assessee under TNMM. 54. Coming to the assessee's comparables, it is seen that some of them have been found to be proper comparable by the TPO himself in the assessment year 2007-08 and also in the assessment year 2009-10. Without any proper reason or change in the functionality and any financial data, it cannot be held that the same companies are not comparable in the intermediary period of the assessment year 2008-09. The TPO has to bring some material on record to show that why these comparables which were good comparable in the earlier year also in and succeeding year, cannot be compared in this year. Thus, three comparables viz. ICRA Management Consulting Services Ltd., ICRA Online Ltd. and IDC India Ltd., cannot be rejected out rightly. Coming to the functional profiles of all the six comparables, it is seen that - (i) ICRA Management Consultant Ltd. This company is engaged in operations of advisory services and is offering consultation service in the area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial data base and back office activities for research and advisory reports. Thus, the data outsourcing charges are mostly related to analysing of data based on which advise is given for the investment purpose in India. Moreover, this company has been accepted by the TPO in the year 2009-10 also. Thus, it is a good comparable. v) Kinetic Trust Ltd. This company though registered as a NBFC but is mainly engaged in corporate consultancy and financial services which also include investment advisory service. Moreover, this company has also been accepted to be a good comparable by the TPO in the assessment year 2009-10. Thus, this company has rightly been included by the assessee for comparability analysis. 55. Thus, all the six companies shortlisted by the assessee are quite good comparables looking to the over all functions and also that the same have been found to be so by the Department in the preceding and succeeding years. Accordingly, the entire adjustment made by the TPO cannot be sustained as the margin of the assessee @ 21% is at arm's length looking to the average margin of the six comparables. Accordingly, the adjustments made by the TPO are deleted. Thus, the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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