TMI Blog2014 (10) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... and acquisition, infusion of private equity or direct investment. Its main revenue is from debt syndication and financial re–structuring advisory services. Thus, such a functional profile cannot be held to be comparable at all with the services / functions performed by the assessee which are mainly on account of advisory support services of providing information and investment recommendation. In view of these functional differences, it cannot be held that the said company is comparable on FAR analysis. Accordingly, Brescon Corporate Advisory Ltd., cannot be held to be a comparable company for the purpose of bench marking the assessee’s margin. Thus, both the comparable companies as taken by the Transfer Pricing Officer should be excluded from the list of financial comparables. After excluding these two comparables, the assessee’s margin should be bench marked with the other list of comparables as taken by the Transfer Pricing Officer i.e., out of 10 comparables these two comparables are to be removed and based on the arithmetic means of the margin of the final set of eight comparables, the assessee’s margin should be bench marked accordingly. - Decided in favour of assessee. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d bench marked its margin with six comparables and later on during the course of transfer pricing assessment proceedings, additional two companies were identified. The arithmetic means of updated set of eight comparable companies were as under: Sr.no. Name of the Company OP/TC (%) A.Y. 2008 09 1. ICRA Management Consulting Services Ltd. 4.14 2. ICRA Online Ltd. 6.08 3. ICRA Techno Analytics Ltd. 5.41 4. IDC (I) Ltd. 15.48 5. Informed Technologies India Ltd. 3.82 6. Future Capital Holdings Ltd. 20.56 7. Future Capital Investment Advisors Ltd. 21.58 8. KPIT Commins Global Solutions Ltd. 7.03 6. Thus, it was reported that the assessee s margin is at arm's length price. The Transfer Pricing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving similar functions performed by the assessee. Accordingly, upward adjustment of Rs. 2,39,28,647 was made in the following manner: Sr.no. Particulars A.Y. 2007 08 A Operating Revenue Rs. 17,89,82,136 B Operating Cost Rs. 16,34,92,694 C Operating Profit Rs. 1,54,89,442 D ALP (%) 24.11 E Arm s length value of international transaction (B*124.11%) Rs. 20,29,10,783 F Amount of adjustment (E A) Rs. 2,39,28,647 9. Before the learned Commissioner (Appeals), the assessee submitted that the details of various functions performed by it and services rendered to its A.E. and also the function performed by the A.E. Based on the functional profile, the assessee raised its objection as to why these two comparables i.e., Brescon Corporate Advisory Ltd. and Sumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee is limited to providing information and investment recommendation to TPG Capital L.P. It merely acts as an independent advisory to its A.E. which in turn reviews and analyses the information / advise obtained from the assessee. The TPG Capital L.P. has an absolutely discretion to reject the advise from the assessee as it is purely recommendatory and not binding in nature. All the decisions relating to selection, acquisition and disposal of investments are exclusively made by TPG Capital L.P. Hence, it s functional profile is entirely different from Brescon Corporate Advisory Ltd. and Sumedha Fiscal Services Ltd. From the annual report of Sumedha Fiscal Services Ltd., he pointed out that these companies are mainly in investment banking and securities dealing. It is also involved in project consultancy services. The overall profile of the said company was enumerated as under: During the year under review your Company achieved new height in all areas and achieved highest ever income from both segments i.e. Investment Banking and Securities Dealing. Your Company continued its focus on fee based activities (Loan Syndication and Project Consultancy Services) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival contentions, perused the relevant findings of the learned Commissioner (Appeals) and the material available on record. The only dispute before us is the inclusion of two comparables namely, Brescon Corporate Advisory Ltd. and Sumedha Fiscal Services Ltd. The assessee has been rendering non binding investment advisory support services to its A.E. TPG Capital L.P., the functional profile which has been incorporated in the forgoing paragraph reflects that the role of the assessee is limited to providing information and making recommendation for the investment in India. Such advisory services are not binding on its A.E. which take its own call after analysing the details and information given by the assessee. From the functional profile of Sumedha Fiscal Services Ltd., it is seen that it is mainly engaged in investment banking and security dealing. Its main income is from loan syndication and project consulting services and also capital market operation. Its three main service segment are (a) capital market operations comprising of stock broking investment mutual funds and other products distribution; (b) consultancy which comprises of loan syndication merchant banking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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