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2016 (1) TMI 1265 - AT - Income TaxTPA - selection of comparable - Held that:- The assessee was engaged in providing broadly four types of services: (i) Firstly, identify the investment opportunity in private equity, distressed debt and listed or unlisted securities and then advise or recommend to the AE for investment in identified target. (ii) Secondly, advise the investee company for financing the investment through equity or debt finance or similar financing, which include purchase of certificates of deposit, making of senior loans; purchase of senior or subordinated notes or bonds (which may or may not be convertible into equity or be purchases with related warrants or options to acquire equity securities); purchase of preferred securities, investments in asset-backed securitization vehicles, and issuance of guarantees. Also, advise the AE, the options for the exchange of investments for other investments in connection with any reorganization, recapitalization, splitting of shares, change of par value, conversion of otherwise (iii) Thirdly, arrange support service (i.e. on outsource basis) for the AE, based on requirement for executing the intended task. (iv) Fourthly, monitor the performance of Investee Company and advise the AE in respect of exit strategy from investment In view of the above summary of activities carried out by the assessee, we do not agree with the contention of the Ld AR that the assessee was merely a nonbinding investment advisory service provider as against characterisation by the TPO as fee based investment and financial advisory service provider. In addition to the advisory, the assessee was also engaged in providing support services to the AE for execution of advisory. The assessee was engaged in providing advice for financing the investment in the investee company and the advice for financing included all kind of possible modes of equity and debt financing. Companies dissimilar with that of assessee need not be selected as comparable. Working capital adjustment - Held that:- While making comparison of the assessee with the comparables, the economic adjustments are important in eliminating material differences in functions, assets, and risk between the assessee and the comparables to increase the comparability. As the request of the assessee seeking working capital adjustment has not been attended either by the TPO or by the DRP, we, therefore, restore the matter to the TPO and direct him to allow the adjustment for working capital from the results of the comparable after providing due opportunity of hearing to the assessee.
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