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2016 (2) TMI 1197 - AT - Income TaxTPA - comparable selection criteria - Addition of 3% markup additionally made over and above the comparative margin arrived - Held that:- The assessee is a Private Limited Company incorporated in India and is 100% subsidiary of Tamasek Holdings Private Limited, Singapore (THPL). Assessee vide agreement dated 1st April 2004 with THPL agreed to provide Investment Advisory Services. While rendering these services, the assessee provides investment recommendation in India to THPL, whereas the later retains the right of the use of investment advice or information. Hence the advisory services provided by the assessee were in the nature of non binding advisory services for which assessee was compensated with cost plus markup. The profitability derived from uncontrolled party engaged in similar line of business activity under similar circumstances, is the measure of arm's length results. If cost or sale is used as the base, then profitability depends largely upon the functions performed, therefore, in such a situation closer functionality is required preferably to an appropriate business segment or transaction. Addition of 3% markup additionally made over and above the comparative margin arrived - additional mark-up applied by the TPO is without any FAR analysis or without any benchmarking exercise with any comparables and more importantly without any analysis of assessee's own facts. The assessee is providing non-binding investment advisory services to its AE and such services as highlighted by Ld. Counsel include; identifying and analyzing potential investment opportunities, evaluating and making recommendations to THPL with respect to specified investments. The monitoring functions performed by the assessee are part and parcel of the portfolio advisory services rendered by it because, the activities carried out by the assessee while undertaking portfolio monitoring activities include analysis of the latest development in the industry, ongoing performance of the industries and providing necessary information to its AE from time to time. This aspect has been noted by the ITAT, Mumbai Bench in the case of Carlyle India Advisors (P.) Ltd. (2013 (4) TMI 486 - BOMBAY HIGH COURT) and in other decisions cited above by the Ld. Counsel. Thus, we hold that no such addition or adjustment on account of extra markup can be made. Accordingly, we direct to delete the addition.
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