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2020 (3) TMI 1133 - AT - Income TaxTP Adjustment - adjustment of brokerage income - selection of MAM - AR prayed that the TNMM may be adopted as the most appropriate method and, without prejudice, if CUP method is to be adopted as the most appropriate method the adjustments to the cost structure be allowed to iron out the differences between the AE and Non-AE transactions - HELD THAT:- Assessee being an institutional brokerage house has earned significant brokerage commission from FII clients, which included AE and Non AE enterprises. The transactions from Non-AE FII clients, the assessee is required to provide broader range of services viz-a-viz services to AE FII clients did not include marketing and international sales support. We find that the assessee is dependent on the overall CLSA group resources without which the brokerage from FII clients could not have materialized. The assessee also filed submission dated 27.10.2014 before the TPO providing detailed explanation with regard to the differences in services provided to the AE and Non-AEs and explanation in support that TNMM was the most appropriate method to determine the ALP of brokerage earned from AEs. We find merit in the submission that TNMM is the correct method and internal CUP would entail adhoc adjustment to price in so far as broking commission from AE and Non AEs are concerned. Operating model of J P Morgan India Pvt. Ltd. [2014 (2) TMI 1215 - ITAT MUMBAI] is not comparable to that of the assessee as majority of the income in the case of J P Morgan India Pvt. Ltd was from related parties, whereas in the case of the assessee significant revenue is from third party FII clients Assessee could not have generated business from FII clients without the support of CLSA group resources, for which it is paying intra group service charges. Hence, in such a case, TNMM could be used as the most appropriate method. In view of these facts and circumstances, we are of the view that assessee has rightly followed the TNMM as the most appropriate method and the decision of the co-ordinate Bench in the case of J P Morgan India Pvt Ltd. [2014 (2) TMI 1215 - ITAT MUMBAI] is not applicable to the present set of facts of the assessee. Accordingly, we are inclined to set aside the order of the DRP and direct the TPO/AO to delete the adjustment of brokerage income Provision of sub-advisory services and information technology ('IT') support services - Companies functionally dissimilar with assessee's services need to be deselected from final list. Addition with regard to sub-advisory services - comparability - Ladderup Corporate Advisors has to be excluded as the said company is into investment banking business and not rendering non-binding investment services. Similarly, Bombay High Court in the case of New Silk Route Advisors P. Ltd General Atlantic Private Ltd. and Goldman Sachhs (India) Securities Pvt Ltd. [2018 (8) TMI 384 - BOMBAY HIGH COURT] has held that merchant banking business cannot be company to nonbinding investment advisory services Mecklai Financial Services company is a persistent loss making company. It has incurred loss only during the year. We also find merit in the argument of the learned AR that product similarity is not important when the method selected for benchmarking is TNMM. Accordingly, we direct the TPO to hold Mecklai Financial Services as a valid comparable. ICRA Management Consulting Services Ltd. is accepted to be a comparable to non-binding investment advisory activity: See AGM INDIA ADVISORS PRIVATE LIMITED VERSUS DCIT, 10- (1) , AAYAKAR BHAVAN, MUMBAI AND VICE-VERSA [2016 (5) TMI 1335 - ITAT MUMBAI] - ICRA Management Consulting Services Ltd. and IDC India Ltd. as valid comparables. Allowability of repairs and maintenance charges of computers - allowable revenue expense - HELD THAT:- We find that additional evidences have been filed which have bearing on the issue involved and accordingly, we remit the issue back to the file of the AO to decide the same in the light of these fresh evidences as per facts and law. Needless to mention that in case, the AO finds these expenses to be in capital in nature, then the assessee may be allowed depreciation on that part of the capital expenditure @60% in terms of provisions of the Income tax Rules.
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