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2015 (6) TMI 961 - AT - Income TaxUpward TP adjustment pertaining to business support services rendered to its AEs - TPO accepted all the comparables but excluded Capital Trust and included Spanco - Held that:- TPO rejected Capital Trust as a comparable simply because for the two out of the last three years taken into consideration, Capital Trust was in the red and not because the nature of business had any variance with that of the assessee. When we look into the business segment of Capital Trust, we find that in the foreign consultancy segment, which we are concerned with, in the year 2004-05, it had OP/OC at 27.25%. Since the nature of services rendered by the comparable were exactly on the similar lines, as that of the assessee, though, during the year, it was in loss, cannot be disqualified as not a legitimate comparable. We are well supported by the decision, cited by the AR, in the case of Brigade Global (supra), relevant portion of which has already been reproduced earlier in the order, we hold that the assessee had rightly taken Capital Trust as a valid comparable and the revenue authorities erred in excluding the same. Apropos the inclusion of Spanco as a comparable, we find that the TPO/DRP were incorrect, because as per the results seen in the case of Spanco, they pertain to BPO segment only, as against the business of the assessee, which provides need based business support services in connection with business activities in the area of financial services carried out by the AEs. Since both these business segments cannot be equated, we hold that the revenue authorities erred in taking the financials of Spanco as a comparable case. - Decided in favour of assessee. Upward adjustment pertaining to brokerage services provided by the assessee to its AEs - Held that:- The assessee had offered list of comparables which had matched its business profile, both with, foreign owned brokers and Indian owned brokers, who were conducting that business through a common channel and according to us, each broker in either category was giving its performance in an uncontrolled regime, therefore, according to us, the adoption of CUP was the most appropriate method, adopted by the assessee to benchmark its ALP. We do not find anything contrary in the conduct and management of the business of the comparable with that of the assessee.We have also referred to the subsequent years study, wherein the average commission is at 19.86 basis charges with AEs and at 20.42 basis points with third parties, which is well within the range as per the proviso.In these circumstances, we are of the considered opinion that no adjustment is required to be made. The addition is therefore deleted.- Decided in favour of assessee. Adjustment pertaining to investment advisory Services in respect of Listed Indian companies & investment advisory /support services in respect of strategic (unlisted) investments - Held that:- TPO as well as DRP have ignored the first fact that the assessee was incorporated in September 2006 and commenced its business operation in December 2006 and most importantly, the assessee in the relevant previous year did not have the license to enter merchant banking business segment. As pointed out by the AR the TPO had adopted the comparables of those entities, whose main segment of business was merchant banking, which have been succinctly examined threadbare by the coordinate Bench in the case of Carlyle India (2012 (10) TMI 884 - ITAT, MUMBAI ), referred to by the AR. On our enquiry from the DR, even he was unable to make any contrary comments on the issue.In the light of our observations hereinabove, we are of the opinion that both DRP as well as TPO erred in adopting comparables, which had a segmental difference from the business of the assessee and therefore, we accept the benchmark adopted by the assessee to fix its ALP. We, therefore, delete the addition made by the TPO/DRP. - Decided in favour of assessee.
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