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TMI Blog2013 (11) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with M/s. SCAL in June 2006 as per which the assessee was appointed as investment advisor to SCAL. The duties of the assessee were listed in clause-3 of the agreement which is reproduced below :- (i) "The Indian Adviser (i.e. the assessee) shall recommend to the Mauritian Adviser (i.e. M/s. Saffron Advisors Ltd.) the manner in which any monies raised by a fund should be invested or otherwise dealt with in respect of proposed investment in Indian markets. (ii) The Indian Advisor shall carry out review of the portfolio of any Fund at regular intervals or whenever the Mauritian Adviser or any delegate of the Mauritian Adviser shall reasonably require. (iii) The Indian Adviser shall recommend to the Mauritian Adviser the manner in which monies required for purpose of a Fund should be realized. (iv) The Indian Adviser shall advise the Mauritian Adviser concerning all actions, which it appears to the Indian Adviser that the Mauritian Adviser should take to carry into effect the purchase and sale of investments and generally the discharge of the duties of the Mauritian Adviser unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Average mean 8.27 10.04 Assessee's margin 13.58 15.72 2.2 The assessee submitted that it was being remunerated at cost plus 15% mark up and, therefore, the international transaction with associate enterprise was at arms-length as margin of comparable was similar i.e. 15.72% . The TPO, However, asked the assessee to explain as to why the research segment of CRISIL should not be considered. The assessee submitted that research segment was not comparable as the assessee was not doing any research activity. The assessee thereafter was asked to do a search on "investment advisory fees" on the capital aline data base. The assessee after conducting search submitted that it had analyzed 15 companies but none of them was comparables because they were also doing some other services. The TPO however did not accept the report given by the assessee. He analysed annual reports of the companies and found that M/s. Future Capital Holding Ltd. had shown investment advisory activity as separate segment and therefore, it was comparable . TPO also noted that Deutche Asset Management India Pvt. Ltd., Sundaram BNP Paribas Asset Management Ltd. and Urban Infrastructure Venture Capital Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparable. However he raised serious objections against inclusion of research segment of CRISIL Ltd. It was submitted that the assessee was on investment advisory and though as part of investment advisory work, the assessee does require some research but the research done by the assessee was not comparable to CRISIL which was doing large scale high end research whereas the assessee was a low end research entity limited only to one client. The ld. AR referred to the annual report of CRISIL at page 56 of the paper book in which it was mentioned that CRISIL was India's leading research house which meets research needs of more than 600 domestic and international clients offering unparalleled width and depth of research spanning the entire economy including equity research. He also referred to directors report at page-60 of the paper book in which it was mentioned that CRISIL collaborated with Standard & Poor in selling S&Ps data and information products in India . The report also mentioned that CRISIL had penetration rates in the banking segment exceeding 90%. CRISIL had also large number of employees which had increased to 1750 as on 31.3.2007. The ld. AR pointed out that in case of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation in case of CRISIL. The new margin computed by DRP in case of Future Capital Holding Ltd. (investment advisory segment) and in case of CRISIL (advisory and research segments) came to 20.56% and 33.3% respectively. 4.1 The assessee has raised no objection before us against selection of Future Capital Holding Ltd. (investment advisory segment) as comparable and its margin computed by DRP of 20.56%. Strong objections have however been raised against inclusion of research segment in case of CRISIL which it has been argued, is not comparable. It has been requested that only advisory section should be considered whereas authorities below have considered both the segments i.e., research and advisory. We have considered the matter carefully. CRISIL has substantial revenue from research i.e. Rs.116.4 crores compared to advisory revenue of only Rs.8.76 crores. The rating revenue is also high at 130 crores. The annual report of CRISIL for the year 2007 shows that it is India's leading independent and integrated research house which meets the business research requirements of more than 600 domestic and integrated clients having unparalleled width and breadth spanning the entire ec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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