TMI Blog2014 (11) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... y is engaged in diversified activities - Segmental reporting is not available. Profit and loss account appears to be only of consolidated accounts - The company is registered with SEBI as a merchant banker and the Director’s report show that it is into takeover , acquisitions, disinvestments etc. - In the absence of specific data it is not possible to make comparison - the company being into merchant banking and cannot be considered as a comparable - the AO is directed to exclude the MOIAPL from the list of the comparables for determination of ALP of the transaction - Decided in favour of assessee. KGL and KJMC – Functionally different companies - Held that:- Following the decision of the High Court in assessee’s own case Commissioner of Income-tax-10, Mumbai Versus Carlyle India Advisors (P.) Ltd. [2013 (4) TMI 486 - BOMBAY HIGH COURT] - the functions of the assessee cannot be compared with that of the list of comparables picked up by the TPO which includes the said KGL and KJMC - the business of investment, merchant banking, corporate finance and similar activities cannot be compared to the investment advisory activities of the assessee – thus, the KGL and KJMC are functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules and judicial pronouncements, which advocate usage of multiple year data of comparable companies for the purpose of determination of the arm's length price. 7. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in not providing the appellant the benefit of 5 percent range as provided by the proviso of section 92C(2) of the Act. 2. Briefly stated relevant facts of the case are that the assessee is a subsidiary of Carlyle Asia Investment Advisors Limited (Carlyle Hong Kong) and it is engaged in the business of rendering of non-binding investment advisory and related support services to Carlyle Hong Kong. Assessee filed the return of income declaring the total income of ₹ 8,04,14,738/-. In consequence to the reference u/s 92CA(1) of the Act, the TPO partly rejected the Arm's Length Price (ALP) computed by the assessee in relation to the international transactions and passed an order under sub-section (3) of section 92CA of the Act and made upward adjustments amounting to ₹ 8,80,02,355/-. Giving effect to the said adjustments of the TPO, AO prepared a draft assessment order u/s 143(3) r.w.s 144C of the Act and compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Holdings Limited (Inv. Adv. Seg) -25.94% 5 Future Capital Investment Advisors Ltd 20.67% Mean 4.50% 5. From the above, the average mean of the said comparables works out to 4.5%, which is much lesser than 15% reported by the assessee (page 3 of the TPO order). During the proceedings before the TPO, the issue of rejecting some of the comparables namely Quantum Advisors Pvt Ltd and Indian Venture Capital Limited (Sl No.1 and 2 of the above Table) and adopting four other companies came up. With the said amendment, the average Mean of the 7 comparables works out to 37.70%, which is far above the PLI of 15% reported by the assessee. The said 7 comparables and their respective PLI (OP/TC) is as under: Sl No. Name of the Company OP/TC 1 KLG Capital Services Ltd 85.22% 2 A R Venture Funds Management Limited 27.49% 3 KJMC Corporate Advisors (India) Limited (formerly k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking, merchant banking, loan syndication, corporate finance and similar activities cannot be compared to the investment advisory activity undertaken by the appellant. It is further submitted that total turnover of KLG is INR 49,50,000/- which is less than one Cr and therefore, it also does not satisfy less than one crore turnover filter. It is a startup company and the perusal of the profit and loss account for the year ending 31st March, 2009 and 31st March 2008 would show that the company is still in the process of setting up, whereas the appellant during the year has a turnover of INR 41,44,25,505/-. Thus, KLG deserves to be rejected on this ground also. Reliance in this regard is placed on the following judicial precedents wherein it has been held that companies with less than one crore turnover should not be taken as a comparable. Sandstone Capital Advisors Pvt Ltd v. ACIT [2014] 147 ITD 240 (Mum) ITO v. CRM Services India (P) Limited [2011] 48 SOT 41 (Delhi) In the light of the above, it is submitted that KLG should be rejected from the final comparable set used for computation of arm's length margin. c. KJMC Corporate Advisors (India) Limited (fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m/2012 (AY 2008-2009), dated 7.2.2014. On perusal of para 12 of the said order of the Tribunal, which contains the operational part, we find the same is relevant and the Tribunal has given its finding under the facts which are similar to that of the AY under consideration. The MOIAPL, which has engaged in the business of merchant banking is not a good comparable for determining the ALP. Relevant contents of the said para 12 are reproduced here for the sake of completeness of this order which read as under: 12. ....The only dispute is whether Motilal Oswal Investment Advisors Pvt Ltd can be considered as a comparable for determination of ALP. A perusal of three comparables considered by the TPO shows that M/s. Future Capital Investment Advisors Ltd., has operating profit at 21.79% whereas OPM of Motilal Oswal Investment Advisors Pvt Ltd is 72.33%. The comparables used by the TPO themselves are showing extreme OPM. A perusal of the Director's report of Motilal Oswal Investment Advisors Pvt Ltd shows that during the year under consideration, the said company has completed 23 assignments successfully as against 14 completed in the immediately preceding year. A close look at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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