TMI Blog2015 (6) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. Representative for the assessee, the said concern has also been excluded from the set of comparables under similar circumstances. Disallowance of expenses on foreign travel - A.O. disallowed 50% of the expenditure primarily on the ground that the assessee did not furnish evidence to prove business justification for the foreign travel - Held that:- The business purpose relating to incurrence of impugned expenditure is missing. The details provided, which are placed in the Paper Book, do not contain any reference to the business purpose for which the travel had been undertaken by the concerned Directors. No doubt, the assessee is rendering services to its group companies abroad and necessarily the directors would be required to travel, so however where the A.O. has required the assessee to point out the business purpose for which the various tours were undertaken, then, in our view, the failure on the part of the assessee to provide such details does invite a disallowance. Therefore, in our considered opinion, having regard to the material and evidence on record, the A.O. was justified in disallowing a sum of ₹ 29,78,191/- out of the foreign travel expenses. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, the Id AO/DRP have erred in disallowing 50 percent of the expenses on foreign travel totaling to ₹ 29,79,191. 4. On the facts and circumstances of the case and in law, the AO/DRP have erred in levying interest u/s 234B and 234C. 2. Although, the assessee has raised multiple grounds of appeal, but substantively speaking, the grievance is with regard to two additions, namely, ₹ 3,46,06,210/- on account of determination of Arm s Length Price (ALP) in respect of international transactions and ₹ 29,79,191/- representing disallowance of expenses on foreign travel. 3. In brief, the relevant facts are that the appellant is a company incorporated under the provisions of the Companies Act, 1956, which is singularly engaged in providing non binding investment research and related services to M/s. Norwest Venture Partners Advisory-Mauritius (NVP, Mauritius), an Associated Enterprise. In fact, the appellant is a 100% owned subsidiary of NVP, Mauritius and in terms of its arrangement with NVP, Mauritius, assessee provides investment research and related services to NVP, Mauritius in a wide range of sectors in India. The provision of advisory services to NVP, Mauri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Future Capital Investment Advisors Ltd. 16.75 2 Kshitji Investment Advisors Co. Ltd. 31.59 3 Future Capital Holdings Ltd. 15.21 4 Motilal Oswal Investment Advisors P. Ltd. 97.67 Arithmetic Mean 40.31% 4. By considering the assessee s margin as at 20.10% and the arithmetic mean of the margin of the comparables of 40.31%, the TPO determined an adjustment of ₹ 4,84,81,561/- vide his order u/s.92CA(3) dated 27.01.2014, which according to him was necessary to bring the stated value of the international transactions to its ALP. Subsequently, the TPO vide order passed u/s.154 of the Act dated 06.02.2014, rectified such adjustment to ₹ 3,46,06,210/-. This formed the basis for the A.O. to pass a draft assessment order u/s.143(3) r.w.s. 144C(1) dated 26.02.2014, whereby the transfer pricing adjustment in relation to the transaction of Provision of investment advisory services to the Associated Ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative also pointed out, by referring to the Profit and loss account of the said concern and also Schedule P of the Financial Statements relating to the segmental accounting policy and Notes to accounts, that no separate reportable segments have been drawn out in the Annual Financial Statements and, therefore, it is also not possible to cull out the financial results of the segment of activity which is relatable to the activity undertaken by the assessee for its Associated Enterprises. On this aspect, the ld. Representative submitted that the Mumbai Bench of the Tribunal in the following cases has held that Motilal Oswal Investment Advisors Private Limited was not includible as a comparable, while benchmarking transactions which are similar to those carried out by the assessee :- 1) Arisaig Partners India Private Limited (ITA No. 1083/Mum/2014 dated 25.03.2015); 2) Acumen Fund Advisory Services India Private Limited (ITA No. 143/Mum/2014 dated 04.07.2014); 3) Carlyle India Advisors Private Limited (A.Y. 2008-09) (ITA no. 7367/Mum/2012 dated 07.02.2014); 4) Carlyle India Advisors Private Limited (A.Y. 2009-10) (ITA No. 2200/Mum/2014 dated 22.08.2014); and, 5) Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn was includible in the final set of comparables. The DRP also accepted the position that the said concern was engaged in advisory services which are broadly comparable to the assessee s activities under test. 8. We have perused the relevant material on record. It is starkly evident that the said concern M/s. Motilal Oswal Investment Advisors Private limited is engaged in qualitatively different and diversified business activities, whereas the activities of the assessee are confined to rendering non-binding investment advisory for its Associated Enterprises. No doubt, both the concerns may be in the business of rendering advisory services, so, however, it would also be necessary to evaluate the manner and the specific sectors, in which such services are being rendered by the two concerns. It is revealed from the Annual Financial Statement of Motilal Oswal Investment Advisors Private limited that the said concern is engaged in rendering services in diversified fields, viz., Equity Capital Markets, Mergers Acquisitions, Private Equity Syndications and Structured Debt, etc. In the case of Carlyle India Advisors Private Limited (supra) for A.Y. 2008-09, the Tribunal concluded tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not found to be satisfactory by the A.O. and, therefore, he disallowed 50% of the total expenses, i.e., ₹ 29,78,191/-. Against the afore-said, the assessee is in appeal before us. 12. Before us, the ld. Representative for the assessee referred to pages 129 to 137 of the Paper Book, wherein is placed the details of such expenditure. The case set up by the assessee is that it is a subsidiary of a foreign company and, therefore, its Directors are often required to travel abroad to generate business and, therefore, the impugned expenses on foreign travel, which have been incurred by the Directors should be considered as business expenses and, accordingly, no disallowance is called for. On the other hand, the ld. DR has relied upon the order of the A.O. in support of the case of the Revenue. 13. We have carefully considered the rival submissions. We find that the A.O. disallowed 50% of the expenditure primarily on the ground that the assessee did not furnish evidence to prove business justification for the foreign travel. In this context, we have perused the details of such expenditure and find that evidently the business purpose relating to incurrence of impugned expend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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