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2015 (6) TMI 594 - ITAT MUMBAI

2015 (6) TMI 594 - ITAT MUMBAI - TMI - Transfer pricing adjustment - inclusion of Motilal Oswal Investment Advisors Private Limited in the final set of comparables challenged - Held that:- 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. The acti .....

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oncern from the final set of comparables on account of functional dissimilarities. In fact, in other precedents cited by 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 busine .....

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re 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 said action of the A.O. is hereby affirmed. Thus, on this aspect assessee fails. - Decided against assessee. - I.T.A. No. 1564/Mum/2015 - Dated:- 30-4-2015 - SHRI G. S. PANNU .....

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sment year (A.Y.) 2010-11. The Grounds of appeal raised by the assessee read as under: 1. The order dated January 28, 2015, passed by the ld AO under section 143(3) rws 144C( 1) and rws 92CA of the Income-tax Act, 1961 ('Act') is not in accordance with the law and is contrary to the facts and circumstances of the present case. Transfer pricing related grounds 2. The Id AO/DRP/TPO have erred in law and on facts in proposing an adjustment of ₹ 3,46,06,210 to the value of the internat .....

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'Rules') which authorizes usage of multiple year data of comparable companies for the purpose of determination of the ALP under Section 92F of the Act. 2.3 Rejecting the objections raised by the Appellant in relation to selection/rejection of comparable companies while determining the ALP. 2.4 Rejecting the objections raised by the Appellant in relation to selection/rejection of filters while selecting comparable companies for determining the ALP. 2.5 Failing to grant the benefit of + / .....

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ievance 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 Par .....

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specified areas that may interest NVP Mauritius; providing non-banking advisory services to NVP Mauritius in respect of potential investment and disinvestment opportunities in India or elsewhere, including advice on the structuring of such opportunities; research, analyse and identify investment opportunities and, on specific instructions from NVP Mauritius, conduct due diligence of such opportunities and provide reports to NVP Mauritius; providing of necessary reports, information and feedback .....

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at an ALP. The assessee had undertaken benchmarking analysis of its international transaction of Provision of investment advisory services by selecting the Transactional Net Margin method (TNM), as the most appropriate method and adopted Operating profit/Total Cost ( OP/TC ) as its Profit Level Indicator ( PLI ). The margin of the assessee was determined at 20.10% and the assessee compared it with the weighted average mean of 15.68% of the 6 comparable companies selected by it in its Transfer Pr .....

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nancial data of the comparables relating to the financial year under consideration. The TPO selected the following final set of comparables:- Sr. No. Company Name OP/TC F.Y. 2009-10 (%) 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 o .....

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nt in relation to the transaction of Provision of investment advisory services to the Associated Enterprises was proposed at ₹ 3,46,06,210/-. The objections raised by the assessee before the DRP did not elucidate any favour and instead the DRP vide its order dated 28.11.2014 affirmed the adjustment as determined by the TPO with respect to the international transaction of Provision of investment advisory services to Associated Enterprises. The A.O. has thereafter passed an order u/s.143(3) .....

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ors Private Limited in the final set of comparables. On this aspect, the plea set up by the assessee is that the activities of the said concern are functionally in-comparable to the activity of the Provision of the investment advisory services rendered by the assessee to its Associated Enterprises. In support, reference has been invited to the business profile of the said concern as emerging from the Annual Report for the instant financial year, a copy of which has been placed in the Paper Book .....

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so resulted in a good pipeline of IPOs in the ensuing year. On this basis, it is sought to be justified that the aforesaid set of activities undertaken by the said concern are not comparable to the assessee s international transaction which is confined to providing non-binding investment advisory services and for that matter, the assessee is not engaged in any advisory services in relation to Equity Capital Markets, Mergers & Acquisitions, Private Equity Syndications or Structured Debt. The .....

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s. 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 .....

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easons, it was asserted that the said concern be excluded from the final set of comparables. 6. On the other hand, the ld. CIT(DR) appearing for the Revenue pointed out that the DRP has dealt with the arguments of the assessee for exclusion of Motilal Oswal Investment Advisors Private Limited and in this connection our attention was invited to the relevant discussion contained in para 10 of the order of the DRP. According to the DRP, the services which are being rendered by the said concern are .....

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set of comparables on the ground that it s activities are functionally incomparable to the activity of Provision of investment advisory services being rendered by the assessee to its Associated Enterprises. In fact, before the TPO, assessee pointed out that the said concern was engaged in providing comprehensive investment banking solutions and that it was rendering services across various products, viz. Equity Capital Markets, Mergers & Acquisitions, Private Equity Syndications and Structu .....

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aid concern was carrying out only advisory services and, according to him, the said concern 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 diversi .....

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he 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 that though the said concern was declaring a solitary stream of operating income under the head advisory fee , but undisputedly it was engaged in diversified fields and the financial results for each segment were .....

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be said to be a concern which is comparable to an entity which is rendering non-binding advisory investment services alone. Thus, in our considered opinion, the assessee is justified in seeking the exclusion of the said concern from the final set of comparables on account of functional dissimilarities. In fact, in other precedents cited by the ld. Representative for the assessee, the said concern has also been excluded from the set of comparables under similar circumstances. 9. In conclusion, o .....

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nt, if any, that is required to be made to the stated value of the international transactions in respect of the provision investment advisory services to its Associated Enterprises on the basis of our afore-said discussion. Thus, on this aspect of the matter, the assessee partly succeeds. 11. The only other issue agitated by the assessee is the disallowance of ₹ 29,79,191/- made out of expenses on foreign travel. In this context, the relevant facts are that the A.O. required the assessee t .....

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