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2015 (3) TMI 1068 - ITAT MUMBAI

2015 (3) TMI 1068 - ITAT MUMBAI - TMI - Transfer pricing adjustment - selection of comparable - Held that:- KJMC Corporate Advisors (India) Limited company is in the business of investment, merchant banking, corporate finance and similar activities which cannot be compared to the investment advisory activities. There is no dispute that the assessee’s international transaction with the AE is only with respect to the investment advisory and no other service or activity like investment, merchant ba .....

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o. 1083/Mum/2014 - Dated:- 25-3-2015 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER For the Appellant : Shri K. Shivaram For the Respondent : Shri. S. D. Srivastava ORDER Per Vijay Pal Rao, JM This appeal by the revenue and Cross Objection by the assessee are directed against the assessment order dated 20.12.2013 passed u/s 143(3) r.w.s 144C(13) of the Income Tax Act in pursuant to the directions of DRP dated 15.11.2013 u/s 144C(5) of the Income Tax Act for t .....

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Hon ble Bombay High Court. 2. The assessee company is wholly owned subsidiary of Arisaig Partners (Asia) Pte Ltd., headquarterd in Singapore. Vide the serviced agreement between the assessee and its holding company (AE), the assessee provides research services to the AE in relation to the suitable investments in India to be made by the AE. During the year under consideration, the assessee carried out international transaction with its AE in respect of provisions of research services. The assess .....

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Chrysler Ltd may be removed from the comparables because of significant related party transaction. The assessee submitted a fresh set of five comparables having mean operating margin at ₹ 4.50%. The TPO did not accept the comparables of the assessee and selected a set of nine comparables by using single year data instead of multi year data applied by the assessee. Accordingly, the TPO determined the mean operating margin of the comparables at 34.37%. The nine comparables of the TPO include .....

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llenged the exclusion of KJMC Corporate Advisors India Ltd from the comparables by the DRP based on the decision of this Tribunal in case of Carlyle India Advisors Private Limited Vs. DCIT (ITA No. 2200/M/2014) dated 22.08.2014. 4. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. During the course of assessment proceedings the assessee has submitted fresh set of five comparables for bench marking its international transaction of providing research servic .....

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ee except the comparable at serial no. 2 namely Indian Venture Capital Ltd and carried out fresh search and added eight more comparables for determination of ALP in respect of the international transaction carried out by the assessee with the AE. The comparables selected by the TPO are as under:- Sl No. Particulars OP/TC 1. KLG Capital Services Limited 85.22% 2. A R Venture Fund Management Limited 27.49% 3. KJMC Corporate Advisors (India) Limited (formerly known as KJMC Global Markets (India) Li .....

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e action of TPO the assessee filed objection before the DRP. The DRP deleted the first three comparables at Sl. No. 1, 2 and 3of the TPO s comparable and accordingly modified the arm s length price. The revenue has accepted the two comparables deleted by the DRP namely KLG Capital Services Ltd and AR Venture Funds Management Limited but challenged the deletion of comparable namely KJMC Corporate Advisors (India) Limited. At the outset, we note that the DRP has deleted this company as a comparabl .....

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High Court. A copy of the said judgment of the Hon‟ble Bombay High Court is placed at page 292 of the paper book. Para 2 of the said judgment dated 22.2.2013 is relevant here, which indicated the approval of the Tribunal‟s order by the Hon‟ble High Court which mentioned that 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 judgment of the Bombay High Court (supra) is relevant for .....

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e to be excluded and the assessee is entitled to relief. Accordingly, AO is directed to exclude the said two comparables too. Accordingly, ground no.4 raised by the assessee is allowed. 7. It was found by the Tribunal that the said company is in the business of investment, merchant banking, corporate finance and similar activities which cannot be compared to the investment advisory activities. There is no dispute that the assessee s international transaction with the AE is only with respect to t .....

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list of comparables. 9. Cross Objection 62/Mum/2014 10. The assessee has raised the following grounds in Cross Objection.. 1. On the facts and in the circumstances of the case and in law, the Learned Dispute Resolution Panel - I, Mumbai ('Learned DRP') erred in directing the Deputy Commissioner of Income-tax - 2(1) ('the Assessing Officer'/ the 'AO') to retain 'Motilal Oswal Investment Advisor Pvt Ltd' as a comparable to the cross objector / respondent without ap .....

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of Motilal Oswal Investments Advisors Pvt. Ltd for the purpose of determining the arm s length price. 12. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The Ld. Authorized Representative of the assessee has pointed out that the company Motilal Oswal Investments Advisors Pvt. Ltd is not functionally comparable with the assessee. In support of his contention he has relied upon the decision of this Tribunal in the case of Carlyle India Advisors Private Li .....

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of the Revenue Authorities as well as the relevant material placed before us. It is an undisputed fact that the assessee is engaged in the business of rendering investment advisory and related support services to its principal Carlyle Hong Kong. The dispute raised in ground no.4 relates to whether (i) KLG Capital Services Ltd (KLG); (ii) KJMC Corporate Advisors (India) Limited (KJMC) and (iii) Motilal Oswal Investment Advisors Pvt Ltd (MOIAPL) are functionally comparable cases or not considering .....

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ns 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 Advis .....

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has completed 23 assignments successfully as against 14 completed in the immediately preceding year. A close look at the financial statements of the said company show that the income from operations have been shown only as advisory fees whereas it is admittedly an undisputed facts that the said company is engaged in diversified activities. Segmental reporting is not available. Profit and loss account appears to be only of consolidated accounts. The said company is registered with SEBI as a merch .....

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