TMI Blog2015 (5) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... ctification order with regard to the application filed by the assessee,u/s.154 0f the Act. Therefore, we are of the opinion, that in the interest of justice matter should be restored back to the file of the DRP who would give a clear direction about the remaining two comparables selected by TPO and objected by the assessee. The DRP would afford a reasonable opportunity of hearing to the assessee before deciding the appeal. Additional ground of appeal raised by the assessee,before the DRP was not adjudicated upon. We direct the DRP to decide the same. - ITA No.1093/Mum/2014 - - - Dated:- 27-5-2015 - S/Sh. Vijay Pal Rao, Judicial Member Rajendra, Accountant Member For the Appellant : Shri M.P. Lohia For the Respondent : Shri N.K. Chand-CIT Order u/s.254(1)of the Income-tax Act,1961(Act) PER RAJENDRA, AM Challenging the order dt.20.1.2014 completed by the Assessing Officer(AO) completed u/s. 143 (3)r.w.s 144C (13) of the Act, the assessee has raised following Grounds of Appeal: Aggrieved by the order passed by the Deputy Commissioner of Income-tax Range -10(1). Mumbai ('AO') in pursuance of the directions issued by Dispute Resolution Panel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of hearing before us authorised representative (AR) of the assessee did not press grounds No.1.(i), 1.(ii), 1.(iv).Hence,same stand dismissed as not pressed. It was further stated that Ground No.1.(iii) was the effective ground as far as Ground No.1 was concerned, that the other grounds were of consequential nature. 2.Assessee-company,engaged in three business activities namely investment advisory segment, wholesale credit and treasury segment and retail financial services segment, filed its return of income on 30.9.2009 ,declaring total income of ₹ 4,09,91,773/-.The AO completed the assessment u/s.143(3) of the Act on 20.1.2014,determining the income of the assessee at ₹ 10, 27,81,540/-. 3.Effective ground of appeal is about upward Transfer Pricing (TP) adjustment of ₹ 6,17, 90, 764/-in determining the rm s-Length-Price (ALP) of the international transactions pertaining to investment advisory/support services provided by the assessee to its overseas Associated Enterprises(AE).In the TP study the assessee adopted seven comparables namely-Birla Sun Life Asset Management Co. Ltd.,Credible Management Consultants Pvt. Ltd., D S P Block Rock Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was vitiated by not using current year data, that the assessee had considered such comparables that were functionally different from it.Vide his letter,dt.19.12.2010,the TPO proposed to reject the TP study carried out by the assessee, as per the provisions of section 92C (3)(c) r.w.s.92CA(3) of the Act.The assessee objected to determination of the ALP of the international transaction by the TPO and filed submissions in that regard.After considering the submissions,he held that there were pertinent defects in the selection of comparables by the assessee, that the determination of ALP by it was unreliable, that the assessee had correctly followed the TNMM as the most appropriate method, that it did not use the current year data in one of the seven comparable selected by it, that it also used the earlier year data along with the current year data,that investment advisory services industry in India was not of cyclic nature, that no facts had been got on record to justify use of earlier year data, that the entire comparability exercise undertaken by the assessee was vitiated.The TPO applied certain filters and held that the comparables applied by the assessee could not be accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of price charged in rendering investment advisory and support services to the AEs for the FY 2008-09.After receiving the order of the TPO, the AO sent the draft order to the assessee. 4.Challenging the draft order of the AO, before the Dispute Redressal Panel(DRP),the assessee raised three grounds of appeal as well as additional grounds of appeal. It made submission before the DRP about MOIAPL and argued that it was engaged in provision of Merchant Banking services, that it was offering comprehensive Investment Banking solutions and transaction expertise covering private placement of equity, debt and convertible instruments covering international domestic capital markets, mergers acquisitions advisory and restructuring advisory implementations, that the income of MOIAPL was largely from cross border and M A activity and the related financing solutions. About ICD, the assessee argued that it provided restructuring advisory and turnaround management advices, that those activities would generate higher revenue as compared to purely investment advisory provided by the assessee. In this connection, it had relied upon the decision in the case of General Atlantic Pvt.Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the remaining 2 comparables selected by the TPO and objected to by the assessee, that the assessee was not a merchant banker like MOIAPL, that merger and acquisitions were the main activities of MOIAPL, that assessee was basically engaged in the business of investment advisory, that DRP had not given any direction about IDC, that remand report was called for. He referred to pg. no.14, 20, 64, 88, 199, 200,362-364, 145, 142. It was also argued that the assessee had filed an application u/s. 154 of the Act before the DRP. In that regard the AR referred to pg. No.191 and 350 of the paper book. He referred to cases of Carlyle India Advisors Private Limited( ITA/2200/ Mum/2014-AY.2009-10, dt.22.8.2014),NVP Venture Capital India Private Ltd. (ITA/1564/ Mum/2015 AY.2010-11, dt.30.4.2015), Sandstone Capital Advisors Pvt. Ltd. (ITA/6315/ Mum/ 2012AY.2008-09,dt.06.2.2013)and Q-India Investment Advisors Private Limited(ITA/923/ Mum/2015 AY 2010-11,dt.24.4.2015).Departmental representative supported the order of the DRP and the AO. He referred to the service level agreement entered into by the assessee on 24. 11.2008 and contended that job-profile of the assessee was similar to the function ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee vide ITA No.7367jMumj2012 (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 Directors 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the Profit and Loss account of the said concern for the year under consideration showed that the only stream of income was from advisory services and not from any activity of merchant banking and, therefore, the said 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 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 Investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed order about MOIAPL only and has not mentioned anything in favour or against the inclusion of the remaining two comparable. In our opinion, the DRP, being a appellate forum, is supposed to decide the issue raised before it by the assessee. Not only the DRP failed to pass a speaking order about those two comparable,but it also did not pass a rectification order with regard to the application filed by the assessee,u/s.154 0f the Act. Therefore, we are of the opinion, that in the interest of justice matter should be restored back to the file of the DRP who would give a clear direction about the remaining two comparables selected by TPO and objected by the assessee. The DRP would afford a reasonable opportunity of hearing to the assessee before deciding the appeal. Additional ground of appeal raised by the assessee,before the DRP was not adjudicated upon. We direct the DRP to decide the same. Effective ground of appeal filed by the assessee stands allowed in favour of the assessee in part. The additional ground filed by the assessee before us is related to the main ground and hence, stands allowed for statistical purposes. As a result, appeal filed by the assessee stands pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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