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TMI Blog2015 (11) TMI 1506X X X X Extracts X X X X X X X X Extracts X X X X ..... low and with the assistance of the Ld. Senior Counsel, we have considered the relevant documentary evidences brought on record in the form of Paper Book. 2.3. Briefly stated the facts of the case are that the assessee is a company registered in India and belongs to the General Atlantic group which is a private equity investment firm. The assessee is providing private equity investment advisory services to its AE which is General Atlantic Service Corporation USA (GASC LLC) a Delaware Limited liability company. GASC LLC is engaged by GA in providing management services to its affiliated limited partnerships globally. 2.4. The assessee is wholly owned subsidiary of GASC LLC based in India and providing information on industries alongwith information in relation to potential targets located in Indian Jurisdictional to its AE GASC LLC, as per the service agreement dated 31.10.2002 entered into between the parties. 2.5. In the Transfer Pricing report, the business of the assessee company is explained as under: "General Atlantic Service Company, LLC, (USA) ('GASC LLC'), a Delaware limited liability company, is engaged in providing management services to its affiliated limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote Corporate Services Ltd. /82.11% 5. L&T Capital Co. Ltd. 340.69% 6. S R E I Capital Markets Ltd. -17.57% 7. Sumedha Fiscal Services Ltd. 59.93% 8. I D C (India) Ltd. 9.99% Average 67.02% 2.10. The assessee was asked to explain why these companies should not be accepted during the year under consideration also. Vide letter dated 29.10.2012, the assessee strongly objected to the inclusion of these companies as comparables stating that these companies are functionally different because they are doing investment banking as well as investment advisory. Rebutting the claim of the assessee, the TPO asked the assessee to justify the selection of comparables made by it wherein the companies are also not exclusively engaged in investment advisory. The TPO further noticed that the assessee has excluded certain companies on the ground that these are not functionally comparable. The assessee was asked to explain why the following companies have been rejected which are also into financial advisory business. KJMC Corporate Advisors (India) Ltd. Motilal Oswal Investment Advisors Pvt. Ltd. AR Venture Fund Management ltd. KLG Capital Services Ltd. Quantum Advi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was that of a merchant banker whereas the assessee is an investment advisor. After considering the facts and the objections raised by the assessee, the DRP directed to accept the following comparables which are similar in activities with the assessee for computing Arm's Length Price required for finalizing the value of international transactions: Sr. No. Company Selected by 1. Crisil Risk & Infrastructure Solutions Ltd. Assessee 2. ICRA Management Consulting Services Ltd., Assessee 3. IDFC Investment Advisors Ltd. Assessee 4. Future Capital Investment Advisors Ltd., Assessee 5. IDC (India) Ltd. Assessee 6. Chartered Capital & Investment Ltd. TPO 7. Edelweiss Capital Ltd. TPO 8. Sumedha Fiscal Services Ltd. TPO 9. Motilal Oswal Investment Advisors Pvt. Ltd. Assessee 10. AR Venture Fund Management Assessee 11. Kshitij Investment Advisory Assessee 3.1. Following the directions of the DRP, the AO completed the ALP adjustment at Rs. 3,24,66,614/-. 4. Aggrieved by this, the assessee is before us. 5. The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. The Ld. Counsel strongly objected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s securities analysis in return for a fee, whether through direct management of client assets or via written publications. An investment advisor who has sufficient assets to be registered with the SEC is known as a Registered Investment Advisor, or RIA. Investment advisors are prohibited from disseminating advice known to be deceitful or fraudulent, and from acting as a principle on their own accounts by buying and selling securities between themselves and a client without prior written consent." and the definition of merchant bank given in Vikipedia is as under: "A merchant bank is a financial institution providing capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms in which they invest. In the United Kingdom, the historical term "merchant bank" refers to an investment bank." 8. A simple perusal of the above definition would show that there is huge difference between the functions. No doubt that in both these companies Chartered Accountants and MBAs are involved but that would not make their functions similar as they are working in different filed with different risks and remuneration. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany are in the field of Stock Broking, Depository services, Commodity Broking and Currency Derivatives Broking and Corporate services are for equity placement, Financial Restructuring, Merchant Banking and also Mergers and Takeovers. This company has earned income from fee based activities like Loan Syndication and Project Consultancy Services at Rs. 787.63 lacs. We have further gone through the financials of this company alongwith the auditor's report. We find that this company is also functionally not comparable with the assessee and for similar reason the Tribunal has excluded this company from the final list of comparables in A.Yrs 2006-07 & 2007-08, 4. Motilal Oswal Investment Advisors Pvt. Ltd At the very outset, in the balance sheet abstract of this company, it is shown as Merchant Banking and Investment/business Advisory Company. Moreover, during the year, this company has shown related parties transaction of reimbursement/sharing of expenses which is 88.16%. As the RPT is more than 50%, this company was also excluded by the Tribunal in plethora of cases mentioned at para-5.2 of this order. In our considered opinion, this company also cannot be included in the final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avelling is must. It is an error to say that assessee was soliciting/seeking potential investors by taking these foreign visits. The findings of the AO are clearly erroneous on the facts of the case and the DRP further fell into error by confirming the same. We, therefore direct the AO to delete the impugned disallowance of Rs. 24,36,150/-. Ground No. 2 is accordingly allowed. 16. Ground No. 3 relates to an incorrect adjustment on account of refund not received. 16.1. We restore this issue to the file of the AO. The AO is directed to furnish the complete adjustment sheets to the assessee explaining how the refund was adjusted after giving a reasonable opportunity of being heard to the assessee. Ground No. 3 is treated as allowed for statistical purpose. 17. Ground No. 4 relates to the levy of interest u/s. 234D of the Act. The levy of interest is mandatory though consequential. The AO is directed to levy interest as per the provisions of the law. 18. Ground No. 5 relates to the initiation of penalty proceedings u/s. 271(1)(c) of the Act. This grievance is premature and requires no adjudication. 19. In the result, the appeal filed by the assessee is partly allowed for statistic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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