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2016 (2) TMI 907 - ITAT MUMBAI

2016 (2) TMI 907 - ITAT MUMBAI - TMI - Transfer pricing adjustment - selection of comparable - analisation of comparables which are in dispute under the TNMM method - Held that:- ICRA MANAGEMENT CONSULTANCY SERVICES LTD - Under the TNMM, one has to see the transaction undertaken are comparable or not and whether any adjustment is required to obtain a reliable result, because under TNMM the net margin are less affected by transactional differences and is more tolerant to some minor functional dif .....

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As stated earlier, in the earlier years, the TPO has accepted ICRA to be a comparable and in later years the Tribunal in AY 2008-09 & 2009-10 has held ICRA Management to be good comparable qua the functions of the assessee and there being no material change on facts, functional profile or any other factor in this year, then as matter of consistency, we do not want do deviate from our findings given in the earlier years. There cannot be a pick and choose of comparables every year unless there ar .....

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30. It is seen that, the company is concentrating on its main activity of corporate consultancy services and financial services. Being a NBFC has not changed the nature of activity undertaken by the company and its core business competency and its revenue is from consultancy services. So far as the turnover filter applied by the TPO, we find that, first of all at the time of selection process, the assessee has not considered the turnover filter for accepting or rejecting the comparables. The tur .....

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uch comparability can be rejected. But here in this case, merely on the ground that it has a low turnover cannot be the reason or criteria for rejection. As this comparable has been held to be a good comparable by the TPO himself and Tribunal in two years have accepted to be a good comparable. Thus as a matter of consistency, we hold that Kinetic Trust Ltd. should be included in the comparability list.

IDC India Ltd. - as discussed functions performed by the IDC India Ltd while dealin .....

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sory services and the realignment agreement was effective from 1st January, 2010, the realignment is also for investment advisory activities. Thus, there is not much impact on the net margins especially in the assessment year 2010-11, therefore, this company cannot be rejected and TPO is directed to include the same in the final comparability list.

Integrated Capital Services Ltd comparable has rightly been rejected and shall not be included in the final comparables.

Motila .....

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lly made over and above the comparative margin arrived at - Held that:- We agree that such an additional mark-up applied by the TPO is without any FAR analysis or without any benchmarking exercise with any comparables and more importantly without any analysis of assessee’s own facts. The assessee is providing non-binding investment advisory services to its AE and such services as highlighted by Ld. Counsel include; identifying and analyzing potential investment opportunities, evaluating and maki .....

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ench in the case of Carlyle India Advisors Private Limited (2013 (4) TMI 486 - BOMBAY HIGH COURT ) and in other decisions cited above by the Ld. Counsel. Thus, we hold that no such addition or adjustment on account of extra markup can be made - ITA No. 776/Mum/2015 - Dated:- 25-2-2016 - Shri B. R. Baskaran, Accountant Member And Shri Amit Shukla, Judicial Member For the Appellant : Shri Porus Kaka, Shri Divesh Chawla For the Respondent : Shri N K Chand, Shri Sambit Mishra ORDER Per Amit Shukla, .....

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ovision of investment advisory services to its associate enterprise (AE). The assessee is mainly aggrieved by exclusion of five comparable companies, (three by the Transfer Pricing officer (TPO) and two by the DRP) and inclusion of one comparable to arrive at the mark-up margin of 37.51% as against the assessee s margin of 21.4%. The assessee in its ground no. 4 has mainly challenged the rejection of the following three comparables selected by the assessee in its TP Study report for the financia .....

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accepted by the TPO. That apart, assessee has also challenged the addition of a further markup of 3% by the TPO over and above the comparative margin arrived at 37.51%. All other grounds revolve around these major issues only. 2. The brief facts qua the issue of Transfer Pricing adjustment are that, the assessee is a Private Limited Company incorporated in India and is 100% subsidiary of Tamasek Holdings Private Limited, Singapore (THPL). Assessee vide agreement dated 1st April 2004 with THPL ag .....

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ing services / functions: (a) Providing research reports, macro economic analysis and other advisory services; (b) Identifying, screening and investigating sectors of the Indian economy for investment opportunity; (c) Advising in investigation, structure, monitoring of portfolio securities/portfolio companies as the case may be; (d) Undertaking economic and market intelligence of the eligible portfolio companies including analysis and investigation of eligible portfolio companies, including thei .....

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ed in the Transfer Pricing Study report and in form 3CEB, entered by the assessee with THPL was as under:- Sr. No. Nature of transaction AY 2010-11 (Rs.) Method used as per TPSR 1 Investment Advisory services 34,31,28,197 TNMM 2 Reimbursement of salary & other cost 7,87,29,790 Not Applicable 3 Purchase of fixed asset 23,09,616 Not applicable 3. As stated above the transaction of Investment Advisory Services was disclosed by the assessee at a mark-up margin of 21.4%. To benchmark the margin, .....

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ss after detailed search process using keynotes on the accepted public data (i.e. Prowess and Capital Line); secondly, by applying quantitative filter to shortlist the number of companies thrown in list; and lastly, every comparable shortlisted were analysed at qualitatively level based on the multiple year data of the financial accounts available in the public domain. The whole search process has been documented in the Transfer Pricing Study report including accept and reject matrix. The entire .....

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anies which were engaged in the rendering of services similar to Corporate Advisory Services, strategic Advisory Services, Consultancy services, etc. The assessee has specifically excluded the comparable companies which were registered as merchant bankers with SEBI, asset management companies, stock brokers and like due to the reasons that their functional risk profile are significantly different from that of the assessee, which merely provides non-binding advisory services to its AE. He further .....

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age of the ITAT, wherein the most of the disputed issues on comparables have been decided in favour of the assessee. Thus, on a larger perspective the issues in this year are by and large are covered by the decisions of the Tribunal in assessee s own case. 5. Like in the earlier years, after detail analysis, the assessee had chosen comparables in its TP Study report to benchmark its margins, firstly by taking weighted average of three years for determining the arithmetic mean by analysing 10 fin .....

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see Operating margin FY 2009-10 Future Capital Investment Advisors Ltd. 15.71% ICRA Management Consulting Services Ltd 0.41% ICRA online Ltd 41.77% IDC India Ltd 13.00% Informed Technologies Ltd. 25.52% Integrated Capital Services Ltd. -2.92% Kinetic Trust Ltd. 10.39% Arithmetic Mean 14.84% Shri Porus Kaka submitted that, after the computation of Arm s Length Margin by benchmarking with the comparables on scientific and qualitative analysis done in accordance with the provisions of the Act and R .....

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the rules, then same methodology has to be adopted by the TPO also. Law does not envisage differential procedure for assessee and revenue so far as selection methodology is concerned. 6. In the transfer pricing order the Ld. TPO, in the show cause notice required the assessee as to why ICRA Management Consultancy Services Ltd. and Integrated Capital Services Ltd. selected by the assessee should not be rejected and why two comparable companies, namely, Future Capital Holdings Ltd. and Motilal Osw .....

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s relating to the comparables which are in dispute before us are discussed hereinafter in brief:- (i) ICRA Management Consultancy Services Ltd. (Rejected by the TPO):- Mr. Porus Kaka, pointed out that ICRA Management is essentially a Professional Consultancy Services Company which provides consultancy in diverse areas such as Government, infrastructure, energy, corporate Advisory, banking and financial sector etc. It was incorporated in 2005 by taking over the entire business management consulti .....

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assessee s submissions made before the TPO, but this company was also subject matter of dispute in the earlier years by the Department, which is evident from the fact that, in assessment year 2008-09 and 2009-10 this comparable has been directed to be included for the comparability analysis by the Tribunal and on same facts this company cannot be rejected. He thus submitted that, the inclusion of ICRA Management Consultancy Services Ltd. is covered by the two decisions of the Tribunal of the im .....

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n financial and corporate sector are important and key function which needs to be analysed rather than the areas in which the services are being rendered. In case of the assessee also if the list of investments made by assessee's AE on the basis of recommendations provided by the assessee is to be seen, then the assessee has also provided non- binding advisory services in diverse fields, like infrastructure, telecom, media, banking, etc. The TPO is also not correct in holding that the Tribun .....

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rust, does not specify that the said company is engaged in the investment advisory; further the said company is NBFC registered with RBI; and lastly, its turnover is only ₹ 20 lakhs. To counter this TPO s observation, Mr. Kaka pointed out that firstly, Directors report for financial year 2009-10 specifically mentions that the company has concentrated on its main activity of a corporate consultancy services and financial services. This is evident from Directors report given at page 193 of t .....

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the decision of Tribunal in the case of Trilogy E Business Software P Ltd vs DCIT (ITA No. 1054/Bang/2011) is not correct as the Tribunal's decision was based on the facts and in that context it has highlighted the importance to apply the turnover over filter ranging between ₹ 1 crore to ₹ 200 crores. The said decision does not implicate that the range of ₹ 1 crore to ₹ 200 crores is to be applied essentially in all the cases. Thus, the decision of the said Tribunal .....

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A No. 3043/2015, wherein, the Hon ble High Court observed that, whether the turnover filter is appropriate one and applicable, cannot be answered in the abstract and is entirely fact dependent. Lastly, the Tribunal in assessee s own case for the assessment year 2008-09 & 2009-10 has accepted the Kinetic Trust Ltd as a comparable company so far as the functions performed by the assessee. The Ld. TPO in utter disregard to the Tribunal s order has stated that the said decision of the ITAT canno .....

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ing Order, however, the DRP has rejected the said comparable while issuing his direction for AY 2010-11 without giving any opportunity to the assessee. Further, the ITAT Mumbai Bench in the assessee s own case for the assessment year 2008-09 & 2009-10 has accepted the IDC India as comparable company to the functions comparable by the assessee. Further, the Hon ble Bombay High Court in the case of Carlyle India Advisors Pvt. Ltd. (32 taxman.com 33) had upheld IDC India as functionally compara .....

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ives and the investment community make fact based decisions on technology purchase and business strategy. The functions performed by the assessee while rendering investment advisory services include analysing financial data of potential clients, analysing market conditions, conducting research on various sectors, markets, companies, etc. (iv) Rejection of Future Capital Investment Advisory Ltd: This comparable was also accepted by the TPO as a good comparable but has been rejected by the DRP wit .....

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of reconstruction of business, merger, amalgamation which is functionally cannot be held to be comparable with the functions performed by the assessee, that is, Investment Advisory Services. The TPO has noted that a consulting and advisory income earned by this company was only ₹ 84 lakhs, which is much less as compared to the assessee s turnover of ₹ 34.31 crores. The TPO has again referred to the decision of ITAT in the case of Trilogy E Business. Mr. Kaka submitted that, assessee .....

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nsert low turnover filter only for the purpose of cherry picking. He referred to the decision of Norton India P. Ltd. vs. Additional CIT (ITAT Delhi bench) (Supra) wherein, the Tribunal held that, the company cannot be excluded from the list of comparable mainly for the reason of having low turnover. Lastly, in the AY 2009-10, the TPO has accepted integrated capital as a comparable company to the assessee and the functions performed by the said company in AY 2010-11 are exactly similar to in AY .....

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is engaged in providing high quality strategic and financial services which are used in acquiring majority equity stake, Financial Advisory services for hundred percent acquisitions, rendering advisory services for placement of equity with investors, rendering strategic financial advisory services to enhance banking fund limits of the companies. The analysis of these services shows that the strategic and financial advisory services rendered by this company are comparable with the high quality, .....

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r will have more investments in its Balance Sheet. As per the notes to the accounts, the company has given a capital commitment of ₹ 1.5 crores to Aditya Birla Pvt. Equity and Reliance Alternative Investment Fund out of which the company has contributed only ₹ 30 lacs and ₹ 22.50 lacs respectively. It has received ₹ 31.72 crores of advisory fees (48.84%) in foreign exchange. At no placed there is any mention of any investment fund or investment related activity being hand .....

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e business for the purpose of RPT calculation. This shows that the company is in the business of rendering advisory services and not in the business of managing funds. c) On going through the above analysis, it is clear that MotilalOswal Investment Advisors P Ltd, is not into investment and key activity and also not in the management of assets for others. Further, the contention of the assessee that an investment bank assists corporations in mergers and acquisitions is not a correct proposition. .....

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ions; • Private Equity Syndications; and • Structured Debt. The annual report for FY 2009-10 indicates the Motilal Oswal has earned its income evenly from all these four business verticals. The annexure to the auditor s report indicates that Motilal Oswal is engaged in the business of merchant banking and investment/business advisory services . The web portal of Motilal Oswal shows that it offers comprehensive investment banking solutions and transaction expertise covering private plac .....

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rgy Limited, Pipavav Shipyard, Jai Balaji Industries Limited, DHFL Limited, etc. Thus, it is evident from the above that Motilal Oswal is engaged in merchant banking and other similar activities, which are not at all functionally comparable to the assessee, which is engaged in rendering of investment advisory services. Mr. Porous Kaka, further submitted that, in the following decisions of the Tribunal, it has been held that Motilal Oswal Investment Advisors Pvt. Ltd. cannot be held to be a compa .....

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. Not only that, there are catena of decisions where it has been held that merchant banker cannot be compared by an Investment Advisor. The lists of such judicial decisions are as under: • Carlyle India Advisors Private Limited v. Additional Commissioner of Income-tax 24 taxman.com 176 (Mumbai); • General Atlantic Pvt Ltd v DCIT 32 taxman.com 178 (Mumbai - Trib); • Goldman Sachs (India) Securities Private Limited v ACIT (ITA No. 7724/Mum/2011) Thus, Motilal Oswal should not be con .....

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red to be added to the average PLI of the comparable companies which was determined at 37.51% by the TPO and accordingly, the Arm s Length PLI was determined by him at 40.51%, as against assessee s operating profit of 21.4%. Thereafter, the TPO has tried to justify such an adding of a mark-up by referring to the definitions of Portfolio management services from the dictionaries came to a conclusion that, assessee is rendering an additional function which is not included in the investment advisor .....

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ices. Such an additional mark-up applied by the TPO is without any FAR analysis or without any benchmarking exercise with any comparables and more importantly without any analysis of assessee s own facts. Nowhere the assessee has provided any portfolio management services. The assessee only renders non-binding investment advisory services to its AE. These services include; identifying and analyzing potential investment opportunities, evaluating and making recommendations to THPL with respect to .....

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The portfolio management functions are part and parcel of investment advisor services and this point has been noted by the ITAT, Mumbai Bench in the case of Carlyle India Advisors Private Limited (supra). He also analysed the applicability of decision of Carlyle India in the case of the assessee. He further placed reliance on following judicial decisions where monitoring of investment was considered part of investment advisory services. The lists of such decisions are as under: i) TPG Capital I .....

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specially, the selection of comparables which has to be done on the basis of information and proper qualitative analysis for each year. The TPO is well within the jurisdiction and power to reject the comparables which has been chosen earlier if he had analysed the facts more deeply. After referring to the decision of Hon ble Supreme Court in the case of Baroda Distributor vs UOI, 155 ITR 120, he submitted that, if a mistake has been committed then same should not be perpetuated. Further, the pri .....

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intelligent analysis then a different view can be taken. Thus, here in this case, the comparables chosen by the TPO or his reasons for the exclusion of the comparables chosen by the assessee needs to be examined afresh based on the information and factual analysis carried out in this year and one cannot be guided by the precedence of earlier years alone. In support of this proposition he referred and relied upon the decisions of ITAT Delhi Bench in the case of Toluna India P Ltd in ITA No. 5645 .....

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tested for each and every year independently and separately for the purpose of determination of ALP. The international transaction has to be compared with uncontrolled and unrelated transaction for using data relating to financial year in which international transaction has been entered into and not merely on the basis of earlier years. Thereafter, he proceeded to give his counter submission with regard to each and every comparables rejected/included by the TPO. ICRA MANAGEMENT CONSULTANCY SERVI .....

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ed by ICRA are different from that of the assessee and so also the assets employed to perform the functions as well as the risk involved. If a criterion of the revenue from consultancy fee is to be taken into consideration, then on same logic, Motilal Oswal should also be included in the list as it has also shown the income from consultancy and so also in other cases also. Thus, this comparable cannot be included on account of single segment of revenue alone, that is, from consultancy fee but ha .....

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uld be seen that the average salary is very high which is evident from the fact that 22 to 25 employees salary paid was more than ₹ 20 crores as compared to the average salary cost of ICRA. Thus, going by the qualitative human asset, then there is a huge variation, which fails the comparability tests. Accordingly, this company should not be included. 11. Kinetic Trust Ltd. : Regarding this comparable, Mr. Chand submitted that, firstly, the total revenue of the company is only ₹ 24 la .....

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is, there has to be some basic critical mass, otherwise, the whole FAR tests fails. Regarding, Ld. Counsels plea that assessee has not taken any criteria of turnover, he submitted that TPO can very well apply the turnover criteria and in support of his contention, he relied upon the decision of ITAT in the case of Sand Stone Capital Advisors Private Ltd. vs. DCIT, reported in 147 ITD 240. Lastly, he submitted that, if turnover is taken as criteria then turnover of Motilal Oswal is twice the turn .....

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ould be removed from the comparability list. 13. IDC India Ltd & Future Capital Advisors Ltd.:- For these comparables, Mr. Chand relied upon the order of the DRP and referred to the direction given by the DRP at para 26 and 27 of the order. Alternatively, he submitted that, if the assessee s contention is accepted that DRP has not given opportunity to the assessee while rejecting these comparables, then matter should be restored back to DRP for considering the assessee s objection on these t .....

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from advisory fees only. It has a single segment and there is no other reportable segment as defined in AS-17. Regarding remarks of auditor s report that it was engaged in the business of merchant banking and bank advisory services, he submitted that, the same has to be treated as investment advisory services only, because this company is particularly into investment advisory for which it receives advisory fees. Under TNMM only the similarity of the functions is to be compared and if there is s .....

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unal then same should be accepted in this year also if there are no material changes. The onus is on the Department to bring on record what is the new material fact which has come in this year, if they want to take a different stand. Otherwise, the Tribunal order has to be followed as judicial precedence especially when rendered in assessee s own case, not once but twice in the preceding assessment years. Regarding each and every comparable, he made his detailed rejoinder and submitted that not .....

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en one side filter cannot be applied by the TPO. The TPO is trying to cherry picked the comparables by applying filter arbitrarily for selection. Regarding Motilal Oswal, he submitted that this company is purely into investment banker and a merchant banker which is entirely different not only on functions but also on assets and risks. The assessee is giving non-binding investment advice to its own AE for which it is reimbursed at cost plus markup, whereas the functions of a merchant banker are e .....

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t year of transfer pricing analysis for the provision of services rendered by the assessee to its AE, albeit in earlier year s also by and large similar dispute had arisen with regard to same set of comparables. The assessee is providing non-binding investment advisory services to THPL and the later retains the right to use such investment advisory services. As noted above the functions performed by the assessee for rendering advisory services for the AE to take decision for making the investmen .....

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ts, services, markets, management, financial solutions, competitive position market ranking, prospects for future performance and relevant industry sector; (e) Undertaking due diligence of investment opportunities and submit reports and recommendation; and (f) Assisting in performance review of portfolio companies, recommending the plans for managerial and business support and furnishing performance and relevant industry sector reports. For rendering these services to its AE the assessee is remu .....

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ested party with the operating profit of an uncontrolled party engaged in the comparable transactions. It measures the net margin or profit earned in an uncontrolled transaction by independent entities. The assessee s margin which is based on operating profit/ operating cost was at 21.4% which have been worked out in the following manner: Total revenue as per P&L Income Investment advisory income 343,128,197 Other income 1,473,267 Total Income 344,601,464 Less: Non operating income Director .....

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er years, the whole dispute revolves around inclusion or exclusion of certain comparables, some of which have already come up for consideration up till the stage of the Tribunal. However, before us the Ld. CIT DR has vehemently opposed the following of the judicial precedence of the earlier years and contended that, the entire issue of inclusion or exclusion of the comparables should be analysed afresh, firstly because, principles of res judicata cannot be applied in income tax proceedings, espe .....

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based on the information available internally i.e. the AE may be rendering or receiving similar services to or from an independent enterprise; or from the information obtained externally from the public domain of the entities involved in similar business and functions. The comparability analysis is basically a comparison of a controlled transaction with the uncontrolled transaction so as to arrive at the appropriate price or margin for making the accurate adjustments. Rule 10B (2) to (4) provid .....

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is is a very critical process of selection which has to be done on a rational basis and scientific methodology. While carrying out the search, certain key words are to be inserted to shortlist the similar category of companies and from results thrown, quantitative filters are applied so that the unwanted comparables are weaned out and a certain range is available for carrying out qualitative comparability analysis from the comparables based on the parameters laid down in Rule 10B(2). The compara .....

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laced before us, especially, the accept and reject matrix of the comparables for the provision of investment advisory services, we find that from nearly 2000 companies which were thrown in the search process, the assessee has finally selected seven comparables after carrying out qualitative analysis. These seven comparables with their operating margin for financial year 2009-10 were as under: Name of the company (Comparables selected By the assessee Operating margin FY 2009-10 Future Capital Inv .....

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hem have been rejected by the TPO and two have been additionally rejected by the DRP and two new comparables have been included by the TPO. Before analyzing each and every comparables, in the background of the arguments made before us and material placed on record, it is noticed that nowhere in the TPO s order it is mentioned what selection process has been adopted for including the two comparables by the TPO. What are the criteria, key words, quantitative and qualitative filters applied for sel .....

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he TPO, nothing has been brought on record before us, that TPO has adopted any scientific method for selection of his two comparables, i.e. Motilal Oswal Investment Advisory Pvt Ltd. and Future Capital Holdings Ltd. From the perusal of para 9.2 of the TPO s order it appears that, he has tried to picked-up the two comparables from the accept and reject matrix of companies by the assessee during its search process. Such an approach clearly indicates cherry picking, which approach cannot be accepte .....

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is the measure of arm s length results. If cost or sale is used as the base, then profitability depends largely upon the functions performed, therefore, in such a situation closer functionality is required preferably to an appropriate business segment or transaction. Now we will analyse the impugned comparables before us in light of the submissions made and in view of the background discussed above. ICRA Management Consulting Services Limited: 20. At the outset, this comparable was subject matte .....

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ure, energy, corporate advisory, banking and financial services, etc. It focuses on consultancy and advisory which is its core area and competency. The revenue generation is purely from consultancy fees which is evident from profit and loss account as on 31st March 2010 (appearing at page 176 of the paper book). The TPO in his order has noted that its consultation or advisory operations ranges in various fields which have been tabulated by him at pages 9 to 11 of the order, which according to hi .....

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s and has a very big client base unlike assessee. However all these facts do not affect the core competency and functions of the said company, which is advisory, because in all the fields it is rendering only advisory and consultancy services. The whole revenue is again from consultancy/advisory fees. In the instant case also, the assessee is providing Investment Advisory Services to its AE in diverse industries like, infrastructure, telecom, media, banking etc. to enable the AE to take decision .....

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However, if any unique function or property significantly affects the operating costs or net margin or has a bearing in the generation of revenue itself, then it cannot be considered to be a fit comparable for benchmarking the net margins. Here it is not the case where there is any unique functions materially affecting the revenue or net margins vis-a-vis the functions performed by ICRA. Hence on functional level it is a good comparable. As stated earlier, in the earlier years, the TPO has acce .....

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compelling to take a different conclusion. Thus, we hold that ICRA Management is a good comparable and should be included in the list of final comparables. Kinetic Trust Ltd. :- 21. This company has been rejected by the TPO on the ground that its turnover is only 24 lakhs and it is registered with the RBI as NBFC. On a lower turnover, the TPO has mainly relied upon the decision of ITAT in the case of Triology E Business. At the outset, it is noticed that in the earlier two years, the Kinetic Tru .....

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as the turnover filter applied by the TPO, we find that, first of all at the time of selection process, the assessee has not considered the turnover filter for accepting or rejecting the comparables. The turnover filter cannot be one of the tool for cherry picking by either of the parties at a later stage, as it has to be done at the threshold level only, i.e. at the time of search process and by applying quantitative filter. However, once turnover filter has not been applied then comparability .....

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ase highlighted the importance of applying turnover filter between the range of ₹ 1 crore to 200 crores. This does not lead to any inference that in all the matters the same criteria for applying the turnover filter should be taken between 1 crore to 200 crores. Thus, the ratio of the Tribunal decision cannot be applied universally in all the cases. Rather in the case of Nortel India Pvt Ltd vs Addl. CIT (supra), the Tribunal held that a company cannot be excluded from the comparable list .....

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nd Tribunal in two years have accepted to be a good comparable. Thus as a matter of consistency, we hold that Kinetic Trust Ltd. should be included in the comparability list. IDC India Ltd : 22. This comparable though accepted by the TPO as a good comparable, however, the DRP has additionally rejected this comparable. In assessment year 2008-09, the Tribunal has held to be a good comparable, firstly, on the ground that this company is also engaged in the advisory and consultancy services for the .....

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d comparable with the companies rendering investment advisory services. This decision of the Carlyle Advisors have also upheld by the Hon ble Bombay High Court. Moreover, we have already discussed the functions performed by the IDC India Ltd while dealing with Ld. Counsel s argument that functions of advisory services are quite similar to the functions of the assessee and, therefore, we accept the assessee s contention that this comparable cannot be rejected. Accordingly, same is directed to be .....

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t be any genuine reason for rejecting the said comparable. The DRP has rejected this comparable on the ground that it is in the process of shutting down its business. However, during the year, it has continued to render the investment advisory services and the realignment agreement was effective from 1st January, 2010, the realignment is also for investment advisory activities. Thus, there is not much impact on the net margins especially in the assessment year 2010-11, therefore, this company ca .....

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Advisor Ltd : 25. This comparable has been included by the TPO and while including the said comparable he has observed that its income is only from Advisory fees during the year and it is performing advisory services in that field of investment like assessee. Before us, Ld. CIT DR arguing for its inclusion submitted that, if the ICRA Management services can be included for having revenue from advisory services then on same analogy this company should also be given the same treatment. From the pe .....

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ernational and domestic capital markets, monitoring mergers and acquisitions and advising M&A as professional and restructuring advisory and implementations. It is also involved in various professional activities of the merchant banking. A Merchant Banker provides capital to companies in the form of share ownership instead of loans. It also provides advisory on corporate matters to the companies in which they invest. The focus is on negotiated private equity investment. The wide range of act .....

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the entire functions and transactions affects the generation of revenue and margins. Such functions are entirely different from investment advisory services. Mere classification of revenue as advisory fees will not put the company in a comparable basket sans functional similarity and transactional analysis. In case of Carlyle India Advisors Pvt. Ltd (supra), it has been held that, the merchant banking functions are entirely different from investment advisory services and this decision of the Tr .....

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markup on the ground that assessee in addition to investment advisory services has rendered portfolio management services, that is, it is monitoring the funds for its AE, hence for such a distinct function further upward adjustment should be made. First of all for making such transfer pricing adjustment a comparability analysis has to be done and then only margins can be benchmarked. He has not brought on record that, assessee is rendering any additional function which is not included in the inv .....

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