TMI Blog2017 (4) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer (AO) observed from the T.P. study for the year under consideration, that the assessee earns remuneration of cost plus 15% mark up for provision of investment advisory services, inter alia, to its parent company, Siguler Guff Global LLC. 2.2 The AO observed that the assessee in its T.P. study has adopted TNMM as the most appropriate method (MAM) and selected the following comparables for justification of the arms length price (ALP) of its international transactions with its associated enterprises (AE): - Sr. No. Name of the Company Weighted Average Operating Margin on operating Costs (%) 2010 1 Future Capital Holding Ltd. 5.52 2 Future Capital Investment Advisors Ltd. 20.35 3 ICRA Management Consulting Services Ltd. 0.71 4 ICRA Online Limited 32.89 5 IDC India Limited 12.72 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;), erred in upholding the action of the Deputy Commissioner of Income Tax, Circle 3(3) ('the Learned AO'), of including two additional comparables, Integrated Capital Services Ltd. and Motilal OswaI Investment Advisors Pvt. Ltd. on an arbitrary basis without undertaking a search process, which are not functionally comparable to the Appellant; and rejecting certain companies engaged in similar line of business as that of the appellant and which were selected by the Appellant in its transfer pricing study report, 2. for determining the arm's length price of provision of investment advisory services and thereby making an adjustment of ₹ 1,90,93,859 to the said international transaction of the Appellant. The Appellant prays that the aforesaid adjustment be deleted. 3. The learned AO/CIT(A) failed to understand and appreciate the functions performed, assets employed and risks assumed by the Appellant and its AEs, thereby comparing companies engaged in merchant banking, investment banking, fund management, financial restructuring and debt syndication etc. with the Appellant, 4. On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that while selecting comparables the assessee, after a scientific and qualitative analysis, has mainly selected companies which were engaged in the rendering of services similar to corporate advisory services, strategic advisory services, etc. The assessee has specifically excluded companies which are rendering services as merchant bankers registered with SEBI, asset management companies, etc. for the reason that their functional risk profile is at wide variance with that of the assessee, which merely provides non-binding advisory services to its AE. It is submitted that the AO has rejected all but one of the comparable companies selected in the assessee s T.P. study (supra) and included two of his own comparables (supra) without specifying the method and process by which he has undertaken the search process for identifying comparable companies. 6.2 In the order of assessment, as per the show cause notice issued, the AO required the assessee to explain as to why, inter alia, five of the six comparable companies chosen by the assessee, which includes; (i) IDC India Limited, and (2) ICR Management Consultancy Services Ltd. should not be excluded from the list of comparables and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advisory services provided by the assessee in the case on hand; where the main function is to give advice to its clients for making investment in diversified fields on a cost plus 15% mark up. Thus it is clear that the wide gamut of functions and transactions provided by Motilal Oswal Investment Advisor P. Ltd. is far wider and different from that of the assessee in the case on hand and render it not functionally comparable to the assessee in the case on hand. It is contended that mere classification of revenue as advisory fees will not place the company as comparable to the assessee in the case on hand, in the absence of functional and transactional similarity. It was submitted by the learned Senior Counsel that the following judicial pronouncements of the Hon'ble Courts/Tribunals, inter alia, have held that Motilal Oswal Investment Advisors P. Ltd. cannot be held to be a comparable company with those providing investment advisory services: - (i) Temasek Holding Advisors (I) P. Ltd. vs. DCIT (ITA No. 776/Mum/2013 dated 25.02.2016 for A.Y. 2010-11) (ii) Carlyle India Advisors P. Ltd. vs. Addl. CIT (43 taxmann.com 184) (Mumbai Trib) (iii) Carlyle India Advisors P. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 776/Mum/2015 dated 25.02.2016 also for A.Y. 2010-11 wherein while excluding Motilal Oswal Investment Advisory Pvt. Ltd. at para 25 thereof held that its merchant banking function being entirely different from investment advisory services it is to be excluded from the list of comparable to assessee s offering only investment advisory services. Respectfully following the decision of the Coordinate Bench in the case of Temasek Holding Advisory (I) Pvt. Ltd. (supra) which is also rendered for A.Y. 2010-11, the year under consideration in the case on hand, we direct the AO to exclude Motilal Oswal Investment Advisory Pvt. Ltd. from the list of comparables to the assessee in the case on hand who is only offering non binding investment advisory services. 8. Integrated Capital Services Ltd. 8.1 The company was selected and included in the final set of comparables by the AO on the ground that it is engaged in providing consultancy and advisory services. According to the learned Senior Counsel, Coordinate Benches in the cases of Q India Investment Advisors Pvt. Ltd. in ITA No. 923/Mum/2015 dated 24.04.2015 and Temasek Holding Advisors (I) P. Ltd. in ITA No. 776/Mum/2015 dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of net cost plus margin of M/s Integrated Capital Services Ltd. at 69.31%, which was related to the assessment year 2009-2010. Our attention was also invited to letter addressed to the DCIT, dated 9-12- 2014, wherein assessee has highlighted this mistake. As per this letter, margin of ICSL was 69.31% in the assessment year 2009- 2010, whereas there was negative margin of 4.01% in the assessment year 2010-2011 under consideration. It was further submitted that while computing the arms length margin, the AO has independently considered the weighted margin of Future capital investment advisory ltd. (i.e. 20.35%) instead of single year margin of 15.71%. 12. We have considered rival contentions and found that ICSL is functionally dissimilar, therefore, it should be excluded from the list of comparables....... 8.3.2 We find that the Coordinate Bench of this Tribunal in the case of Temasek Holdings Advisors (I) P. Ltd. in its order in ITA No. 776/Mum/2015 dated 25.02.2016 for A.Y. 2010-11, following the decision of the Coordinate Bench in the case of Q India Investment Advisors P. Ltd. (supra), has excluded Integrated Capital Services Ltd. from the final list of comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparable to companies rendering investment advisory services. 9.3 Per contra, the learned D.R. for Revenue supported the orders of the authorities below in excluding this company, M/s. IDC India Limited from the final list of comparables of the assessee in the case on hand. 9.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited and relied on. We find that the Coordinate Bench of this Tribunal in the case of Temasek Holdings Advisors India P. Ltd. in ITA No. 776/Mum/2015 dated 25.02.2016 has observed that this company, M/s. IDC India Limited is a good comparable to those companies engaged in investment advisory services since it is also engaged in advisory and consultancy services for the purpose of investment made in various sectors. In coming to this finding, the Coordinate Bench has placed reliance on the decision of the Hon'ble Bombay High Court in the case of Carlyle India Advisors Pvt. Ltd. (supra) which has upheld the decision of the Coordinate Bench in the same case reported in (2013) 43 taxmann.com 184 (Mum-Trib) wherein it was held that this company M/s. IDC India Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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