TMI Blog2017 (9) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... e in calculating the operating margin of the assessee as well as final comparable companies. Respectfully following the same, we set aside this issue to the file of TPO/AO to treat the foreign exchange gain/loss as operating in nature in calculating the operating margin of the assessee as well as final comparable companies. - ITA No. 1681/Del/2015, ITA No.1018/Del/2016, ITA No.75/Del/2017 - - - Dated:- 4-9-2017 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Appellant by : Shri Kapil Hirani, CA, Shri Suresh Tolani, Adv., Shri Darpan Kirpalani Respondent by : Shri T.M. Shivakumar, CIT ( DR) ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER All these appeals have been preferred by the assessee against the orders giving effect to the directions given by the Hon ble Dispute Resolution Panel-IV (DRP), New Delhi. As the grounds are almost identical in all three appeals, these are being disposed of through this common order. 2. Brief facts of the case are that the assessee, D. E. Shaw India Advisory Services Private Limited (D. E. Shaw India), is a company incorporated in India as a private limited company, with its regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. MotilalOswal Investment Advisors Private Limited 95.87% Added by TPO 9 Ladderup Corporate Advisory Private Limited 9.61% Added by TPO Average 39.04% 2.1.2 Out of these comparables, the assessee is accepting Cyber Media Research Limited, Future Capital Investments and ICRA Management Consulting Services Ltd. but is contesting the remaining five comparables. The following grounds have been raised in this year s appeal:- 1. That on the facts and circumstances of the case and in law, the order of assessment framed by the learned Deputy Commissioner of Income-tax, Circle - 7(1), New Delhi (hereinafter referred to as 'the learned AO') pursuant to the directions of the Hon'ble Dispute Resolution Panel - IV (hereinafter referred to as 'the Hon'ble DRP') under section 143(3) read with section 144C of the Act, is a vitiated order having been passed in violation of principles of natural justice and is otherwise arbitrary and is thus bad in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isors Private Limited and Kshitij Investment Advisory Company Limited as comparables without appreciating that these comparables are engaged in merchant banking services, security and stock broking services, loan syndication/ debt syndication and project consultancy services, investment banking services, institutional equities, insurance brokerage, asset management and wealth management, merger and acquisition advisory, ESOP advisory, equity/ debt placements and restructuring, syndication of finance, portfolio management and mutual fund distribution and do not satisfy the functional, assets and risks ( FAR ) analysis test vis-a-vis the Appellant in relation to the international transaction pertaining to provision of financial and investment advisory services. 3.7 That the learned TPO erred in selecting certain companies as comparables without appreciating that these companies have displayed exceptional profit during the relevant financial year (i.e. FY 2009-10) under consideration which was on account of exceptional circumstances and did not portray the correct operational profitability in the industry. 3.8 The learned AO/ learned TPO have erred, in law and on facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sory and consultancy services, ₹ 13,031,164/- on account of receivables and ₹ 49,66,653/- on account of buy back of shares. On the assessee approaching the Hon ble DRP, the Hon ble DRP gave partial relief to the assessee by directing the Assessing Officer to allow working capital adjustment thereby reducing the TP adjustment to ₹ 89,112,587/-. The Hon ble DRP also directed the adjustment in respect of buy back of shares to be deleted. However, the Hon ble DRP did not grant any relief in respect of receivables. In this assessment year, the assessee had selected eight comparables to benchmark the transaction involving investment advisory services in its TP documentation. TPO rejected six of the comparables and only retained two and thereafter, added ten new comparables. The final list of comparables after the Hon ble DRP directions are 12 as under:- S. No. Comparable companies Adjusted OP/ TC Original TP Study I Added by TPO 1 A. K. Capital Services Limited -75.08% Added by TPO 2 Aditya Bir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant. 3. That the learned AO/ learned Transfer Pricing Officer ( TPO ) has erred on facts and in law in making the transfer pricing adjustment of INR 89,112,587 in respect of the international transaction relating to the provision of financial and investment advisory services to the associated enterprises ( AEs ) undertaken by the Appellant. 3.1 That the learned TPO erred, on facts and in law, in rejecting the economic analysis in the documentation filed by the Appellant in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ( the Rules ) and proceeded to make a transfer pricing addition based on re-determination of the arm's length price of the international transaction. 3.2 That the learned TPO erred, in law and on facts in using single year financial data (i.e. data for FY 2010-11 only) as against multiple year financial data used by the appellant for determination of the arm's length price of the international transaction pertaining to provision of investment advisory services. 3.3 That the ld. TPO erred, on facts and in law, in applying lower turnover filter of INR 5 crore to reject Informed Technologies Limited and Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le computing the operating margins of the Appellant and the comparable companies for the application of the TNMM. 3.8. That the learned TPO/ Hon'ble DRP erred, on facts and in law, by not making appropriate adjustment for risk differences between the Appellant and the selected comparable companies in the arm's length price so determined for the international transaction pertaining to provision of investment advisory services, as the Appellant is remunerated on cost plus basis for impugned transaction and bears minimal risk. 3.9. That the learned TPO have erred, on the facts and in law, in not allowing the benefit of downward adjustment of 5%, as provided in the Proviso to section 92C of the Act, from the arm's length price determined for the impugned transaction. 4. That the learned AO/ learned TPO/ Hon'ble DRP have erred, on the facts and in law, in making the transfer pricing adjustment of INR 1,30,31,164 by erroneously recharacterizing the outstanding receivables from AE of the Appellant as unsecured loan and computing notional interest on alleged delays in realization of payment from the AEs against the invoices raised for investment advisory services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable companies after the Hon'ble DRP s directions are as under:- S. No. Comparable companies Adjusted OP/ TC Original TP Study /Added by TPO 1 Aditya Birla Capital Advisors Private Limited 34.02% Added by TPO 2 Ajcon Global Services Limited 14.76% Added by TPO 3 Almondz Global Securities Limited (Segmental) 35.75% Added by TPO 4 ICRA Management Consulting Services Limited 2.37% Original TP Study 5 IM + Capital (Brescon Corporate Advisors Limited) 19.91% Added by TPO 6 Keynote Corporate Services Limited 62.42% Added by TPO 7 Ladderup Corporate Advisory Private Limited 33.85% Added by TPO Average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies having significantly higher turnover vis-a-vis the Appellant. 4.4 That the learned TPO/ Hon ble DRP erred, on the facts and in law, in rejecting Informed Technologies Limited, Integrated Capital Services Limited, ICRA Online Limited and Cyber Media Research Services Limited (formerly IDC (India) Limited) as comparables for provision of investment advisory services to AE without appreciating the fact that the services provided by these companies are similar to the functional profile of the Appellant. 4.5 That learned TPO/ Hon ble DRP have erred, on the facts and in law, in rejecting Cyber Media Research Services Limited by erroneously observing that it is incurring persistent losses. 4.6 That learned TPO/ Hon ble DRP have erred, on the facts and in law, in selecting IM + Capitals (Formerly Brescon Corporate Advisors Limited), Keynote Corporate Services Limited, Ladderup Corporate Advisory Private Limited, Aditya Birla Capital Advisors Private Limited, Ajcon Global Services Limited and Almondz Global Services Limited as comparables without appreciating that these companies are engaged in merchant banking services, security and stock broking services, loan syndica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erred, on the facts and in law, in applying arbitrary interest rate of 12.25 percent while determining the notional interest on the alleged delays in collection of receivables from the AEs against the invoices raised for the provision of investment advisory services. 5.2. Without prejudice, the learned TPO/ Hon'ble DRP have erred, on the facts and in law, in considering the SBI base rate instead of London Interbank Offered Rate ( LIBOR ) while calculating notional interest on alleged delays in realization of payment from the AEs as the invoices were raised on the AEs in foreign currency i.e. USD. 5.3. That the learned TPO has erred, on the facts and in law, and has grossly violated the principle of natural justice by not providing a suitable opportunity of being heard to the Appellant by issuing show cause notice before making the adjustment in relation to the notional interest on outstanding receivables. 6. That the learned AO/ Hon'ble DRP have erred, on the facts and in law, on the circumstances of the case and in law by alleging that the Appellant has furnished inaccurate particulars of income, thereby proposing to initiate penalty proceedings under section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that merchant banking concern cannot be compared to investment advisory services. Reliance was also placed on the cases of Temasek Holdings Advisory(I) Private Limited in ITA No. 4203/Mum/2012 for assessment year 2007-08 and TPG Capital India Pvt. Ltd. in I.T.A. no. 880/Mum/2013 for assessment year 2008-09 wherein M/s Brescon Corporate Advisors Limited had been excluded by the ITAT on account of functional dissimilarity. ii) Keynote Corporate Services Limited Ld. AR submitted that this comparable had earned the entire revenue from non-comparable activities like merchant banking, issue management and investment banking solutions, mergers and acquisition, equity/debt placement and restructuring. Ld. AR referred to page 96 of the annual report compendium in support of his contention. Ld. AR also submitted that Keynote was registered as a merchant banker with SEBI and was therefore not comparable with the assessee company. Ld AR placed reliance on the order of the ITAT Mumbai Bench in Carlyle India Advisors Pvt. Ltd. in I.T.A. No. 7901/Mumbai/11 for assessment year 2007-08 wherein it had been held that Keynote Corporate Services Limited was into merchant banking and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this company earned revenues from corporate and consumer lending and insurance advisory services and was accordingly functionally dissimilar. Ld. AR referred to page 152 of the Annual Report Compendium in support of his contention. It was also submitted that the TPO had not considered this company as a comparable in subsequent assessment years. It was also submitted that during the year under consideration, this company had realigned its business to Everstone Investment Advisors Pvt. Ltd. and accordingly the impact of the same was seen in assessment year 2011-12 wherein the company had earned income only from other sources and nil income from investment advisory activities. Ld. AR also submitted that he was relying on general principles regarding functional dissimilarity between merchant banking services and investment advisory services. 3.1 Ld. AR also submitted that if M/s Brescon Advisors and Holdings Limited, Motilal Oswal Investment Advisors Private Limited and Keynote Corporate Services Limited were excluded from the final set of comparables, then the transaction undertaken by the assessee would become at arm s length and thereafter the other two comparables need not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recharacterized as a loan. The TPO has not brought any material on record to suggest that this is a loan and therefore interest is to be charged. The TPO re-characterized the whole transaction pertaining to provision of service as that of a loan which is not permissible without any materials or evidence suggesting that such transaction is a loan. Reliance placed on: Essar Steel Orissa Ltd. Vs. ACIT (ITA 2289/Mum/2014) 3. Account receivables arising from an International Transaction are closely linked to the main transaction and as such should be benchmarked using a combined transaction approach. The transaction should be considered as being 'closely linked' to the main transaction as per Rule 10A (d) of the Rules and should be benchmarked using a combined transaction. Reliance placed on: Kusum Healthcare Pvt. Ltd. (ITA 6814/Del/2014) confirmed by Delhi High Court in ITA No. 765/2016 Goldstar Jewellery Limited (ITA 6570/Mum/2012) Tally Solutions Pvt. Ltd. Vs. ACIT- IT(TP) A.No. 1364/Bang/2011 Yash Jewellery Pvt. Ltd. Vs. DCIT- (2016) 66 taxmann.com 216 (Mum) 4. The Ld. TPO has failed to choose a method that is mandatorily prescribed under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e favour of the appellant. The appellant thus in light of the above submission prays before your honours that the adjustment made on account of notional interest on outstanding receivables ought to be deleted in the interest of natural justice. Without prejudice to the appellant s contention above, in case it is held that adjustment on account of interest on outstanding receivables is warranted then the appellant further submits as under:- 11. The Appellant without prejudice submits that in case it is held that interest on outstanding receivables is warranted then Interest on Net Outstanding Receivables from AE's (Receivables - Payables) ought to be calculated in the interest of natural justice. 12. Without prejudice to Appellant's contention that there is no delays in receipt of payment from AEs, even if one were determine the alleged delays, then the same should be determined based on the average realization period within which independent companies selected by the TPO for TNMM has received payment from their customers and same should be compared with the average realization period of the Appellant. 13. Average realization period of comparable companies is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahindra Limited (ITA NO. 1176/Mum/2010) 18. Without prejudice to the above, the Appellant further submits that the TPO and the Hon'ble DRP have made computational errors while calculating the adjustment towards interest on outstanding receivables. In case it is held that the adjustment towards interest on outstanding receivables is warranted, the correct amount ought to be considered in the interest of natural justice. 3.4 The Ld. Authorised Representative submitted that similar issue was also being agitated in appeal for Assessment Year 2011-12 and 2012-13 with the difference that in Assessment Year 2011-12, the TPO had considered only net outstanding receivables i.e. receivables minus payables whereas in Assessment Years 2010-11 and 2012-13, the TPO had taken the gross amount of receivables. It was also submitted that the average realisation period of comparable companies was 106 days whereas it was 121 days in the case of the assessee and, therefore, the difference for the purpose of adjustment can only be 15 days (121-106) and not 30 days as calculated by the TPO. 3.5 Ld. Authorised Representative also submitted that one of the comparables M/s Ladderup Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the TPO should not be disturbed. 4.1 On the issue of interest on receivables, the Ld. CIT DR placed reliance on the order of ITAT Delhi Bench in Mckinsey Knowledge Centre Pvt Ltd Vs. DCIT in ITA No 154/Del/2016. 4.2 On the issue relating to foreign exchange gain/loss, the Ld. CIT DR fairly agreed that the same needed to be excluded or included in both the AE as well as non-AEs. 4.3 Ld. CIT DR also filed written submissions which are being produced here-in-under:- I. In the present appeal the Taxpayer is seeking exclusion of 5 comparables on strict functional comparability - though the same was not done neither in the TP study nor by the TPO. The TPO has selected the comparables for benchmarking the transaction on broad functional similarity between the functions performed by the taxpayer and the comparables. II. Objections of Taxpayer: The taxpayer is now objecting that the services provided by the said 5 (out of 9) companies are not comparable to the 'investment advisory sevices' that is being provide by the Taxpayer. Brescon is being sought to be excluded on the ground that it is providing debt syndication services. Karvy is sought to be excluded on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication given by taxpayer for inclusion of Integrated Capital Services Ltd' at page 88 of the Appeal set (internal page 3 of TPO order) we can see that all of the following services rendered by that entity were proposed by the Taxpayer as comparable services(TPO rejected this entity on turnover filter). This only reinforces the fact that the Taxpayer and the TPO have treated various functions in the financial sector as comparable to the functional profile of the Assessee: Advisory, Compliance Representation Services to On-going / New Business Setting up business in India by overseas enterprises Economic Legislations, including Company law, Direct /Indirect taxes Agreements Contracts, including joint venture, technical know how/ collaboration Due diligence for business investment/ combination Business Consolidation /Restructuring Services Advising, Identifying Implementing Strategic Alliance/s Acquisitive expansions/s Structuring Amalgamation / Merger De-merger Complying with Statutory Procedures, Obtaining Approvals / Consents of Authorities Negotiations, to facilitate acquisition/takeover of businesses IV. If one goes b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny's subsidiary Company Ladderup Corporate Advisory Private Limited (LCAPL) which is engaged in the fee based services has successfully completed various big ticket loan syndication, private equity and corporate advisory transactions. Further Ladderup Corporate Advisory Private Limited has received Merchant Banking Registration from Securities and Exchange Board of India (SEBI) and shall now be able to serve clients in the services related to capital market transactions like QIP, Open Offers, Buy Back offers, IPO, EPO, Right Issues, valuations, etc. which will further establish its presence in equity capital market. ii. The Annual Report of Laddcrcup Finance ltd, under the heading BUSINESS PERFORMANCE INCLUDING SUBSIDIARIES OF LADDERUP FINANCE LIMITED found at page -20 of the Annual Report states as under: Ladderup Corporate Advisory Private Limited (LCAPL), a subsidiary of your company is engaged in fee based advisory services to its clients. LCAPL has maintained its focus on fee based big ticket transactions and will continue to focus on the same because of the increased opportunities in the space of debt syndication, private equity, M A and corporate advisory particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involve the concept of Public-Private Partnership (PPP) between Government and private investors. Your Company has been a thought-leader in the Water sector, especially in the areas of implementing PPP transactions, and has participated in various international forums such as the World Water Week of the Stockholm International Water Institute, the Institute of Water Policy at Singapore, and an internal seminar organised by the Asian Development Bank, Manila. The track record of your Company in working with clients such as GTZ, KfW, the World Bank, and UNICEF stands testimony to the capabilities of your Company in these sectors. During the year under review, your Company partnered Ecorys Netherlands, B.V. in multiple projects, including in the preparation of an integrated transport policy for Punjab, and another project involving a review of highway agencies in South Asia. Your Company was also engaged in diverse mandates related to the formulation of sanitation plans for several cities, feasibility studies for setting up funds for urban development, and in transaction advisory mandates for setting up PPP projects for water supply in several cities. Your Company also completed a fea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total revenue. Hence, geographical segment is considered as one segment. 4. Future Cap Inv i. In this company there has been an realignment of business' as is evident from its Annual Report and hence is not a good comparable. The company has handed over its 'advisory services business to another company by name Everstone Investment Advisors Pvt Ltd and the Agreement is effective from 1st Jan 2010 as per the Annual Report (page 33 of Annual Report) - Para 13 of Notes to Accounts (Sch-14). The company was no more into investment advisory business w.e.f. 1st Jan 2010. Relevant portion of the Annual Report (Page-4 and 34) is reproduced below: RE-ALIGNMENT OF INVESTMENT ADVISORY BUSINESS OF THE COMPANY During the year under review, the Company and its holding company viz. Future Capital Holdings Limited (FCH) entered into appropriate agreements with Everstone Investment Advisors Private Limited, to realign its investment advisory activities with a view of having a focused and dedicated approach to the Investment Advisory Business. The realignment of the investment advisory activities of the Company has been effective from January 1,2010. 13. The Board of Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be as per the present understanding of the law. Only then it would result in correct assessment of income relating to the 'international transactions', (mandated by S.92(1) of IT Act) III . It is submitted that the following observations Hon ble Special Bench of ITAT in the case of Aztec Software And Technology vs ACIT (2007) 294 ITR 32 (Bang) supports the above proposition: 133 ..Having regard to the purpose of the legislation and application of similar enactment world over, it must further be held that adjustments made on account of ALP by tax authorities can be deleted in appeal only if the appellate authorities are satisfied and records a finding that ALP submitted by the assessee is fair and reasonable. Merely by finding faults with the transfer price determined by the revenue authorities (A.O. / TPO], addition on account of adjustments cannot be deleted. This is because the mandate of section 92(1) is that in every case of international transaction, income has to be determined having regard to ALP. Therefore, unless ALP furnished by the taxpayer is specifically accepted, the appellate authorities on the basis of material available on record has to det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxpayer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself. B. Case law: Kapurchand Shrimal vs.CIT(1981) 131ITR 0451(SC) (copy submitted] (Para -17 on pages 5 6). Important portion is as under: It is, however, difficult to agree with the submission made on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further direction. It is well-known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute. i . Similarity of provisions of S.25A of 1922 Act and 92(1) of 1961 Act. ii .Both are mandato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -A, which is restricted to consideration of substantial question of law , if any arising. As would be seen from the discussion that follows, the obligation to make proper inquiry and reach finding on facts does not end with the AO. This obligation moves upwards to CIT (Appeals), and also ITAT, should it come to their notice that there has been default in such respect on the part of the AO. In such event, it is they who are duty bound to either themselves properly inquire or cause such inquiry to be completed. If this were not to be done, the power under Section 148 would be rendered prone to abuse 38. The provision of appeal, before the CIT (Appeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact-finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the door of the said appellate authority. For such purposes, we only need to point out one step in the procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see s margin of 16.54% and therefore no further adjustment would be required and the entire transfer pricing addition would be liable to be deleted. On the remaining comparables being contested, the arguments of the Ld. AR were as underi) Axis Private Equity Limited Ld. AR submitted that this company was functionally dissimilar as it was into asset management services. It was also submitted that the TPO had used unreliable information while including this as a comparable because he had relied on the draft red-erring prospectus of another company Neesa Leisure Limited to substantiate the comparability. It was also submitted that the approach of the TPO was inconsistent as excess was included as a comparable in this year but had been rejected in assessment year 2010-11. It was also submitted that this company was earning supernormal profit of 30.36%. The ld. AR also placed reliance on the decision of ITAT Mumbai in the case of M/s Goldman Sachs (India) Securities Private Limited vs DCIT in I.T.A. No. 222/Mumbai/2014 and of ITAT Delhi Bench in Avenue Asia Advisors Private Limited vs DCIT in I.T.A. 6638/Del/2013 wherein this company was excluded as a comparable. ii) Ajcon Glob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the same should be excluded. 6. Ld. CIT DR placed heavy reliance on the findings of the lower authorities and also filed written submissions in support of his arguments which were identical to the written submissions filed for Assessment Year 2010-11 and, therefore, the same are not being reproduced here for the sake of brevity. 7. The Ld. AR, thereafter, advanced his arguments in ITA 75/Del/2017 for Assessment Year 2012-13 and submitted that ground no. 1, 2, 3, 4, 4.1 and 4.9 were general. Ground no. 4.2, 4.10 and 5.3 were not being pressed. It was also submitted that ground no. 4.8 related to the issue of foreign exchange gains/losses and bank charges which was identical to the earlier two years and the arguments made by the Ld. Authorised Representative for Assessment Year 2010-11 would apply and the same were not being repeated for the sake of brevity. It was also submitted that ground nos. 5, 5.1 and 5.2 relate to interest on receivables which were also identical to the earlier year s arguments and were not being repeated. 7.1 On the issue of comparables it was submitted that if Keynote Corporate Services Ltd., Almondz Global Securities Ltd. and Ajcon Global ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT DR that the matters be restored to the file of the TPO for a fresh adjudication. 10. We have heard the rival submissions and carefully perused the relevant material placed on record. First of all, we take up the comparables being agitated by the assessee. (A) Assessment Year 2010-11 10.1 The assessee has submitted that if three comparables viz. Brescon Advisors Holdings Ltd., Keynote Corporate Services Ltd. and Motilal Oswal Investment Pvt. Ltd. are excluded, the assessee will fall within the range of 5%, therefore, initially we proceed to adjudicate on these 3 comparables and other comparables will be taken up at a later stage if the need so arises. (i) Brescon Advisors Holdings Ltd. Ld. Authorised Representative has placed reliance on a number of case laws and has argued for the exclusion of this comparable. The ITAT Delhi Bench in the case of Xander Advisors India Pvt. Ltd. vs ACIT in I.T.A. No. 5840/Del/2012 for Assessment Year 2008-09 has noted in Para 10 of the said order that this company was engaged in carrying on merchant banking and investment activities along with providing project advisory services. The Bench has also noted that this company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and recapitalization and debts syndication, it cannot be considered a comparable with the company providing investment advisory services like the assessee. Accordingly, we direct the TPO/Assessing Officer to exclude this company from the final list of comparables. (ii) Keynote Corporate Services Ltd. It has been the assessee s contention that this company has earned revenue from merchant banking, investment activity, mergers and acquisition advisory, ESOP Advisory and equity, debt placements and restructuring. It is the assessee s contention that this company is functionally different and for that purpose it has relied on the order of the ITAT Mumbai Bench in the case of Carlyle India Advisors Pvt. Ltd. in I.T.A. No. 7901/Mum/2011. The relevant paragraph of the order of the ITAT Mumbai is being reproduced as under:- Keynote is a full service investment banking group focused on mid market companies in India. With services that enable our clients to access Capital Markets, Corporate Finance_ Advisory, Mergers and Acquisitions Advistory, ESOP Advisory, Equity/Debt Placements and Restructuring, Keynote has emerged as a onestop- botique for mid market companies across the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Pvt. Ltd. by ITAT Mumbai in I.T.A. No. 1581/Mum/2014 wherein this company was directed to be excluded in page 11 of the order. The relevant portions are being reproduced for a ready reference:- Motilal Oswal Investment Advisors Pvt Ltd:- 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 various field and industries including advisory services 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 perusal of the directors report, it is seen that this company derives its business income from four different business verticals, i.e. Equity capital markets, merger and acquisitions, profit equity syndications and structured debt. It also give advises on cross border acquisition. Its core competence is in the field of merchant banking. It also provides comprehensive investment banking solutions and transaction expertise covering priv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y providing investment advisory services. Accordingly, we direct the Assessing Officer/TPO to exclude this company also from the final list of comparables. The assessee has submitted that if the three comparables viz. M/s Brescon Corporate Advisors Pvt. Ltd., Motilal Oswal Investment Advisors Pvt. Ltd. and Keynote Corporate Services Limited were excluded from the final list of comparables. The assessee s transaction will come within the arm s length. The assessee has also provided a chart in which the adjusted OP/TC has been calculated after the exclusion of these three comparables and it works out to 14.84% as compared to assessee s margin of 19.47%. As we have directed the Assessing Officer/TPO to exclude these three comparables, we are not adjudicating on the other comparables contested by the assessee for Assessment Year 2010-11 and direct the Assessing Officer/TPO to verify the working of the assessee at the time of excluding these three comparables and working out the new margins. The assessee will also be given proper opportunity by the Assessing Officer /TPO while finalizing the margins. (B) Assessment Year 2010-11 10.5 In Assessment Year 2010-11 also, the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI and has pointed out that company is registered as a merchant banker at Sl. No. 6 of the said list of merchant bankers. Reliance has also been placed by the assessee on the order of the ITAT Mumbai Bench in the case of Carlyle India Advisors Pvt. Ltd. in I.T.A. No. 1286/Mum/2012 wherein companies engaged in providing investment banking services were held as not comparable to companies providing investment advisory services. It is also noteworthy that this order of ITAT Mumbai has been affirmed by the Bombay High Court. We have already reproduced the relevant portion of the order of the ITAT wherein the Bench has discussed and adjudicated that the issue of exclusion of companies providing merchant banking services. Respectfully following the same, we direct that Almondz Global Securities Ltd. be excluded from the final set of comparables. The assessee has submitted that if Brescon, Keynote and Almondz Global Securities Ltd. are excluded from the final set of comparables, the transaction will be with the arm s length. As we have already directed the Assessing Officer/TPO to exclude these three companies from the final set of comparables, we do not feel it necessary to adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (2012) 345ITR 241 (Delhi). 12. Consequently, the Court is unable to find any error in the impugned order of the ITAT giving rise to any substantial question of law for determination. The appeal is, accordingly, dismissed. 10.10 It is seen that the TPO has considered a period of 30 days to be normal for the realization of receivables and has calculated notional interest on period/number of days exceeding 30 days while making the upward adjustment, however, as the Hon'ble Delhi High Court has held in Kusum Health Care Pvt. Ltd. (supra) that there might be a delay in calculation of money even beyond the agreed limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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