TMI Blog2016 (11) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... ted global and domestic clients. we direct the AO to exclude above mentioned three comparables from the final list. Effective ground of appeal is decided in favour of the assessee. - ITA No. 840/Mum/2015 - - - Dated:- 11-11-2016 - Shri Rajendra, Accountant Member and Saktijit Dey, Judicial Member Revenue by : ShriN. K. Chand -CIT Assessee by : Shri Arvind Sonde ORDER Per Rajendra A. M. Challenging the orders dated 11/12/2014 of the AO passed in persuance of the directions of the Dispute Resolution Penal(DRP)dtd. 28. 10. 2014, the Assessee has filed present appeal. It is wholly owned subsidiary of Arisaig Partners (Asia) Pte Ltd. , headquartered in Singapore. It filed its return of income on 05. 10. 2010, declaring total income of ₹ 2. 63 crores. During the assessment proceedings, the Assessing Officer(AO)made a reference to the Transfer Pricing Officer(TPO)to determine the Arm s length price(ALP)of the IT. s. , who made an adjustment of ₹ 1, 83, 86, 942/-. After receiving the order of the TPO, the AO issued a draft assessment order to the assessee and same was challenged before the DRP. After considering the directions of the DRP, the AO co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany was from advisory services, that the comparable company was not engaged in portfolio management services as alleged by the assessee , that the argument regarding super normal profit was not acceptable in view of the decision delivered in the case of Maersk Global Centres (India) Pvt. Ltd. (ITA7466/M/2012), that the TPO/Assessing Officer were justified in including it in the list of comparables. About IDFC, the assessee had argued that segmental information was not available in that case, and that it was engaged in portfolio management services, the DRP observed that as per annual report of AY 2010-11 IDFC had entered into investment segment, that there was no logic in the argument of the assessee that segmental information was not available. In the case of ICRA O the assessee had contended that it was not functionally comparable as the company as well, as its outsourced service segment were engaged in providing diversified services. The DRP held that the outsource service segment was almost similar in nature so far as functional aspect of service were concerned, that the segment dealt with research and analysis related to financial sector, that the advisory were provided on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as in the case of Acumen Fund Advisory Services India Private Limited Vs. DClT (ITA No. 143/Mum/2014). 13. On the other hand, the Ld. DR has relied upon the orders of TPO and DRP 14. At the outset, we note that the Tribunal in the case of Carlyle India Advisors Private Limited Vs. DCIT (supra), has examined the functional comparability of Motilal Oswal Investments Advisors Pvt. Ltd in para 8 and 9 as under. - 8. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. It is an undisputed fact that the assessee is engaged in the business of rendering investment advisory and related support services to its principal Carlyle Hong Kong. The dispute raised in 6 ground no. 4 relates to whether (i) KLG Capital Services Ltd (KLG); (ii) KJMC Corporate Advisors (India) Limited (KJMC) and (iii) Motilal Oswal Investment Advisors Pvt Ltd (MOIAPL) are functionally comparable cases or not considering the decision of the Tribunal as well as the judgment of the Bombay High Court relied upon by the assessee. Regarding MOIAPL, assessee relied heavily on the order of the Tribunal in its own case for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the said company namely Motilal Oswal Investment Advisors Pvt Ltd is engaged in the business of Merchant Banking and, therefore, is not a good comparable of a company providing investment advisory services to the AE. We further note that that in case of Acumen Fund Advisory Services India Private Limited Vs. DCIT (supra), the Tribunal while following the order in case of Carlyle India Advisors Private Limited Vs. DCIT (supra), has held that the said company is not functionally comparable with the business of investment advisory services. 16. In view of the findings of the Tribunal in the above said decision in the case of Carlyle India Advisors Private Limited Vs. DCIT (supra), as well as Acumen Fund Advisory Services India Private Limited Vs. DCIT (supra), we are of the view that the company Motilal Oswal Investment Advisors Pvt. Ltd is primarily in the business of Merchant Banking and, therefore, is not functionally comparable with the business of the assessee being investment advisory to its AE. Accordingly, we delete Motilal Oswal Investment Advisors Pvt. Ltd from the list of comparables selected by the TPO and direct the Assessing Officer/ TPO to recomputed the arm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociate enterprise. The earnings of IDFC Investment Advisors Limited, though titled as 'advisory fee', are indeed computed on the basis of amount of fund deployed by the investee fund plus a performance fee whereas the assessee is being compensated on cost plus fixed markup basis. On account of this difference in the business model of IDFC Investment Advisors Limited, it would not be appropriate to compare assessee s international transaction of Provision of investment related support services to its associate enterprise with that of the IDFC Investment Advisors Limited. Before us, the Ld, Representative for the assessee had also relied upon the decision of Mumbai Bench of Tribunal in the case of Bain Capital Advisors (India) Private Ltd. Vs. DCIT in ITA No. 413/ Mum/2015 order dated 15. 5. 2015, wherein for the instant assessment year itself, IDFC Investment Advisors Limited has been held to be incomparable with an assessee who is engaged in providing non-binding investment advisory related support services only. In our considered opinion, the decision of the Tribunal in the case of Bain Capital Advisors (India) Private Ltd (supra) also supports the plea of the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, we direct the AO to re-compute the arms length adjustment after excluding IDFC from the list of comparables. XXXXXXXXXXXX 7. We find that the assessee objected to the inclusion of ICRA-O and IDFC on the ground that the TPO had applied no scientific method in arriving at the said two companies, that the companies had been cherry- picked by the TPO and he had not furnished the process applied by which he had come to select the said two companies, that such an approach to select comparables was impressible in law and on that count alone the said two companies should be rejected, that the FAA had rejected ICRA-O as comparable to investment advisory services rendered by the assessee and had stated assessee's knowledge process outsourcing division provided financial and analytical services and support to clients in the areas of Data Extraction, Aggregation, ElectronicConversion of Financial Statements, Validation and Analysis, Accounting and Finance, Research and Analytics, that the company was not engaged in investment advisory or consultancy services, that the AO was directed to exclude ICRA-O from the final set of comparable companies, that he had held ..... 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