TMI Blog2019 (9) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Shri Rakesh Ranjan ORDER PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Dispute Resolution Panel II, Mumbai [hereinafter for short DRP ] dated 29.11.2013 for the A.Y. 2009-10. 2. Assessee has raised the following grounds in its appeal: - 1. The learned AO and Honourable DRP failed to appreciate that the arm's length price (ALP) as determined by the Appellant should have been accepted, as the jurisdictional pre-condition in section 92C(3) of the Act before the learned transfer pricing officer could proceed to determine the ALP was not fulfilled in its case. 2. The learned AO, based on the directions of the Honourable DRP, erred on facts and in law, in making an upward adjustment of ₹ 55,191,720 in determining the ALP of the international transaction of investment advisory services rendered by the Appellant, on the following grounds: 2.1 In rejecting the comparable companies, namely Access India Advisors Limited, ICRA Management Consulting Services Limited and Kinetic Trust Limited, selected by the Appellant in the transfer pricing documentation to benchmark the international transaction of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment advisory services can be considered to be at arm s length. 4. Ld. DR vehemently supported the orders of the authorities below. 5. We have heard the rival submissions and perused the orders of the authorities below. On a perusal of the decision of the Tribunal for the A.Y. 2010-11 in ITA No. 581/MUM/2015 dated 16.09.2016 we find that the Tribunal held as under: - 19. Now, we come to various comparable companies, which are being disputed before us by the assessee. From the chart incorporated above, it can be seen that, assessee had chosen 8 comparable companies, out of which, 3 comparables were rejected by the TPO and 2 additional comparables were added from the DRP stage and 3 comparable companies which were chosen by the assessee and accepted by the TPO, same has been further rejected by DRP, leading to set of only 3 comparable companies, the arithmetic mean of which was arrived at 55.06% as against the assessee s operating margin of 20%. The comparables selected by the assessee, TPO and DRP are illustrated in the following manner:- S No Particulars Assessee s Set TPO s Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that, in the said case the Tribunal in its decision while considering similar functions of an entity rendering non-binding investment advisory services has dealt with similar set of comparables in detail after considering the various gamuts of arguments and also the annual report of the comparable companies relevant for the AY 2010-11. The relevant observation and finding of the Tribunal on these comparables are reproduced hereunder: - ICRA Management Consulting Services Limited: 20. At the outset, this comparable was subject matter of consideration before the Tribunal in AY 2008-09 2009-10 , wherein this company was held to be good comparable both on the ground of functional similarity and in view of principles of consistency as it was held to be a good comparable by the TPO in the earlier years. From the perusal of the annual report, which is appearing from pages 156 to 187 of the paper book, we find that it is essentially providing consultancy services in diversified areas, like in government sectors, infrastructure, energy, corporate advisory, banking and financial services, etc. It focuses on consultancy and advisory which is its core area and competency. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal 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 are some material difference in facts and circumstances 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 Trust Ltd has been held to be good comparable based on its functional profile. So far as functions are concerned, it is evident from the Directors reports, which are placed in the paper book from pages 187 to 230. It is seen that, the company is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose of investment made in various sectors and secondly, it has been found to be good comparable by the TPO in the assessment year 2007-08 and 2009-10. Once company has been held to be good comparable consistently for three years then without any change in the material facts, it cannot be held that this comparable could be rejected in this year. Moreover, in the case of Carlyle Advisory India Ltd., ITAT Mumbai Bench, reported in 43 taxman.com 184, the Tribunal held that this company is a good 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification of the 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 Tribunal has been upheld by the Hon ble Bombay High Court. Thus, in view of plethora of judicial decisions as referred to by Ld. Counsel and in view of functional differences as discussed as above, we hold that Motilal Oswal cannot be put into the comparability list and is directed to be excluded. Future Capital Investment Advisory Ltd:- 23. This company is also accepted by the TPO as good comparable, however, the DRP has rejected the same. Such a rejection by the DRP is without giving any opportunity to the assessee. From the perusal of the annual report, which has placed in the paper book from pages 263 to 272, it is seen that it is primarily engaged in rendering investment advisory services only and its operating in a single segment. Thus, there cannot be any genuine reason for rejecting the said comparable. The DRP has rejected this compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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