TMI Blog2022 (12) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be excluded - DR did not make any strong objection in this issue. No contrary judgment was produced by ld DR during hearing. We are directing that M/s Khandwala Securities Ltd M/s Keynote Corporate Services Ltd be excluded from the set of comparable. Accordingly, the Ground no-2 of the assessee is allowed. - ITANo.5636/MUM/2014,ITANo. 5709/MUM./2014 - - - Dated:- 5-8-2022 - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER For Assessee : Sh.Nishant Thakkar Ms Jasmin Amasadvala For Revenue : Shri Sauel Pitta, CIT-DR ORDER PER ANIKESH BANERJEE, J.M. The instant appeals werefiled by both the Revenue Assessee against the order of the LearnedCommissioner Income Tax (Appeals)-11, Mumbai [in shortCIT(A)]bearing appeal No. CIT(A)-11/DC3(2)13-14/299 dated 30.06.2014 was passed u/s 250 of the Income Tax Act, 1961 (in short Act ), for assessment years 2008-09. The impugned order was generated from the order of the ld. Dy. Commissioner of Income Tax-3(2), Mumbai (in short A.O.) passed on dated 30.01.2012 u/s 143(3)r.w.s. 144C(3) of the Act, 1961. 2. The Revenue has raised the following grounds: - 1. Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... originating a transaction, undertaking due diligence, legal review etc. 4.1 On a review of the above function the ld. Transfer Pricing Officer (in short TPO) has held the assessee is engaged in the business of rendering investment advisory and investment support services. So the TPO rejects the entire set of comparables selected by the assessee by stating that the assessee s activities are akin to those performed by Knowledge Process Outsourcing (KPO) companies and thereafter selected six companies all of which were engaged in either engineering design services or data analytics. The assessee s grievance is exclusion of the assessee s comparable without considering nature of the business and inclusion are erroneous. Further, the assessee filed an appeal before the Ld. CIT(A) and theLd. CIT(A) accepted the assessee plea and reject the some companies from the list of comparable such as:- i. Aryaman Financial Services Ltd. ii. Centrum Capital Market Ltd iii. CRISIL Ltd iv. Capital Trust Ltd. v. Besant Raja International Ltd. vi. NTPC Electric Supply Company Ltd. Rejected the assessee s plea to exclude two companies from the list of comparable i. Khandwala S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the Assessee prayer to exclude the following companies from the list of comparable: - i. Khandwala Securities Ltd. ii. Keynote Corporate Services Ltd. In sum, the final list of comparable after the order of the CIT(A) was as under: 1. Access India Advisors Ltd. 2. ICRA Management Consulting Services Ltd. 3. IDC (India) Ltd. 4. Sumedha Fiscal Services Ltd. (Segmental) 5. SREI Capital Markets Ltd. 6. Keynote Corporate Services Ltd. (Segmental) 7. Khandwala Securities Ltd. (Segmental) ITA No. 5636/M/2014- Appeal of Revenue 5.2. Related Ground no 1 2 of the revenue the ld DR vehement argued and relied on order of the TPO. In argument,ld DR mainly pointed out that the ld. CIT(A) erred rejecting the comparison to KPO companies selected by the TPO anderred in accepting the assessee's contention to reject Aryaman Financial Services Ltd, Centrum Capital Markets Ltd, CRISIL Ltd, Capital Trust Ltd., Besant Raj International Ltd and NTPC Electric Supply Company Ltd being companies selected by itself. 5.3. The ld Counsel drew our attention on the grounds raised by the Department are fully covered in favour of assesseeby the Apax Partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not final. It is for the TPO to examine and find out the companies listed as comparables which are, in fact comparable. The impugned order has on FAR analysis found thatM/s. Indowind Energy Ltd. andB.F. Utilities Ltd. are not comparable. They are in a different area i.e., wind energy while the Respondent-Assessee is in the filed of solar energy. 6.2. The ld DR in argument did not able to show any contrary view against the submission of assessee. 6.3. We heard the rival submissions and considered the documents available on records. The determination of nature of activities the crux of the case. It was explained by the ld. Counsel that while it was predominantly engaged in providing advisory and support services to its AEs, the Assessee had also been engaged in origination activities, i.e. sourcing clients in India who would be interested in engaging the investment banking services of its AE's abroad - which function is one of the several functions performed by an investment banker. Since the Assessee is not carrying on full-fledged investment banking activities. It would be relevant to consider a blend of comparable companies that are involved in provision of investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Global Market (India) Limited and Kinetic Trust Limited on the basis that both the mentioned companies are persistent loss-making companies. 7.1. The assessee submitted that the parameters to test whether a company can be treated as a persistent loss- making company are no longer res Integra - Tribunals and Courts (including the jurisdictional High Court) have consistently held that for a company to be treated as a persistent loss making company so as to be excluded from being treated as a comparable.It should have incurred/suffered a loss for 3 consecutive previous years (including the year under consideration). Reliance is placed on the following decisions in this regard: CIT v/s. Goldman Sachs (India) Securities Pvt. Ltd. 69 taxmann.com 19(Bom.). Sabic Innovative Plastics India Pvt. Ltd., 104 taxmann.com 162 (Ahm-Trib) MOL Maritime India Pvt. Ltd. 120 taxmann.com 245(Mum.). 7.2. It is submitted that the said companies are not persistent loss makers as is evident from Page 135 of the Factual paper book: a. Since KJMC Global Market (India) Limited has earned a 4.27% profit margin in AY 2007-08 (i.e. immediately preceding Assessment Year) it cannot be rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Delhi) for AY 2008- 09 ii. JP Morgan India Private Limited v/s. ACIT. ITA No. 8193/M/2010 (Mum.) -upheld by the Bombay High Court in PCIT v/s. JP Morgan India Pvt. Ltd. [102 taxmann.com 335 (Bom.)] The extract of relevant paragraph is as follows: 7. iv. In view of the above, findings of the fact by the Tribunal that the services are rendered by M/s. Khandwala Securities Limited being different from the service rendered by the respondent to its AE's, the exclusion of M/s. Khandwala Securities Limited from the list of comparison cannot be disturbed. This in the absence of the respondent pointing out how function of the two are similar. The mere fact that the respondent had included M/s. Khandwala Securities Ltd as a comparable, would not bar the respondent from contending otherwise. The object and purpose of the entire exercise of determining the ALP is by having proper comparables. Thus, there is no merit in the above objection taken by the Revenue. 7.5. The ld Counsel further argued that the ld. CIT(A) has erred in rejecting the plea of the Assessee for exclusion of Keynote Corporate Services Ltd. on grounds of high profit. CIT(A) has misconstrued the argument ..... X X X X Extracts X X X X X X X X Extracts X X X X
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