TMI Blog2020 (7) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... ing investment advisory services. Therefore, we direct the TPO to exclude this comparable from the final set of comparable. Considering the decision of Tribunal in assessee‟s own case for earlier year wherein three comparable namely Almond, Crisil and ICRA was considered as valid comparable. We have directed to exclude Excel Infoways Ltd on the basis of order of DRP for AY 2012-13 and our discussion therefore, we find that both the substantial ground of appeal are covered in favour of assessee. Considering the facts that we have allowed both the substantial ground of appeal in favour of assessee therefore, adjudication on the issue related with economic analysis has become academic. - ITA No. 7277/Mum/2018 - - - Dated:- 15-7-2020 - Shri Pawan Singh, Judicial Member and Shri M. Balaganesh, Accountant Member For the Appellant: Shri Mukesh Butani-AR For the Respondent: Shri Anand Mohan-CIT-DR PER PAWAN SINGH, JM This appeal by the assessee is directed against the final assessment order dated 30.10.2018 passed under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter the Act ) passed in pursuance of the direction of DRP dated 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O under the directions of the Hon'ble DRP have erred in rejecting Knowledge process Outsourcing (KPO) companies selected by the Appellant on a without prejudice basis for determining the arm's length price of the international transactions entered into by it. 8. On facts and circumstances of the case and in law, while determining the arm's length price of the international transaction entered into by the Appellant, the learned AO / TPO under the directions of the Hon'ble DRP have erred in selecting comparable companies which are not comparable to the appellant based on the parameters stated in Rule 10B(2) of the Rules. 9. On facts and circumstances of the case and in law, while determining the arm's length price of the international transaction entered into by the Appellant, the learned AO / TPO under the directions of the Hon'ble DRP have erred in arbitrarily selecting comparable companies and not sharing the methodology for conducting the search process in violation of section 92C. 10. On facts and circumstances of the case and in law, the learned AO/ TPO under the directions of the Hon'ble DRP have erred in not granting the benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.00% Arm‟s Length Price (OP/TC) 42,64% Hence arm‟s length OP = D=42.64% x B 32,64,27,933 Arm‟s length operating income = E = (D+B) 109,19,71,867 Adjustment = (E-A) 21,15,99,518 4. On receipt of the report of TPO under Section 92CA(3) the AO passed draft assessment order dated 4th December, 2017 by making adjustment of Rs. 21,15,99,518/-. A copy of the draft assessment order was served upon the assessee. The assessee, on receipt of the draft assessment, exercised his option for filing objection before the DRP. The assessee, besides objecting the characterisation of assessee by TPO in place of non binding investment advisory and related services also challenged inclusion of comparable and rejecting the comparables selected by the assessee without considering the functions performed assets employed and risk assumed (FAR) analysis of the assessee vis-a-vis the comparable selected. The DRP sustained the re-characterisation of the TPO in place of investment advisory and related support services, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to why the assessee should not be characterised as KPO by taking view that most of the employee of the assessee are drawing high salary. The assessee filed its reply and contended that based on FAR (functions performed asset employed and the risk assumed), the assessee can be characterised as limited risk bearing captive investment advisory and related services provider. It was also contended that the salary paid to the employee of assessee are commensurate with the role and responsibilities undertaken by them, and is comparable with the industries slandered. The TPO instead of examining the contents of the reply furnished by the assessee followed the order of DRP for AY 2013-14, wherein the objections of the assessee was rejected. In AY 2013-14 the DRP held that investment service provider may function as KPO. The DRP upheld the action of TPO by following its order for preceding assessment year (AY 2013-14). 8. We have noted that on identical set of facts in assessee's own case for assessment years 2012-13 and 2013-14 in ITA No. 2366 6321 dated 27.02.2019, wherein the assessee‟s appeal for A.Y. 2013- 14 has raised specific ground for re-characterisation of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Excel Infoways Ltd. was excluded by the Tribunal in earlier years. 11. For inclusion of Almond, Crisil and ICRA, the ld. AR of the assessee submits that these comparable were allowed as comparable in assessee‟s own case for A.Y. 2013-14 and Excel Infoways Ltd. was excluded in A.Y. 2012-13. The ld. AR for assessee submits that in case all three abovesaid comparable i.e. Almond, Crisil and ICRA are included and Excel Infoways Ltd. is excluded the mean margin of assessee would be with a tolerance range. 12. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 13. We have considered the submission of both the parties and find that co-ordinate bench of Tribunal in assessee‟s own case for A.Y. 2013-14 in ITA No. 6321/Mum/2017 dated 27.02.2019 while considering the comparability of Almond, Crisil and ICRA passed the following order: 41. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the maintainability of the exclusion of certain companies which were selected by the assessee as comparables in its TP stu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO as a comparable in the case of certain assesses which were providing investment advisory services viz. (i) Kitara Capital Pvt. Ltd. Vs. ITO (ITA No. 130/Mum/2014; and (ii) General Atlantic (P) Ltd. Vs. DCIT (2015) 64 taxamann.com 423 (Mumbai) . We thus in the backdrop of our aforesaid observations are of the considered view that the TPO/DRP has erred in excluding the aforementioned company viz. Crisil Risk and Infrastructure Solutions Ltd. from the final list of the comparables. In terms of our aforesaid observations, we herein direct the A.O/TPO to include the said company viz. Crisil Risk and Infrastructure Solutions Ltd. in the final list of comparables for benchmarking the international transactions of the assessee during the year under consideration. (B) ALMONDZ GLOBAL SECURITIES LTD: We have perused the Annual report‟ of the aforementioned company and find that the business of the assessee during the year comprised of providing consultancy in the financial areas. The assessee has taken the margin earned by the aforementioned company under the segment of Corporate Finance and Advisory Fee segment. As per the annual report‟ of the company the SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at involved in providing investment advisory. We find that the various objections raised and the basis adopted by the ld. D.R to justify the exclusion of the aforementioned company viz. ICRA Management Consulting Services Ltd. as comparable in the case of the assessee, had been rebutted and dislodged by the ld. A.R in his submissions placed in the appeal of the assessee for A.Y 2012-13. We are of the considered view that as the facts of the case before us, as well as the functional profile of the assessee and the aforementioned company viz. ICRA Management Consulting Services Ltd. had not witnessed any change during the year under consideration, therefore, our observations recorded for including the said company as a comparable in the case of the assessee for A.Y 2012-13 shall apply mutatis mutandis in the present appeal of the assessee for A.Y 2013-14. We thus in terms of our aforesaid observations are of the considered view that the assessee had rightly included the aforementioned company viz. ICRA Management Consulting Services Ltd. as a comparable in the case of the assessee and the same had wrongly been excluded by the TPO/DRP. In terms of our observations recorded while dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the year under consideration to justify its inclusion. We have further noted that the TPO himself identify this company as back office services to its AE‟s. More over unusual business year is also not disputed by the TPO. Even otherwise this comparable was included by TPO by treating the assessee as KPO. The assessee has placed on record the annual report of this company at page no. 119 to 186 of the paper book. We have carefully perused the annual report of this comparable company. Perusal of annual report of this comparable company shows that this company is engaged in providing business support service; IT enabled services and development of infrastructure facilities. Considering the segmental reporting of the comparable company, in our view this is not a valid comparable with the assessee which is engaged in providing non-binding investment advisory services. Therefore, we direct the TPO to exclude this comparable from the final set of comparable. 18. Considering the decision of Tribunal in assessee‟s own case for earlier year wherein three comparable namely Almond, Crisil and ICRA was considered as valid comparable. Further, we have directed to exclude Excel ..... 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