BLACKSTONE ADVISORS INDIA P.LTD,MUMBAI vs. DCIT CIR 6(1), MUMBAI

This appeal was originally disposed of by the Coordinate Bench of the Tribunal on 9.3.2016. Subsequently, the assessee has moved a Miscellaneous Application pointing out therein that the Tribunal has failed to adjudicate issues contested on three comparables. The miscellaneous Application of the assessee was numbered as M.A. No. 130/Mum/2016 and the same was disposed of by the Coordinate Bench of the Tribunal on 8.6.2018 by allowing the prayer made in the miscellaneous application. Accordingly, the order dated 09-03-2016 passed by the Tribunal was recalled for the limited purpose of disposing of the issues agitated in respect of following three comparables :-

The assessee in its appeal had pleaded for exclusion of Motilal Oswal Private Equity Advisors Pvt. Ltd. and inclusion of two other comparables mentioned above.

We have heard the parties and perused the record. With regard to Motilal Oswal Private Equity Advisors Pvt. Ltd., the learned AR submitted that the said company is acting as “investment manager”, i.e. they are managing the funds given by their clients and hence they are acting as portfolio manager. On the contrary, the present assessee is engaged in providing investment advisory services only. The Learned AR submitted that the Tribunal, in its order dated 9.3.2016, excluded a comparable named Motilal Oswal Investment Advisors Pvt. Limited, since they are also doing investment management function. The Learned AR submitted that the findings given by the Tribunal in the case of the Motilal Oswal Investment Advisors Pvt. Limited will equally apply to Motilal Oswal Private Equity Advisors Pvt. Limited, as both the companies are engaged in similar activities of acting as Portfolio managers.

The Learned AR submitted that M/s Motilal Oswal Investment Advisors Pvt. Limited was directed to be excluded by the co-ordinate bench of Tribunal in the case of M/s Wells Fargo Real Estate Advisors Pvt. Limited (ITA No.1520/Mum/2016 dated 17-01-2018), wherein the Tribunal has followed the decision rendered by another co-ordinate bench in the case of Temasek Holdings Advisers India P Ltd (ITA 477/Mum/2016 dated 11-08-2017), wherein also the very same comparable was directed to be excluded. He submitted that M/s Wells Fargo Real Estate Advisors Pvt. Limited is also an investment advisor only. The Learned AR also took us through the financial statements of the above said company in order to show that this comparable

On the contrary, the learned DR submitted that the assessee-herein is carrying out all research activities in equity market and render advise on making investments. However, the assessee is not engaging itself in making actual investment, but gives advice to the investment managers. The Learned DR submitted that Motilal Oswal Private Equity Advisors Pvt. Ltd. is making actual investment in addition to carrying on research activities. Accordingly, learned DR submitted that there is no much difference in the activities carrying out by the assessee-company and Motilal Oswal Private Equity Advisors Pvt. Limited. Hence, it should be taken as comparable. He further submitted that the Tribunal in the case of Wells Fargo Real Estate Advisors Pvt. Limited (supra) rejected this company only for the reason that the TPO did cherry picking of comparable.

We have heard the rival contentions on this issue and perused the record. Admittedly, Motilal Oswal Private Equity Advisors Pvt. Limited is undertaking portfolio management work on behalf of its clients by actually investing funds of the clients in the equity market. However, activities of the assessee are restricted to give investment advice only to its AEs. The fund managers of the AEs have to take a call on the investment advice so given by the assessee. Giving investment advices is one type of activity and making investments by considering the advices so given is another type of activity. As pointed out by Ld A.R, the risks involved in both types of activities are totally different. Hence, in our view, the activities carrying on by the assessee cannot be compared with the activities carried out by Motilal Oswal Private Equity Advisors Pvt. Limited. We noticed that the Coordinate Bench of the Tribunal has considered the very same comparable, i.e., Motilal Oswal Private Equity Advisors Pvt. Limited in the case of Temasek Holdings Advisors India Pvt. Ltd. (67 taxamnn.com 221). The Tribunal held that the above said comparable company was carrying out investment in portfolio companies and in that year

Before us, the learned DR contended that the decision in the case of Temasek Holding Advisors India Pvt. Limited was given for A.Y. 2010-11 and year under consideration is 2008-09. He contended that the activities carried on by Motilal Oswal Private Equity Advisors Pvt. Limited in A.Y. 2008-09 needs to be verified in order to find out whether it was actually undertaking portfolio management works or not.

We have earlier noticed that the learned AR has carried us through Annual Report and Financial Statements of Motilal Oswal Private Equity Advisors Pvt. Limited. We noticed from the financial statements that the only business income, besides interest and sundry income, derived by it was by way of “investment management fees” only. In the director’s report also, the details of funds collected by it for making investments are mentioned. Both these aspects make it clear that M/s Motilal Oswal Private Equity Advisors P Ltd is engaged only in investment activities for its clients in relevant year also. Hence the Coordinate Benches, in the case of Temasek Holdings Advisors India Pvt. Ltd. (supra) and Wells Fargo Real Estate Advisors Pvt. Ltd. (supra), have held that the above said company cannot be considered to be a comparable for an investment advisory company. Following the above said decisions, we hold that M/s Motilal Oswal Private Equity Advisors Pvt. Limited cannot be taken as comparable in the hands of the assessee company.

The next comparable is IDC (India) Limited. The TPO has excluded this comparable and the assessee is contending that the same is required to be 5 M/s. Blackstone Advisors India Private Limited included as the functional profile is identical. We notice that the above said company was considered by the co-ordinate bench in the case of Temasec Holdings Advisors (I) P Ltd (38 taxmann.com 80) and it has been held to be a good comparable, as M/s IDC (India) Limited was also engaged in advisory and consultancy and services.

The Ld A.R submitted that M/s IDC (India) Ltd is held to be a good comparable for companies providing in investment advisory services in plethora of cases. On the contrary, the Ld D.R., supported the order passed by the AO on this comparable.

Since IDC India Ltd has been held to be a good comparable in the case of Temasec Holdings Advisors (I)(P) Ltd (supra), following the same, we direct the TPO to include the above said company as comparable company.

The next comparable urged by the assessee to be included is M/s ICRA online Ltd. The Ld A.R submitted that the co-ordinate bench in the case of Temasec Holdings Advisors (I) (P) Ltd has held to be a good comparable. The Learned DR, on the contrary, submitted that ICRA Online Limited is dealing in product and services. Since it is dealing in products, the Ld D.R contended that it cannot be comparable with the assessee-company.

We noticed that the Coordinate Bench in the case of Temasek Holdings Advisors India Pvt. Ltd. (supra) has considered ICRA Online Limited and has held that the same is also mostly engaged in investment advisor services only. Accordingly it was held that it is good comparable for comparability analysis purposes. Following the order passed by the Tribunal, we direct the Assessing Officer to include M/s ICRA online Ltd as comparable company.

In the result, appeal filed by the assessee with regard to above said three comparables is allowed.