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Before: SHRI C.N. PRASAD & SHRI ASHWANI TANEJA (ACCOUNT MEMBER)
Per Ashwani Taneja, AM:- This appeal has been filed by the Assessee against the order dated 15.1.15 passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) of the Act passed in pursuance to directions of the Dispute Resolution Panel-2 Mumbai(hereinafter called D.R.P) issued u/s144C (5) of the Act vide order dated 22.12.14 on the following grounds:- Without prejudice to the facts, circumstances and merits of 1. the case, the Hon'ble Dispute Resolution Panel ('DRP') has issued directions and enhanced the transfer pricing adjustment made by the Transfer Pricing Officer ('TPO') contrary to Section 144C(11) the Income-tax Act, 1961 ('the Act') and against the principles of natural justice. On the facts and in the circumstances of the case, the 2. learned TPO has erred in making an upward adjustment of Rs. 14,78,97,525/- to the income of the appellant earned on account of provision of non-binding investment advisory services to its Associated Enterprises and the learned Assessing Officer ('AO') and DRP has erred in further enhancing the adjustment to Rs. 25,13,431266/-. On the facts and ill the circumstances of the case, the learned 3. AO/ TPO has erred in passing an order not in accordance of Section 92C(3) of the Act and the DRP has erred iii confirming the approach adopted by the AO/ TPO. On the facts and in the circumstances of the case, the 4. learned TPO and the learned AO have erred in making and the DRP has erred in confirming the approach adopted by the learned AO/ TPO, who have disregarded the benchmarking analysis conducted, search filters applied and the comparable companies selected by the Appellant without appreciating the fact that such selection was based on the contemporaneous data and the transfer pricing study report prepared and maintained as per section 92D of the Act read with Rule IOD of the Rules.
On the facts and in the circumstances of the case, the 5. learned TPO and the learned AO have erred in making a transfer pricing adjustment and the DRP has erred in enhancing the transfer pricing adjustment made by the learned TPO, by using non contemporaneous data and substituting the Appellant's analysis with a set of cherry picked companies based on conjectures surmises.
6. On the facts and in the circumstances of the case, the learned TPO and the learned AO have " erred in making a transfer pricing adjustment and the DRP has erred in enhancing the transferpricing adjustment made by the learned TPO, by incorrectly considering a fresh comparable company (namely, Motilal Oswal Investment Advisors Pvt. Ltd.). Thus, the Appellant prays that the fresh comparable company introduced by the learned TPO/AO and then DRP be deleted.
On the facts and in the circumstances of the case, the learned TPO and the learned AO have erred in making a transfer pricing adjustment and the DRP has erred in enhancing the adjustment made in the order of AO/ TPO, without providing the step by step accept/reject matrix of companies selected by him based on his search process. On the facts and in the circumstances of the case, the Appellant prays that the comparable companies selected in the Transfer Pricing documentation (namely, ICRA Management Consulting Services Limited; IDC (India) Limited; Future Capital Holdings Limited and Future Capital Investment Advisors Limited) that have been incorrectly rejected by the DRP be considered in determining the arm's length price of the international transaction carried out by the Appellant pertaining to the provision of non-binding investment advisory services.
9. Without prejudice to the facts and circumstances of the case, the DRP has erroneously deleted the two companies selected by the Assessee in the Transfer Pricing documentation (namely Future Capital Holdings Limited and Future Capital Investment Advisors Limited) without providing the Appellant with a show cause notice or an opportunity of being heard.
On the facts and in the circumstances of the case, the learned TPO and the learned AO have erred in making and the DRP has erred in confirming the action of the learned AO/ TPO of not allowing appropriate adjustments in accordance with the provisions of Rule IOB(1)(e)(iii) of the Rules to account for difference between international transactions and the alleged comparable uncontrolled transactions selected by the learned AOITPO.
On the facts and in the circumstances of the case, the finding of the TPO and the DRP that the Appellant has failed to show the difference in the level of risks borne by it as compared to the comparable cases is erroneous, incorrect and contrary to record. Your Appellant prays that the finding be set aside and the risk adjustment prayed for be granted.
On the facts and in the circumstances of the case, the learned TPO and the learned AO have erred in making and the DRP has erred in confirming the approach of the AO/ TPO to disregard the use of multiple year data, especially for preceding financial years (viz. FY 2007-08 and FY 2008-09) as permitted under the provisions of Rule I01)(4) of the Rules as elaborated in the TP study.
On the facts and in the circumstances of the case, the learned AO has erred in not following and complying with the directions of the DRP.
On the facts and in the circumstances of the case, the learned AO has erred in initiating penalty proceedings under Section 274 read with Section 271(1)(c) of the Act. 15. On the facts and in the circumstances of the case, the learned AO has erred in levying interest under Section 234B and Section 234D of the Act.” 2. During the course of hearing, at the very outset it was stated by the Ld. Counsel of the Assessee that disputes involved in this appeal have been now substantially reduced because of the decision of the Tribunal in assessee’s own case by the ITAT vide order dated 13.1.17 for AYs. 2008-09 & 2009-10 in & 171/M/14. It has been submitted that now the dispute is confined to only inclusion or exclusion of following the three comparables:-
1. 1. Motilal Oswal Investment Advisers Pvt. Ltd. 2. ICRA Management Consulting Services Ltd. 3. IDC India Ltd.
3. It is submitted that with regard to above three companies the Tribunal has already taken a decision in the aforesaid order and if, the same is followed, then the assessee would not be pressing any other controversy as all other grounds have become infructuous,at this stage.
4. Per contra, Ld. CIT (DR) vehemently opposed the submissions made by the Ld. Counsel of the assessee and reiterated all the arguments which were made before the DRP.Ld. CIT-DR subsequently, filed detailed submissions wherein exhaustive arguments have been made to oppose the submissions of the assessee. It is noted by us that these very arguments were made in the cases relied upon by Ld. Counsel and these have been considered therein by respective benches. Further, we find that similar arguments were also made by the Ld. CIT(DR) before the Tribunal in appeals for AY 2008-09 & 2009-10. It is noted that representation was done forAY 2008-09 & 2009-10 before the Tribunal by the same counsel of the assessee and Ld. CIT(DR) was also same.
We have gone through all the facts and circumstances of the case and find that facts and circumstances for AY 2010-11 are identical to the facts and circumstances and the legal position for AY 2008-09 & 2009-10. Under these circumstances we are inclined to follow the orders passed by the Tribunal for the aforesaid assessment years, as a matter of consistency and judicial discipline.
Now, we shall deal with the three comparables one by one as has been dealt by Tribunal in the aforesaid order. Motilal Oswal Investment Advisers Pvt. Ltd.
The assesse has objected to the inclusion of this company as a comparable on the ground that the said company is registered with SEBI as a merchant banker whereas the assessee is merely an investment advisor. Therefore, the said company cannot be taken as comparable to the assessee. It is noted that this issue has already been dealt with by the Tribunal in the aforesaid order wherein it has been held that the aforesaid company is not comparable to the assessee and, therefore, the same was directed to be excluded with the following observations:- “38 Ld. Authorised Representative objecting to the inclusion of this company as a comparable submitted, it is registered with SEBI as a merchant banker, hence, it cannot be considered as a comparable to the assessee. In this context, learned Authorised Representative relied upon the following decisions:- i) DCIT v. Warburg Pincus India P. Ltd., 2009, A.Y. 2005-06 etc., order dated 29.7.16 ii) Carlyle India Advisory Pvt. Ltd. v/s DCIT, [2014] 43 taxmann.com 184 (Mum.); iii) Acumen Fund Advisory Services India Pvt Ltd v/s DCIT,[2014] 590 taxmann.com 317 (Mum).
iv) BAIN Capital Advisors India P Ltd v/s DCIT, AY 2009-10 v) DCIT v/s Arisaig Partners India P. Ltd IT No.1083/Mum/2014, etc. order dated 25.3.2015 vi) Goldman Sachs India Securities Pvt Ltd v/s DCIT ITA NO 222/Mum/2014 A.Y. 2009-10, order dated 30.11.2015. vii) Carlyle India Advisory Pvt. Ltd. v/s A CIT, [2014] 43 taxmann.com (Trib.) 184 (Mum.); viii) M/s. Blackstone Advisors India P. Ltd. v/s DCIT, ITA no.3191 Mum.12014, order dated 9.3.2016; ix) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA 11 no.776/Mum./2015, A. Y. 2010-11, order dated 25.2.2016; xi) Bain Capital Advisors India P. Ltd. v/s DCIT, ITA no.413/Mum./2015, A. Y. 2010-11, order dated 15.5.2015; xii) Q-India Investment Advisors P. Ltd. v/s DCIT, ITA no.9231 Mum./2015, order dated 24.4.2015; xii) Carlyle India Advisory Pvt. Ltd. v/s A CIT, [2016] 68 taxmann.com (Trib.) 14 (Mum.); xiii) NVP Venture Capital India Pvt. Ltd. v/s DCIT, [2015] 58 taxmann.com (Trib.) 87 (Mum.); & xiv) AGM India Advisors (P) Ltd. v/s DCIT, [2016] 70 taxmann. com 219 (Mum.).
Learned Departmental Representative, however, justified selection of this company as a comparable.
We have considered the submissions of the parties and perusedthe material available on record in the light of the decisions relied upon. It is evident from the annual report of the company as well as other material facts, this company is a merchant banker. In case of Goldman Sachs Securities Pvt. Ltd. (supra), the co-ordinate bench of the Tribunal having taken note of the aforesaid factual position has held that this company cannot be a comparable to an investment advisory service provider. In fact, in a plethora of decisions of the Tribunal cited before us, the consistent view is this company being engaged in merchant banking and investment business, cannot be a comparable to investment advisory services. Respectfully following the consistent view of the Tribunal as expressed in the aforesaid decisions, a number of which pertained to the impugned assessment year, we exclude Motilal Oswal Inv. Advisors P. Ltd. from being treated as comparable.
In addition to that the assessee has also placed reliance upon the decision of the Tribunal in the case of TA Associates Advisory Pvt Ltd vs DCIT (ITA No.496/Mum/2015) dated 22-01-2016 for AY 2010-11. It was brought to our notice that this decision has been passed for AY 2010-11 relying upon the judgement of Hon’ble Bombay High Court in the case of CIT vs Carlyl India Advisors Pvt Ltd 32 Taxman.com 23 (Bom). It was also brought to our notice that the said decision was authored by the AM. We have carefully gone through the decision and find that this issue has been threadbare discussed before arriving at the conclusion that the said company is a merchant banker and, therefore, cannot be compared with the company engaged in the business of pure advisors. Thus, respectfully following the orders of the Tribunal, the said company is directed to be excluded from the list of comparables. ICRA Management Consulting Services Ltd & IDC India Ltd.
It has been brought to our notice that both the above said comparables have been accepted to be included in the list of comparables by the Tribunal in the aforesaid order. It is noted that the Tribunal gave following observations while directing to accept the above companies as comparables:- “41. Objecting to rejection of this company as a comparable, learned Authorised Representative submitted, this company provides consulting corporate and regulatory support analysis and strategies, etc., to clients. Referring to Schedule-12 on notes to accounts forming part of annual report of the company, learned Authorised Representative submitted, the company operates in a single segment i.e., consulting services. He, therefore submitted, company being functionally similar to assessee should be accepted as a comparable. In support of such contention, he relied upon the following decisions:- 1) DCIT v/s Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2014] 47 ITR (Trib.) 311 (Mum.); ii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2013] 27 ITR (Trib.) 125 (Mum.); and iii) M/s. Blackstone Advisors India P. Ltd. v/s DCIT, Mum.12014, order dated 9.3.2016; iv) Bobst India P. Ltd. v/s DCIT, [2015] 63 taxmann.com 339 (Pune); v) TIBCO Software India P. Ltd. v/s DCIT, [2015] 56 taxmann. com 91 (Pune); vi) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Murn.12015, A.Y. 2010-11, order dated 25.2.2016; vii) AGM India Advisors (P) Ltd. v/s DCIT, [2016] 70 taxmann. com 219 (Mum.).
We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. Though, the Transfer Pricing Officer and the DRP have excluded this company observing that it is not functionally similar to the assessee, however, on a perusal of the annual report of the company we have noticed that it is basically engaged in consulting services. The Tribunal, Mumbai Bench, in DCIT v/s Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2014] 47 ITR (Trib.) 311 (Mum.), while considering comparability of this company in the very same assessment year i.e. assessment year 2009-10, having found that the company is offering consultation services in the area of strategy, risk management, operations, improvement, regulatory economics and translations advisory and its entire revenue is generated from consultation fee has concluded that the company is giving consultation in various types of industries through investment advisory, we direct the Assessing Officer to include this company as a comparable. IDC INDIA LIMITED 43. In view of our observations in appeal being ITA no.6981/Mum. 2012 and also the fact that in case of DCIT v/s Temasek Holding Advisors India Pvt. Ltd. v/s DCIT, [2014] 47 ITR (Trib.) 311 (Mum.) the company has been accepted as a comparable to an investmen advisory service provider of the very same assessment year i.e., for the assessment year 2009-10, we direct the Assessing Officer include this company as a comparable. The Transfer Pricing Officer is directed to compute the arm's length price keeping in vies observations made us herein above in respect of various comparables.”