GOLDMAN SACHS (INDIA) SECURITIES P.LTD,MUMBAI vs. ASST CIT CIR 7(1)(1), MUMBAI

3.i.Referring to the website of the IDCL,the DRP held that it was not engaged in the activities of providing investment advisory services,that its activities were functionally absolutely different from the functions of the assessee,that the activities of IDCL were in and absolutely different segment from the segment to which the activities of the assessee belonged to,that those factors were not available to the higher appellate authorities in the appeals for the earlier assessment years.Referring to the decision of the Tribunal delivered in the cases of Temasek and Carlisle India Advisers Private Ltd.(ITA/7901/Mum/2011),the DRP held that the TPO/AO had rightfully rejected the comparable from the final list. 3.ii.DRP referred to the annual report of the ITIL and held that it was not involved in investment advisory services, that it was not functionally comparable with the assessee. 3.iii.Similarly,it referred to the annual report of the ICSL and held that it was advising corporate entities into business restructuring and inbound domestic and Mergers and acquisi - 2 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. tions,that though services were very distinct from investment advisory services, that the TPO had rightfully rejected it as a valid comparable. 3.iv.With regard to MOIAPL,the DRP held that it should be taken out from the list of the valid comparables, as it was engaged in merchant banking and other activities, that the functions performed by it were different from the functions of the assessee. 3.v.About LCAPL,the DRP observed that it was a boutique investment banking firm that offered financial advisory services namely re-capitalisation, joint ventures, that syndicate, Project and acquisition financing,IP offerings,Mergers and acquisitions, strategic manage - ment accounting, that as per the annual report it had earned Rs. 11.18 crores from financial and management consulting services, that it had acquired merchant banking licence in July, 2010,that there was no evidence that during the year 2010-11 any income had been received from merchant banking, that merely being a SEBI registered merchant banker did not mean that company had earned its income or any part of it from merchant banking, that AO had rightly included it in the list of valid comparables.

3.1.During the course of hearing before us,the Authorised Representative(AR)argued that if ICRA and IDCL were included in the final list of the comparables and MOIALP was exclude -ed as a valid comparable,the margin will be in the range of plus/minus 5% of the permissible limit.He relied upon the cases of AGM India Advisors Private Ltd.(ITA/4757/ Mum/2015& 4801/Mum/2015),3i India Private Ltd.(ITA/581/mum/2015)and Tamesek(ITA/ 776/Mum/ 2015). The Departmental Representative(DR)argued that in the case of IDCL the DRP had taken note of the contents of the website of the assessee, additional facts for the year under consideration were brought on record, that the cases relied upon by the AR were no help to the assessee,that subscription services was part of e- product, that market services and event management services were rendered by IDCL,it was a product company and would not be compared with the assessee,that it did not have any inventory,that IDCLoperated under single segment,that the main focus of the company was on marketing as evident from the go to market services segment is concerned. He referred to pages 38, 861, 874, 875, 879 of the paper book and contended that principles of res-judicata were not applicable to income tax proceedings. About ICRA, he argued that notice u/s.133 (6) was issued by the TPO, that additional facts were considered by him during TP proceedings, that there was difference in quality of manpower of the assessee and ICRA, that there was different in FAR analysis of both the companies. 3 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd.

The DR argued that the auditor had filed report about the activities of MOIALP, that audit report had not been discredited,that if ICRA was to be included as valid comparable than MOIALP could not be excluded. About Infosys,the DR argued that turnover filter was a valid criteria, in the case of Pentair the Tribunal had upheld the proposition that turnover filter should be considered while determining the ALP of an IT. With regard to other comparables,he relied upon the order of the TPO/DRP. In his rejoinder,the AR stated that DR had advanced the same arguments that were raised before the Tribunal in the case of AGM India,that nothing new had happened during the year under consideration,that ICRA had claimed that it was in the field of management consult - ancy.About IDCL,he contended that the DRP had not brought on record that the matter referred to it was relevant for the year under consideration,that the cost of manufacturing for the year under consideration was similar,that royalty was there in the earlier years also, that subscription would not make the assessee product company.

3.2.We have heard the rival submissions and perused the material before us.We find that in the case of AGM India Advisors Private Ltd.(supra),the Tribunal has dealt with inclusion/ exclusion of ICRA and IDCL and MOIALP as valid comparables for investment advisory services,that it had considered all the arguments that have been raised by the DR.We would like to reproduce the relevant portions of the order of AGM India Advisors Private Ltd.and same read as under: 6.a.First we would take up the matter of ICRA.In that regard,the DR argued that page 437,438 and 462 of the PB showed that ICRA was engaged in rendering consultancy services to companies other than in financial sector i.e.urban development,water sector etc.,that it was also engaged in cross border mergers and acquisitions transactions(Pg.493 of the PB),that the annual report of ICRA(Pg.432-461 of the PB)did not provide for any segmental information,that if MOIAPL was rejected as a comparable on that ground ICRA should also be rejected,that the Tribunal order of Temasek(supra)relied upon by the FAA pertained to AY.2007-08 and 2008-09,that same should not be applied to the year under consideration.He placed reliance on the Kerala High Court decision of Kalpetta Estates Ltd.(211 ITR 635)to say that res-judicata did not apply to income-tax proceedings. The AR argued that the issue is directly covered by the order of the Tribunal delivered in the case of Temasek(ITA/7761Mum/2015-AY.2010-11),that ICRA's comparability to companies engaged in Investment Advisory was no longer res-integra,that it had been re-confirmed by the ITAT in the case of Temasek (supra),that the very arguments of the DR narrated above 4 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. were urged before the ITAT in that matter, that although the assessee was operating under financial services sector it would provide investment advisory services which involved undertaking research,analysis to its AE in diverse field such as chemicals, commodities and retail, distribution and transportation, financial and business services, manufacturing and industrial, media, etc.which includes financial services sector,that the underlying functions /activities performed with respect to management consultancy services involved the analysis of the business and operations of a company, its profitability,operational efficiencies,future outlook,etc.based on which consultancy or advise would given to the management of a company which were functionally similar to the activities performed by the assessee for rendering investment advisory services,that Note 12 of the annual report of ICRA clearly mentioned that it had only one business segment i.e. consulting services and had no other primary reportable segment (pg.460 of the PB).Moreover,the product description provided in the annual report specifies Management Consultancy Services as the only product offered by the company (Pg.461 of the PB). With regard to the Pg.439 of the PB,the AR stated that ICRA had only rendered advisory services in case of Asia's leading company in the Metals and Energy sector cross border M&A transaction.He further argued that MOIAPL had been rejected on the ground that it was engaged in merchant banking investment banking services which were functionally not comparable to the investment advisory services rendered by the assessee,that despite such dissimilarity the Accounts it did not give break-up of results from the said two activities separately, that it could not be treated as a valid comparable,that ICRA did not have separate segmenals,that it rendered only advisory services in varied fields,that hence the argument that because ICRA had no segmentals it must be rejected as MOIAPL is liable to be rejected was devoid of merits,that the DR,during his argument,failed to mention that the Tribunal had upheld the acceptance of ICRA as a comparable in the case of Temasek for AY.2010-11 as well,which had been argued by the DR himself,that the Tribunal had taken a note of the fact that ICRA was rendering consultancy/advisory services in various sectors and after considering these facts,it adjudged ICRA to be a good comparable, that ICRA should be accepted as a functionally comparable company to the non-binding investment advisory services provided by the assessee. He referred to the cases of Temasek Holdings Advisors Private Limited(ITA/4203/Mum/2012 &6504/SSMum/2012-AY.s.2007-08&2008-09), M/s Blackstone Advisors Private Ltd.(ITA/1581/Mum/2016-AY.2008-09).

6.a.i.We have heard the rival submissions and perused the material before us. Before proceeding futher,we would like to mention that the assessee is engaged in providing non- binding investment advisory services to its AE.As per the Agreement dated 08.06.2009 the assessee was to provide reports on a timely basis containing news and information on 5 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. investment areas including industries and/or other specified areas that may interest the Investment Manager,to provide non-binding advisory services to the Investment Manager in respect of potential investment and divestment opportunities in India or elsewhere,including advice on the structuring of such opportunities to carry out research and analyse and identify investment opportunti-es and to conduct due diligence of such opportunities and provide reports,to provide the Investment Manager the necessary reports, informa -tion and feedback in connection with the performance of investments in India,that The FAA had,after considering the activities performed it and following the order of the ITAT in the cases of Temasek,held that the company is a valid comparable. We find that while deciding the appeal of Tamasek for the AY.2010-11(supra),the Tribunal had dealt with all the argument that were advanced by the DR before us.We would like to reproduce the relevant portion of the said order and same reads as under: "ICRA MANAGEMENT CONSULTANCY SERVICES LTD.

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. The revenue generation is purely from consultancy fees which is evident from profit and loss account as on 31st March 2010 (appearing at page 176 of the paper book). The TPO in his order had noted that its consultation or advisory operations ranges in various fields which have been tabulated by him at pages 9 to 11 of the order, which according to him appellant is not performing. On the perusal of the directors' report and also the remarks of the TPO, we find that the ICRA Management is providing consultancy services in a myriad areas rangingfrom development, transportation, urban infrastructure, energy sector, banking and financial services and advising cross border M&A transaction etc. Some other observation made by the TPO is that ICRA had participated in various international forums, partnered with foreign company in multiple projects and had a very big client base unlike appellant. However all these facts do not affect the core competency and functions of the said company, which is advisory, because in all the fields it is rendering only advisory and consultancy services. The whole revenue is again from' consultancy/advisory fees. In the instant case also the appellant is providing Investment Advisory Services to its AE in diverse industries like, infrastructure, telecom, media, banking etc. to enable the AE to take decision for making investments.The functions of consultancy/advisory have to be seen as its core competence area and not in the field in which such consultancy is given.Under the TNMM, one had to see the transaction undertaken are comparable or not and whether any adjustment is required to obtain a reliable result, because under TNMM the net margin are less affected by transactional differences and is more tolerant to some minor functional differences between controlled and uncontrolled transactions. However, if any unique function or property significantly affects the operating costs or net margin or had a bearing in the generation of revenue itself, then it cannot be considered to be a fit comparable for benchmarking the net margins. Here it is not the case where there is any unique functions materially affecting the revenue or net margins vis-a-vis the functions performed by ICRA.Hence on functional level it is a good comparable. As stated earlier, in the earlier years, the TPO had accepted ICRA to be a comparable and in later years the Tribunal in AY 2008-09 & 2009-10 had held ICRA Management to be good comparable qua the functions of the appellant 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 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. 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. " It is further pertinent to note here that it is not in dispute that the functional profile of Temasek(supra)was comparable with the assessee.We have compared the functional profiles of both the companies for the AY.2010-11 and have found them almost same,that ICRA was accepted as a comparable in the assessee 's own case in subsequent years i.e.in the AY.s.2012-13 and 2013-14,that the Tribunal had consistently accepted ICRA a valid comparable in other Investment Advisory cases.While deciding the appeals of Tamasek for the AY.s.2007-08 and 2008-09,the Tribunal has held as under: "51(i)………… This company is engaged in operations of advisory services and is offering consultation service in the area of strategy, risk management, operations, improvement regulatory economics and transactions advisory. From the various fields of activities as seen from the directors' report, it is seen that this company is providing management and advisory services for various types of industries. All its revenue is generated from consultation fees. Thus, this company is giving consultation in various types of industries through investment advisors. Thus, this company is a good comparable more so when it had been accepted by the TPO in the earlier year as well as in the succeeding year; " In the case of M/s Blackstone Advisors Private Limited (supra),the Tribunal has held as follow: "c)This company is providing consultancy services in diverse areas like, government, infrastructure, energy, banking and financial services etc. Its core competence is mainly advisory services in various industries. Its revenue generation is from consultancy fees. Thus,a company which had provided management, consultancy services in diverse fields can be held as comparable to investment advisory companies as the appellant while giving investment advisory services too analyses the various sectors of industries while recommending for investment. At a functional level this company can be very well said to be a good comparable as it is purely on advisory services rendering company. Moreover, this company had been held to be to the Investment Advisor Ltd in the Temasek Holdings Advisors (India) Pvt Ltd (supra) ". We further find that the very argument of the DR that were advanced before us, were considered and rejected by the ITAT in the case of Temasek for AY.2010-11. We find that the ITAT records the DR's submission as under: "If a criterion of the revenue from consultancy fee is to be taken into consideration, then on same logic, Motilal Oswal should also be included in the list as it had also shown the income from consultancy and so also in other cases also. " The reference made by the DR to the Kerala High Court decision of Kalpetta Estates Ltd.[211 ITR 635] to say that res judicata does not apply to income-tax proceedings is not relevant in the said proceedings as there are no new material placed on records by the DR with regards to 8 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. the change in functional profile of ICRA or Temasek Holdings Advisors (India) Private Limited. After considering the same arguments the Tribunal had held,as stated earlier,that ICRA was a valid comparable for investment advisory company and had emphasized on following the rule of consistency.We find that in the subsequent years ICRA has been accepted a valid comparable,that all the arguments raised by the DR in the matter of Tamasek for the AY.2010-11,have been dealt extensively by the Tribunal,that it had rejected the arguments raised by the DR.Respectfully following the orders of the Tribunal delivered in the cases mentioned in earlier paragraphs,we hold that the order of the FAA does not suffer from any legal or factual infirmity.So,confirming his order we hold that he had rightly included ICRA in the list of valid comparables. 6.b.With regard to IDCL the DR argued that it was a product company,that it would follows AS-9 to recognise revenue,that the payment of copyright reflected that IDCL was buying copyrighted products and selling the same,that that it had income from business conventions, that that it dealt in products..He referred to the Pg. 469,475,481,484-486 of the paper book . He also referred to Website print outs titled "IDC's Go-to-Market Services..”. In his reply,the AR argued that the FAA had considered the activities performed by the assessee,that he had followed the orders of the Tribunal delivered in the cases of Sandstone Capital Advisors Private Limited (ITA/6315/Mum/2012)and Temasek (supra)and had held that the company was a valid comparable.The AR stated that matter of ICDL was covered by the order of Temasek for the AY.2010-11,that IDCL's comparability to companies engaged in Investment Advisory was no longer res integra,that it had been re-confirmed by the ITAT in the case of Temasek(supra),that the functional profile of Temasek for the AY.2010-11was comparable with the assessee,that it was accepted as a comparable in the assessee's own case in subsequent years,that the Tribunal has accepted it a valid comparable in other Investment Advisory cases.He referred to the case of Sandstone Capital Advisors Private Limited(ITA/6315/Mum/2012-AY.2008-09),Temasek(supra-AY. s.2007-08, 2008-09),that the activities and functions of IDCL from the AY.2008-09,have remained unchanged including the during the year under consideration.He referred to the annual report of IDCL for the year ending 31.03.2008 and stated that Page 469 of the PB showed that IDCL had income from sales and services,that because the Annual Accounts used the term sales it did not mean that IDCL sold products as any trader or manufacturer would,that the Pg.482 clearly mentioned that the company was engaged in rendering market research and management consultancy services,that as a service provider is also required to follow AS-9,that it was incorrect to say that following AS would show that IDCL was a trader or manufacturer of products, that expenses incurred towards the copyright were considered to be operating in nature and formed only 6.17% of the total expenditure incurred during the year,that payment for copyright would only show that IDCL uses certain copyrighted material while rendering 9 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. services, that Pg.486 of the PB made it clear that the word products used by IDCL in its Annual Accounts referred to nothing but the areas in which it provides research/advisory viz. Infrastructure Technology Segment (Global IT),Finance (Investment Research Advisory), Marketing (CMO Advisory),that the sale income referred to by the DR related to the sale of various research reports which are prepared by IDCL on the basis of the research, analysis and survey undertaken by them,that IDCL could not be concluded to be a product company,that the three page hand-out titled "About IDC Go-to-Market Services", submitted by the DR pertained to and provided information in connection with IDC Inc. and not IDCL,that the Web site print outs titled "IDC's Go-to-Market Services include"were prints of a web site taken on 16.12.2015,that the information did not relate to the year under consideration and hence could not be relied upon, that there was nothing in the printouts which suggeseds that IDCL was a product company or that it was not a valid comparable to the assessee. 6.b.i.We have heard the rival submissions and perused the material before us.We find that while adjudicating the appeal of Tamasek for the AY.2010-11 the Tribunal had held as under: "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 had held to be a good comparable,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 havealready discussed the functions performed by the 1DC India Ltd while dealing with Ld. Counsel's argument that functions of advisory services are quite similar to the functions of the appellant and, therefore, we accept the appellant's contention that this comparable cannot be rejected.Accordingly, same is directed to be included in the comparability list. " We find that IDCL had been accepted by the TPO as a valid comparable to the assessee for the AY.s. 2012-13 and 2013-14.It is found that the very arguments of the DR narrated above were urged before the ITAT in the case of Sandstone Capital Advisors Private Limited(supra)as under: "7.1.1 Per contra, Shri Ajeet Kumar Jain,Ld.CIT DR had submitted that in the case of IDC India Ltd., the income had been shown in the P&L account under the head 'sales and services' income. The description of sales had not been given in the records. He had further pointed out that as per the Schedule to the Balance Sheet; the general business profile of [DC India Ltd is 10 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. given as (conversion income and management consultancy) conduct of research and survey, business functions and management consultancy; therefore,this company is functionally different from the business profile of the appellant. We further find that the Tribunal has decided the matter as follow: “8. Having considered the rival submissions as well as the relevant material on record, we find that the main business of the assessee from which it had derived its income is conducting research and survey, business conversion and management consultancy. Though the separate results in respect of each activity are not provided; however, prima facie, it appears that the company is in the business of marketing research and management consultancy.Therefore,as far as the functions of IDC India Ltd are concerned, the same are similar to the activity of the appellant. Therefore, in our considered view,IDC India Ltd can be considered as a good comparable for the purpose of determination of ALP. " It is found that the annual report of IDCL(at Note 13 on page 482 of the PB), mentions the following: "The Company is engaged in the business of 'Market research and Management Consultancy which is identified as the only and primary business segment of the company' Further all the operating facilities located in (India) " 6.b.ii.We are of the opinion that IDCL was not a product company,that had it been a trader of products it would have "stock" appearing in its Balance Sheet,that it was a fact that no such opening or closing stock was appearing in the Balance Sheet,that the said fact clearly demonstrated that IDCL was not a product company as suggested by the DR.Analysis of page 469 of the PB reveal that it was clear that there is no income from business convention earned by IDCL during the year.In these circumstances,by using the word Products IDCL would not become a trader or a manufacturer of products.The underlying functions/activities performed with respect to research and survey services involves the analysis of the business and operations of a company/sector.IDCL’s profitability, operational efficiencies,future outlook,etc. which were similar to that of the functions and activities performed by the assessee for rendering investment advisory services.The AR also referred to the note (ii) to the annexure to the auditor's report,in support of his argument that IDCL was not a product company(Pg.466 of the PB.).The note reads as under: "The Company is a research Company, primarily dealing in research and survey services and products.It does not have any physical inventories". In our opinion,the note clearly proves that IDCL was not a product company. XXXXXX Considering the above,we hold that the FAA was justified in holding that IDCL should be accepted as a functionally comparable company to the non-binding investment advisory services provided by the assessee.” With regard to MOIALP the Tribunal has held as under:

ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd.

“4.b.In the case of Tamasek(supra)for the AY.2010-11,the Tribunal has held that MOIAPL cannot be considered a valid comparable,as far as investment advisory services are concerned. Para 25 of the order reads as follow: 25. This comparable has been included by the TPO and while including the said comparable he has observed that its income is only from Advisory fees during the year and it is performing advisory services in that field of investment like assessee. Before us, Ld. CIT DR arguing for its inclusion submitted that, if the ICRA Management services can be included for having revenue from advisory services then on same analogy this company should also be given the same treatment. From the perusal of the directors’ report, it is seen that this company derives its business income from four different business verticals, i.e. Equity capital markets, merger and acquisitions, profit equity syndications and structured debt. It also give advises on cross border acquisition. Its core competence is in the field of merchant banking. It also provides comprehensive investment banking solutions and transaction expertise covering private placement of equity, debt and convertible instruments in international and domestic capital markets, monitoring mergers and acquisitions and advising M&A as professional and restructuring advisory and implementations. It is also involved in various professional activities of the merchant banking. A Merchant Banker provides capital to companies in the form of share ownership instead of loans. It also provides advisory on corporate matters to the companies in which they invest. The focus is on negotiated private equity investment. The wide range of activities include portfolio management, credit syndication, counseling on M&A, etc. This whole range of functions and activities carried out by Motilal Oswal is definitely are far wider and much different from investment advisory services where core functions is to give advices for making the investments in diversified fields. A company which is engaged in merger and acquisitions, private equity syndication, loan/credit syndication and performing most of the function of a Merchant Banker, then the entire functions and transactions affects the generation of revenue and margins. Such functions are entirely different from investment advisory services. Mere classification of 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.” In the case of Wells Fargo Real Estate Advisors Pvt.Ltd.(supra)similar view was taken as under: “6.We have heard the rival submissions and perused the material before us.We find that on 07.12.2012 the assessee had submitted its profile and analysis of the functions performed, assets utilised and risks assumed. As per the FAR the assessee would identify opportunity for parent company to participate in equity security particularly relating to commercially physical projects 12 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. in the real estate sector,that it was sharing business intelligence, market research, compliance of regional regulatory requirement so as to assist its AE,that it would not conclude any contract on behalf of the AE nor was it facilitating external commercial borrowings in real estate business . We find that the TPO had rejected the comparable selected by the assessee and had adopted three new comparables.As far as MOIAPL is concerned,there is no doubt that the job profile of both the companies are different.The assessee is engaged in investment advisory services,whereas MOIAPL was carrying on business of mergers and acquisitions and other related activities. The assessee is not a merchant banker like MOIAPL.In the case of Carlyle India Advisors Private Limited (supra), the Tribunal has held that MOIAPL cannot be taken as a valid comparable in cases,where the assessee is rendering advisory servcies.In that matter the Tribunal held as under : “8.We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. It is an undisputed fact that the assessee is engaged in the business of rendering investment advisory and related services to its principal Carlyle Hong Kong. The dispute raised in ground no.4 relates to whether (i) KLG Capital Services Ltd (KLG);(ii) KJMC Corporate Advisors (India) Limited (KJMC) and(iii)Motilal Oswal Investment Advisors Pvt Ltd(MOIAPL)are functionally comparab-le cases or not considering the decision of the Tribunal as well as the judgment of the Bombay High Court relied upon by the assessee. Regarding MOIAPL, assessee relied heavily on the order of the Tribunal in its own case for the AY 2008-2009, a copy of which is placed at page 282 of the paper book. On perusal of the said order of the Tribunal, we find that it is decided in favour of the assessee vide 2012(AY 2008-2009),dated 7.2.2014. On perusal of para 12 of the said order of the Tribunal, which contains the operational part, we find the same is relevant and the Tribunal has given its finding under the facts which are similar to that of the AY under consideration. The MOIAPL,which has engaged in the business of merchant banking is not a good comparable for determining the ALP. Relevant contents of the said para 12 are reproduced here for the sake of completeness of this order which read as under: "12…... .The only dispute is whether Motilal Oswal Investment Advisors Pvt Ltd can be considered as a comparable for determination of ALP.A perusal of three comparables considered by the TPO shows that M/s. Future capital Investment Advisors Ltd., has operating profit at 21.79% whereas OPM of Motilal Oswal Investment Advisors Pvt Ltd is 72.33%. The comparables used by the TPO themselves are showing extreme OPM.A perusal of the Directors report of Motilal Oswal Investment Advisors Pvt Ltd shows that during the year under consideration, the said company has completed 23 assignments successfully as against 14 completed in the immediately preceding year. A close look at the financial statements of the said company show that the income from operations have been shown only 13 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. as advisory fees whereas it is admittedly an undisputed facts that the said company is engaged in diversified activities. Segmental reporting is not available. Profit and loss account appears to be only of consolidated accounts.The said company is registered with SEBI as a merchant banker and the Directors report show that it is into takeover, acquisitions, disinvestments etc. In the absence of specific data it is not possible to make comparison.It can therefore, be safely said that the said company being into merchant banking and cannot be considered as a comparable. We, accordingly, direct the AO not to consider Mottial Oswal Investment Advisors Pvt Ltd as a comparable for determination of ALP…… " 9.Considering the above, we direct the AO to exclude the MOIAPL from the list of the comparables for determination of ALP of the said transaction.” The Hon'ble Jurisdictional High Court has dismissed the appeal filed by the Department in the case of Carlyle India Advisors Private Limited (IT Appeal 1286 of 2012,dated 22. 02.2013). Here,we would also like to refer to the order of NVP Venture Capital India Private Ltd. (supra),where in a case of investment advisory the comparable of MOIAPL was rejected by the Tribunal.In that matter the Tribunal had held as under :- “7.We have carefully considered the rival submissions.We find that the assessee has been consistently canvassing before the lower authorities that Motilal Oswal Investment Advisors Private limited be excluded from the final set of comparables on the ground that its activities’are functionally incomparable to the activity of Provision of investment advisory services being rendered by the assessee to its Associated Enterprises. In fact, before the TPO, assessee pointed out that the said concern was engaged in providing comprehensive investment banking solutions and that it was rendering services across various products, viz. Equity Capital Markets, Mergers & Acquisitions, Private Equity Syndications and Structured Debt, etc. The appellant relied upon the decision of the Tribunal in the case of Carlyle India Advisors Private Limited (214 Taxmann 492), to support its plea for exclusion of the said concern from the final set of comparables. The TPO rejected the aforesaid plea on the ground that the Profit and Loss account of the said concern for the year under consideration showed that the only stream of income was from advisory services and not from any activity of merchant banking and, therefore, the said concern was carrying out only advisory services and, according to him, the said concern was includible in the final set of comparables. The DRP also accepted the position that the said concern was engaged in advisory services which are broadly comparable to the assessee's activities under test. 8.We have perused the relevant material on record. It is starkly evident that the said concern M/s. Motilal Oswal Investment Advisors Private limited is engaged in qualitatively different and diversified business activities, whereas the activities of the assessee are confined to rendering non-binding investment advisory for its Associated Enterprises. No doubt, both the 14 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. concerns may be in the business of rendering advisory services,so,however, it would also be necessary to evaluate the manner and the specific sectors,in which such services are being rendered by the two concerns.It is revealed from the Annual Financial Statement of Motilal Oswal Investment Advisors Private limited that the said concern is engaged in rendering services in diversified fields, viz. Equity Capital Markets, Mergers & Acquisitions, Private Equity Syndications and Structured Debt,etc.In the case of Carlyle India Advisors Private Limited(supra) for A.Y.2008-09, the Tribunal concluded that though the said concern was declaring a solitary stream of operating income under the head 'advisory fee', but undisputedly it was engaged in diversified fields and the financial results for each segment were not available. The Tribunal also found that the said concern was registered with SEBI as a Merchant Banker, and that it was carrying on merchant banking activities.In our considered opinion, the afore-said features with respect to the activities of the M/s. Motilal Oswal Investment Advisors Private limited (supra) noted by the Tribunal in the case of Carlyle India Advisors Private Limited (supra) for assessment year 2008-09,are clearly emerging in the instant year too and, therefore, it cannot be said to be a concern which is comparable to an entity which is rendering non-binding advisory investment services alone.Thus, in our considered opinion, the assessee is justified in seeking the exclusion of the said concern from the final set of comparables on account of functional dissimilarities.In fact,in other precedents cited by the ld. Representative for the assessee,the said concern has also been excluded from the set of comparables under similar circumstances.

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We find that if ICRA and IDCL are included and MOIAPL is excluded as final and valid comparable,then the assessee will be in safe zone,as argued by the AR.We are not expressing our views about other comparables.Effective ground of appeal is decided in favour of the assessee. IT-e Services: 4.Next effective ground of appeal is about inclusion /exclusion of certain comparables of IT-e services segment.During the TP proceedings,the TPO found that the assessee provides high end support services to investment division of its AE,that the value of IT in that segment was Rs.61,10,19,912/- ,that it had applied TNMM as MAM, that the PLI applied was OR/OE,that it had selected 12 comparables to determine the ALP.He applied certain filters to select the comparables. Out of the twelve,four companies could pass the filters applied by him and the they were- Accentia Technologies Ltd.(ATL),Informed Technologies India Ltd. (ITIL), Jindal Intellicom Pvt. Ltd.(JIPL) and Micro Genetic System Ltd.(MGSL).He rejected the balance comparables, namely,Aditya Birla Minacs Worldwide Ltd.(ABMWL),Caliber Point Business Solutions Ltd (CPBSL),Cepha Imaging Private Ltd.(CIPL),CG VAC Software and Exports Ltd. (CVSEL), Cosmic Global Ltd.(CVGL),Fortune Infotech Ltd.(FIL),Jeevan Softtech Ltd.(JSL),R-Systems Ltd.(RSL). He included five new comparables- Acropetal Technologies (AT), E-4-e Healthcare Business Service Pvt. Ltd.(EHBSPL),Eclerx Services Ltd.(ESL), Infosys BPO Ltd.(Infosys) and TCS e-serve(TCS).The assessee objected inclusion of four comparables.After considering the objections of the assessee,he finalised the list of valid comparables and the list included eight comparables. He made upward adjustment of Rs.6.73 Crores.

4.1.The assessee agitated the matter before the DRP and in pursuance of its directions, the AO made an adjustment of Rs.5.75 crores by considering the arm’s length markup of such services at 26.93%.He considered the following comparables: SN. Company Comparable selected by OP/TC 1. ATL Assessee 29.18% 2 ITIL Assessee 9.65% 3 JIPL Assessee 13.70% 4 MGSL Assessee -0.02% 5 AT TPO 23.95% ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd.

6 EHBSPL TPO 9.69% TPO 7 ESL 56.86% 8 Infosys TPO 17.86% 9. TCS TPO 69.31% Average 26.93% Before proceeding further,it would be useful to discuss the inclusion and exclusion of comparables by the TPO/DRP: i)In the case of Micro Genetic System Ltd. (MGSL),the TPO held that not only the revenue of the company had declined by 50% for the year under consideration,but it had also incurred losses. Before the DRP,the assessee placed reliance on M/s.Capital IQ Information System Ltd. (India) Pvt. Ld.(ITA/124 and 170/Hyd./2014) and assessee’s own case for the AY.2007-08 wherein the Tribunal had upheld the inclusion of Capital Trust Ltd.which was rejected by the TPO on the ground that the company was suffering loss.After considering the available material,the DRP directed that there was no reason to reject the comparable because there was loss in a particular year.It directed the TPO to accept it as a valid comparable. ii)Caliber Point Business Solutions Ltd.-Segmental(CPBSL).The TPO rejected the said comparable for the reason that it had a different year ending other that 31st March. The assessee submitted that on review of segment reporting,it was clear that major operations of the company was in the BPO segment,that the BPO services were comparable to the services provided by the assessee. The DRP held that the assessee had not made any submission specific to the rejection of the comparable,that it had accounting period different for Financial year,that contemporaneous data was not available,that the TPO had rightly rejected the comparables. iii)R-Systems Ltd.(RSL).The TPO rejected the company as it had different year ending other than the March ending. The assessee made the same submissions before the DRP that were made in the case of CPBSL.It was also argued that RSL was accepted as a valid comparable in the case of Mercer Consulting (India) Pvt. Ltd.(ITA/966/Del/2014).After considering the annual report of the RSL,the DRP held that the turnover of the software segment of the company for the year ending on 31.12.2010 was Rs.175.68 crores only,that the assessee had not furnished the ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. audited quarterly segmental results of the company,that the TPO had rightly rejected the comparable. iv)CG VAK Software and Exports Ltd.(CVSEL):The TPO had rejected the company for the reason that the comparable segment had turnover less than Rs.1Crore. The assessee argued that the company was in BPO segment and that the BPO services were comparable to services provided by the assessee.After going through the annual report of the comparable,the DRP held that segmental result showed that company was persistently making losses in the comparable segment,that the other income included foreign currency income of Rs.46lakhs,that even the comparable segment failed the turnover filter of Rs. 1 crore,applied by the TPO. v)Cosmic Global Ltd. (CVGL):The TPO rejected the company for the reason that it did not satisfy the export sales filter applied by him. The assessee argued,before the DRP,that CVGL was functionally comparable to IT-e services rendered by the assessee, that no reason were provided by TPO for considering threshold of 75% of total export as an appropriate filter to reject the company.The DRP held that 75% export sales was a valid filter,that the assessee had 100% export in that segment,that the TPO had rightly rejected it as a valid comparable. vi)Aditya Birla Minacs Worldwide Ltd.(ABMWL):The TPO rejected the company for the reason that it failed the RPT filter. The DRP,rejecting the submissions of the assessee,held that 25% RPT filter was a valid filter, that the comparable had failed that filter,that the TPO had rightly rejected it as comparable. vii)Eclerx Services Ltd.(ECL):The assessee argued before the DRP that company was earning super normal profit of 56.86 % ,that it operated under an exceptional year of operation,that it provided services in the form of data analytics and data process solution, that it was engaged in activities which the assessee did not undertake,that in the case of MAERSK Global Services (I )Pvt. Ltd.(ITA7466/Mum/2012), ECL was rejected as a valid comparable, that in the case of Capita IQ Information System (India) Pvt. Ltd.(ITA/1961/Hyd/2011) the Tribunal had upheld the rejection of ESL from the list of companies comparable to provisions of IT-enabled services. The DRP after considering the available material held that the assessee performed services which were BPO in nature,that it had not demonstrated the specific reason for the high profits,that in absence thereof without any valid reasons differentiating it on FAR analysis the contention of the assessee could not accepted.The DRP referred to the case of Willis ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd.

Processing and held that, issue of inclusion or exclusion of comparables had to be decided not on the ground of abnormal or high profit margins,that ESL was a valid comparable. viii)Acropetal Technologies-Segmental(AT)-The TPO held that AT was engaged in diversi -fied activities including information technology services.He considered the health care service segment as comparable to the IT-e s provided by the assessee. Before the DRP,the assessee argued that activities of AT were not functionally comparable with the activities of the assessee,that the company operated under an exceptional year of operation that it was predominantly a software service company,that in the case of Symphony Marketing Solutions(ITA/1316/Bang/2012) the Tribunal had held that it could not be conside -red comparable to a BPO service. Assessee placed reliance upon four more cases,decided by the Tribunal.The DRP held that the company was in 3 segments-engineering design,ITeS and health care BPO.It directed the IPO to adopt the PLI of IT-e segment of AT for bench - marking. ix)TCS-E-Serve Ltd.(TCSE)-The assessee objected to the inclusion of the said company before the DRP and contended that as per the annual report TCSE earned revenue from four activities,that it was taken over by Tata Consultancy Services,during AY.2009-10,that it had a high brand value,that the accelerated margin of the company for the current year was due to takeover,that company was earning very high profit i.e. 69.31%,that it had a huge turnover of 1593 crores as compared to the turnover of the assessee of 61.10crores. However,the DRP upheld the order of the TPO and referred to the case of Tech books Intl Pvt. Ltd.(ITA/240/Del/2015-AY.2010-11,dated 06.11.15)and held that high profit or high turnover was not a criteria to exclude an otherwise comparable co. x)Infosy BPO Ltd.(Infosys):The assessee requested the DRP to exclude the said comparable stating that it had very high turnover viz-a-viz the turnover of the assessee .It relied upon the various cases decide by the Tribunal in that regard. The DRP,while rejecting its objections, held that it was functionally comparable on the basis of activities of the assessee,that high profitability was not good ground for rejection of a comparable,that the TPO had proved that turnover did not have much impact on profitability. xi)E-4-e Healthcare Business Service Pvt. Ltd.(EHBSPL)-Before the DRP,the assessee contended that the company was engaged in health care out-sourcing services.The DRP held that EHBSPL was into healthcare BPO and was functionally comparable to the assessee, that the TPO had rightly accepted it as a valid comparable.

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4.1.During the course of hearing before us,the Authorised Representative(AR)stated that in the assessee’s own case the Tribunal had excluded ECL and AT from the list of the valid compa -rables(ITA/6921/Mumu/2012.AY.2008-09,dtd.22.07.2016),that in the case of Capitia India Pvt.Ltd.(ITA.s/356&105/Mum/2016.AY.2-11-12,dtd.19.09.2016)TCS was held to be an in-valid comparable for IT-e services,that the Tribunal had held that Infosys was not a valid comparable in the case of Actis Global Services Private Limited(ITA/6175 /Del/ 2015, AY. 2011-12,dtd.29.07.2016),that in the matter of Exevo India Pvt.Ltd.(ITA/907/ Del/ 2016, AY. 2011-12,dtd.25.07.2016)CVSEL and RSL were considered valid comparable for IT-e servi -ces,that EHBSPLwas a functionally different company and that it was not engaged in providing IT-e services. He referred to pages 4,43 and 51 of the paper book.He argued that the if the above inclusion/ exclusions were considered the margin would fall with the permissible limit of +/(-) 5%, that then there was need to consider the other comparables. 4.2.We have heard the rival submissions and perused the materials before us.We find that the TPO had included five new comparables in the final list after rejecting comparables selected by the assessee,that DRP had held that MGSL should be included in the final list,that it upheld the exclusion of CPBSL,RSL,CVSEL,CVGL,ABMWL,that it confirmed the inclusion of EHBSPL,ESL,Infosys,TCS and AT(e-segment only) in the final list of the comparables. 4.2.a.We would like to deal with the inclusion/exclusion of the comparables by the DRP.We find that the Tribunal had excluded AT and ECL from the list of the valid comaparables, while deciding the appeal filed by the assessee for the earlier year(supra).We are reproducing the relevant paragraphs of the order and same read as under: “56.We have considered the submissions of the parties and perused the material available on record. As per the annual report of this company, it is noted that the company is engaged in offering solutions in the field of data analytics, operations management, audits and re– conciliation, matrics management and reporting services. The functionality of the company was not only considered by the Tribunal, Mumbai Special Bench, in the case of Maersk Global Centres India Pvt. Ltd. (supra), but a host of other decisions referred to earlier, wherein, it has been held that the company is involved in providing high end services which is in the nature of KPO, hence, cannot be compared to a general ITES provider. In fact, the Hon'ble Delhi High Court in Rampgreen Solutions Pvt. Ltd., o 2015, has held that this company being a KPO service provider cannot be considered as a comparable to ITES companies. We may further mention, many of the orders passed by the co–ordinate benches of the Tribunal rejecting Eclerx Services Ltd. as a comparable to ITES service provider is for the very same assessment year 2008–09. Therefore, respectfully following the view expressed by various judicial authorities, we hold that Eclerx Services Ltd. being functionally different cannot be treated as comparable to the assessee.” XXXXXXX ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd.

“67.We have considered the submissions of the parties and perused the material available on record. We have noted that the Tribunal, Bangalore Bench, in Symphony Marketing Solutions India Pvt. Ltd. (supra), after perusing the annual report of this company found that major source of income is from providing engineering design service which is not comparable to ITES / BPO functions. The Bench observed, provision of engineering design service is a high end service amongst the BPO which requires high skill, hence, it can be regarded as KPO service. The bench, therefore, excluded the company as a comparable to ITES / BPO segment. The Tribunal, Hyderabad Bench, in M/s. Market Tools Research Pvt. Ltd. v/s DCIT, following co–ordinate bench decision in Symphony Marketing Solutions India Pvt. Ltd. (supra) has also held that the company cannot be treated as comparable to a company performing ITES / BPO functions. As these decisions rendered by the Tribunal are for the very same assessment year, respectfully following the same, we direct exclusion of this company from the list of comparables. It has been submitted before us by the learned Sr. Counsel that on exclusion of these companies, the margin of the assessee would be within +/– 5% tolerance band of the arithmetic mean of the comparable companies requiring no further adjustment to the price charged. In view of the aforesaid submissions of the learned Sr. Counsel, we do not consider it necessary to deal with the other comparables objected to by the assessee as it is merely of academic interest. Ground no.2, raised by the assessee is partly allowed.” Respectfully following the same,we hold that AT and ECL have to be excluded from the list of the valid comparables. 4.2.b.In the case of Capitia India Pvt.Ltd.(supra)the Tribunal had held that TCS was not a valid comparable for IT-e services in following mannere: “i) M/s TCS e-Serve:- From the perusal of its Annual reports, it is seen that, this company is engaged in the business of providing ITES services and BPO services primarily to ‘Citi Group’ entities globally. It operations comprised of transaction processing includes the broad spectrum of activities involving the processing, collections, customer care and payments in relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities. From the perusal of the profit and loss account, the revenue shown from transaction processing and other services is approximately Rs.1442.42 crores. There are no segmental details and any other bifurcation as to what comprised of transaction processing charges and other services. That apart, it is seen that, this company is a part of Tata Group and has a huge brand value across the world and also owns huge intangibles. Thus, there is a huge difference in the assets employed by this Company as compared to the assessee which also reflects in its revenue and profit margin. Its intangible assets itself is more than Rs. 3337.4 crores as on 1st April, 2010 and additions during the year were more than Rs.756.24 crores. Thus, this company having huge intangibles assets cannot be compared with the assessee who has no significant intangibles. That apart, it has been pointed out by the Ld. Counsel that, this company has been emerged with TCS in the year 2009 which has led to shooting up of its profit margin to 13% to 68%-70%. This factor itself points out that its high profit margin were due to its huge brand value, which cannot be held to be comparable with captive service provider like Assessee Company. So far as the decision of ITAT Delhi Bench in the case of ‘Techbooks International Pvt. Ltd’ is concerned as pointed out by the Ld. Counsel, we find that this decision of the Tribunal has been distinguished and explained by the subsequent three decisions of the Delhi Bench of the ITAT, wherein, the Tribunal has categorically held that, in absence of any segmental details and segregation of the total revenue this comparable company cannot held to be comparable. The relevant observation of the Tribunal in the case of Ameriprise India Pvt. Ltd (supra) reads as under:- 12.5 We have gone through the annual report of Company and have carefully considered the reasoning given by the coordinate Bench in the case of Techbook International P Ltd (supra). On perusal of Schedule ‘O’ – Notes to Accounts of the Standalone financials of the Company, ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. it is clear that the Company is engaged in “transaction processing” – and “technical services” activities. No separate segmental details are available. On a careful reading of the decision of coordinate Bench in Techbook International P td (supra) it is clear that Schedule ‘O’ – Notes to Accounts in respect to carried out by Company and relevant segmental details were never brought to the attention of the Bench. We find that in the absence of availability of any such segregation of the total revenue of this company, it is not possible to separately consider its profitability from rendering of “Transaction processing services”. Thus, the entity level figures render this company as unfit for comparison. Following the above reasons also taken note in the case of TCS e-Service International Limited, we order for the elimination of this company from the final set of comparables”. Subsequently in the case of Equant Solutions India Pvt. Ltd also this company has been held to be un-comparable on the following reasoning: “We have also considered the rival contention for exclusion of TCS e-service td. It is mainly involved in transaction processing and technology services. It carries on business of providing technology service such as software testing, verification and validation. It is also developed a software such as transport management software therefore functionally this company is dissimilar to the assessee company. It also owns huge intangible and uses of Tata Brand, which has definitely benefited this comparable, it is directed to be excluded”. This, in view of our discussion and also following the precedence in the aforesaid cases, we hold that TCS e-Serve cannot be held to be comparable company, accordingly, we direct the AO/TPO to exclude the same from comparability list.” Respectfully following the same,we hold that TCE e-Service cannot be considered a valid comparable in the case of the assessee. 4.2.c.It is found that in the case of Actis Global Services Private Limited(supra),the Tribunal had held that Infosys was not a valid comparable for the IT-e services company.We are reproducing the relevant portion of the order and it reads as follow: “(ii). Infosys BPO Limited: 17.This comparable is selected by the learned TPO after rejecting the contentions of the assessee regarding functional non-comparability,incomparable scale,brand profits, presence of intangibles, extra ordinary events etc.The learned TPO held that this company operates primarily into business process Management Services and taxpayer has not shown how brand and ownership of intangibles is leading to high profit margin.The ld. DRP also rejected the objection of the assessee. 18.The learned AR of the assessee submitted before us that this comparable has been considered in appellant's own case for assessment year 2010-11 by the coordinate bench and following the decision of Hon'ble Delhi High Court in the case of Rampgreen Solutions, has held that it is functionally incomparable with the assessee. He further stated that there is no change in the data analysis of the assessee as compared to the previous year and therefore, this issue is covered so far as exclusion of this comparable in favour of the assessee is concerned. In spite of that he submitted in his synopsis,the functions performed by this company and demonstrated that it is full fledged entrepreneur carrying greater risk compared to the assessee. He further stated about the outsourcing model, substantial sealing in market expenses and also drawn our attention that there is extra ordinary event during the year. He further relied on the decisions of Hon'ble Delhi High Court in thecae of Rampgreen Solutions Pvt. Limited vs. CIT and also Agnity India Technologies vs. ITO over and above assessee's own case for assessment year 2010-11. He also submitted that Hon'ble Bombay High court in the case of Pantaire Water India Pvt. Ltd. has excluded this company on account of wide difference in turnover.

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4.2.d.Before taking up other comparables,we would like to refer to the matter of Exevo India Pvt.Ltd.(supra),wherein CVSEL and RSL were considered valid comparable for IT-e service. Following is the relevant portion of the order of the Tribunal: “CG-VAK software and exports Ltd 7.1. The ld.TPO excluded this company from the list of comparables as the revenue generated under ITES segment of this comparable is just Rs. 82.78 Lacs was start hence the Ld. TPO held that this company fails the turnover filter 7.2. The Ld. A.O. has not brought on record any material / documents contrary to the above submissions of the assessee. The Ld. TPO has also not been able to bring out any instance of functional dissimilarity of this comparable with that of assessee. The Ld. D.R. placed his reliance on the findings of the authorities below. 7.3. We have perused the orders passed by authorities below, and arguments advanced by both the parties. It has been observed that the assessee in its TP study has objected to the adoption of the turnover filter applied by the TPO. It has been submitted that turnover filter could be deployed if 23 ITA(TP)/927/M/16(11-12)Goldman Sachs (India)Securities Pvt.Ltd. the tested party is a risk bearing entrepreneur. However, to the facts of the present case, the assessee does not assume any risk and is remunerated at cost plus basis. Ld. A.R. has placed reliance in the case of Willis Processing Services Pvt. Ltd. in I.T.A.No. 4547/Mum/2012 wherein the Co-ordinate bench of this Tribunal has held as under: “The turnover is not a criteria as prescribed under the Rule 10B(2) for selecting the comparables. It is settled proposition that the decisive factor for determining inclusion or exclusion of any case as a comparable are prescribed under Rule 10B(2) which does not specify any such factor of turnover on the basis of which a particular case can be included or excluded in the list of comparables.” “In service industry, turnover does not play any significant role as far as the margins are concerned…. This reinforces the view that turnover does not play a significant role in service industry and there is no link between turnover and margins…. The turnover is not a relevant factor for choice of comparables has been confirmed in many decision, as listed below.” 7.4. Applying the ratio laid down by the coordinate bench of this tribunal in the case of Willis processing services private limited (supra) we direct the ld. TPO/AO to include this company to the list of comparables. R Systems International Ltd 7.5. The ld.TPO has rejected the company on account of different financial year ending vis-a-vis the assessee. The ld.AR submitted that companies whose financial data was available for the relevant period, were considered in view of rule 10 D (4), which provides that information to be used must be contemporaneous. The ld. AR submitted that, though the Company has different financial year ending, were operating during the same period of time as the assessee, and were also facing similar business cycles, market and economic conditions as faced by assessee having financial year from April to March. He thus submitted that in absence of evidence available to the contrary that there has been a significant impact on the margins due to change in different reporting/accounting period, it is incorrect to disregard the comparable using this filter. Ld.DR, however, referred to the extracts made by the ld.TPO in his order to submit that R Systems International Ltd., should not be considered comparable with assessee. 7.6. After considering the rival submissions and pursuing the relevant material on record we find that the ld. TPO has not pointed out exact difference, the change of accounting year has made to the financial results of the comparable. The ld.TPO has further not pointed out whether it would not be possible to restate those financial results for a different accounting period without significant change in net profit margins or any other parameters considered relevant. Multinational companies generally operate in different geographical regions and different countries follow different accounting or financial years, functionally similar or even identical companies, cannot be held to be incomparable, only owing to differences in the date of ending of the financial year. As most of the business enterprises operate on the going concern concept, which is so fundamental to present the accounts. The concept used in accounting is just an artificial means to reckon the operating results of business operation at a given point in time and nothing would turn up on changing the end of accounting period from 31st March to any other date within a short span of time. Assuming a situation where the tested party is following a different financial year ending (say 01/01/2010 to 31/12/2010), following the filter adopted by the ld. TPO, one would reject all the company with the financial year ending 31st of March 2010 and only consider companies with financial year ending 31/12/2010. The number of comparable companies available after using such a filter would be very limited and therefore, in such a case the net margin earned by the comparable companies would be different from the one that would be computed without using this filter. This view is supported by the coordinate bench of this Tribunal in the case of DCIT vs. McKinsey knowledge Centre India private limited in wherein it has been held that if a company is functionally comparable, it cannot be rejected merely on the ground that data for the entire financial year was unavailable, if the data can be reasonably extrapolated. Hon’ble tribunal further observed that rule 10 B (4) cannot be interpreted in such a rigid manner so as to defeat the basic objective of the rule. The relevant extract of the ruling are reproduced below:

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“ 23. ….. However, in our considered opinion, if a comparable is functionally same as that of the tested party then the same cannot be rejected merely on the ground that data for entire financial year is not available. If from the available data on record the results were financial year can be reasonably extrapolated, then the comparable cannot be excluded solely on this ground. The learn ADR as referred to rule 10 B (4) which only mandates that the data which is to be utilised for analysing the comparability of uncontrolled transactions with an international transaction, has to be financial year only in which the international transaction has been entered into. This rule is based on matching principle but this role cannot be interpreted in such a rigid manner so as to defeat the basic object of rule viz., selection of the comparable for determination of arms length price of an international transaction” (emphasis supplied) 7.7. In any case the ld.TPO has not cited any instances of functional dissimilarity of this comparable company with that of assessee.We therefore direct the ld. AO/TPO to consider this company in the final list of comparable. Accordingly ground No. 3 to 9 stands disposed accordingly.” Respectfully following the above,we direct the AO to include both the comparables in the final list of valid comparables.

4.3.We find that if the above mentioned four comparables i.e. AT, ESL, Infosys and TCS e- Service,are excluded from the list of comparables and two of the comparables selected by the assessee namely CVSEL and RSL are included in the list,the margin shown by the assessee would be within +/- 5% of the tolerance band of the arithmetic mean of the comparables.

Therefore,we hold that the IT.s entered in to by the assessee were at Arm’s length for the year under appeal.We are not dealing with other comparables.

Ground no.2 is decided in favour of the assessee.

5.Last ground of appeal pertains to disallowing charges paid to National Stock Exchange, BSE and National Securities Clearing Crop.,amounting to Rs. 24.18 lakhs.It was brought to our notice that the issue is covered by the order of the Tribunal order dated 22.07.2016 (ITA/6912/Mum/2012,AY.2008-09).We would like to reproduce the relevant portion of the order and same reads as under: “73.The issue raised in ground no.6, relates to deduction claimED of an amount of Rs.11,86,105, paid to Bombay Stock Exchange and National Stock Exchange. 74.Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction towards payment made to stock exchanges called for necessary details. After verifying the details submitted by the assessee he observed that such payment was towards fine for non–confirmation of clearing house trades, client code modification, etc. He, therefore, called upon the assessee to explain the payment made being in the nature of penalty why should not be disallowed. Though, the assessee objected to the disallowance by stating that the payment made are not for breach of any statutory provisions, however, the Assessing Officer rejected the claim of the assessee and disallowed the amount. Being aggrieved, assessee challenged the disallowance before the DRP.

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75.The DRP also sustained the disallowance accepting the reasoning of the Assessing Officer. 76.We have considered the submissions of the parties and perused the material available on record. Identical issue came up for consideration before the co–ordinate bench in assessee’s own case for assessment year 2009–10 in ITA no.222/Mum./2014. The Tribunal after considering the submissions of the parties in the context of facts and material on record being convinced that the payment made by the assessee to stock exchanges were not for infraction of any law in view of the judgment of Hon'ble Jurisdictional High Court deleted the addition. For ready reference, the observations of the Tribunal is reproduced below:– “13.2. Before us, the Ld. Senior Counsel drew our attention to the decision of the Hon'ble High Court of Bombay in the case of Angel Capital & Debitt Market Ltd. in Income Tax Appeal (L) No. 475 of 2011 wherein the Hon'ble Court had the opinion to consider the following question of law. "Whether on the facts and in the circumstances of the case and in law the Hon'ble Tribunal was justified in deleting the disallowance made by the Assessing Officer of claim of the Assessing Company for a deduction of payment of Rs. 6,51,240/- towards penalty paid to Stock Exchange even though such penalty payment was clearly disallowable under Explanation to Section 37(1) of the Income Tax Act?" and the same was answered by the Hon'ble High Court as under: "As regards question (C) is concerned, the finding of fact recorded by the ITAT is that the amount paid as penalty was on account of irregularities committed by the assessee's clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such a case the explanation to Sec. 37 would not apply. Accordingly question (C) raised by the revenue cannot be entertained." Respectfully following the ratio laid down by the Hon'ble High Court (supra), we direct the AO to delete the impugned additions. Ground No. 7 is accordingly allowed.” 77.No material difference in facts having been brought to our notice by the learned Departmental Representative, respectfully following the decision of the co–ordinate bench and the decision of the Hon'ble Jurisdictional High Court cited supra, we allow deduction claimed by the assessee. Ground no.6, is allowed. Respectfully,following the above ground number three is decided in favour of the assessee. ITA/902/Mum/2016:

6.The first effective ground of appeal ,raised by the AO is about exclusion of MOIALP from the list of valid comparables for investment advisory services.In the earlier part of our order, we have held that MOIALP is not a valid comparable.Following the same,ground no.1 is decided against the Assessing Officer.

7.Next effective ground of appeal is about deleting the addition by the DRP under the head expenditure incurred on account of ESOP.We find that identical issue was decided by the Tribunal while deciding the appeal for the 2008-09 as under: “71.We have considered the submissions of the parties and perused the material available on record. We have noted that identical issue of deduction claimed on account of ESOP arose for consideration in assessee’s own case for assessment year 2009–10 before the Tribunal in ITA no.222/Mum./2014. The Tribunal vide order dated 30th November 2015, held as under:– “12.3. Before us, the Ld. Senior Counsel drew our attention to the decision of the Special Bench of the Bangalore Tribunal in the case of Biocon Ltd 144 ITD 21

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(Bang) wherein on similar facts the discount on issue of ESOP was allowed as deduction. 12.4. The Ld. DR could not bring any distinguishing decision in favour of the Revenue. Respectfully following the decision of the Special Bench (supra), we hold that discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business of profession. Ground No. 5 & 6 are accordingly allowed.” 72.No material difference in facts having been brought to our notice by the learned Departmental Representative, respectfully following the decision of the co–ordinate bench as referred to above, we allow assessee’s claim of deduction and delete the addition made by the Assessing Officer.” Respectfully following the above Grounds no.2 & 3 are decided against the AO.