FIL CAPITAL ADVISORS (INDIA) P.LTD,MUMBAI vs. DCIT CIR 3(1), MUMBAI

Captioned appeal at the instance of the assessee is directed against the order dated 31st October 2014, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2010–11, in pursuance to the direction of the Dispute Resolution Panel (DRP).

2 FIL Capital Advisors India Pvt. Ltd. advisory services to its overseas Associate Enterprises (A.E). It is stated, the assessee provides investment advisory services only to its A.E., therefore, it is a risk mitigated entity. For the assessment year under consideration, the assessee entered into international transaction of non–binding investment advisory services with its A.E. and earned revenue of ` 25.83 crore. For bench marking the transaction, the assessee undertook a study by adopting TNMM as most appropriate method with OP/OC as the PLI. By considering itself as the tested party, the assessee undertook a search process in the data bases and identified following seven comparables with average arithmetic mean of 18.23% on the basis of three year data. i) Access India Advisors Pvt. Limited; ii) Future capital Advisors Pvt. Limited; iii) ICRA Management Consulting Services Limited; iv) IDC (India) Limited; v) Informed Technologies Limited; vi) Integrated Capital Services Limited; and vii) Kinetic Trust Limited.

2. As the assessee is reimbursed at cost plus 20% and the margin shown for the impugned assessment year by the assessee at 19.67% on operating cost is higher than the margin of the comparable companies on operating cost, the transaction was treated as at arm's length. The Transfer Pricing Officer, however, rejected the transfer

3 FIL Capital Advisors India Pvt. Ltd. pricing study of the assessee pointing out various defects and deficiencies. He also rejected six out of seven comparables selected by the assessee while retaining Future Capital Investment Advisors Limited, that too on the basis of single year data. After rejecting the transfer pricing study, the Transfer Pricing Officer proceeded to select fresh comparables and the final set of six comparables proposed by the Transfer Pricing Officer with arithmetic mean of 42.66% are as under:–

Sl. Name of Comparable OP/TC no. (%) 1. Future Capital Investment Advisors Ltd. 15.71 2. Future Capital Holdings Ltd. (Segmental 31.68 Investment Advisory) 3. IDFC Investment Advisors Ltd. 36.62 4. ICRA Online Ltd. 41.77 5. Kshitij Investment Advisory Co. Ltd. 32.33 6. Motilal Ostwal Investment Advisors Pvt. Ltd. 97.87 Arithmetic Mean 42.66

4 FIL Capital Advisors India Pvt. Ltd. pricing adjustment. Against the draft assessment order, the assessee raised objections before the DRP. However, the DRP more or less rejected all the contentions / objections of the assessee in relation to the transfer pricing adjustment and issued direction to the Assessing Officer to finalise the draft assessment and accordingly, the impugned assessment was passed against which the assessee is in appeal before us.

4. Though, in the grounds of appeal, the assessee has raised various issues, however, at the time of hearing Shri Porus Kaka, learned Sr. Counsel, appearing for the assessee, restricted his arguments to selection / rejection of comparables by the Transfer Pricing Officer / DRP. Herein after, we will deal with the arguments of the parties in respect of each of the comparables under dispute.

5. Objecting to the selection of this company as a comparable, learned Sr. Counsel submitted, this company is engaged in providing portfolio management service (PMS). In this context, learned Sr. Counsel, referring to the annual report of the company for the relevant assessment year a copy of which is placed at Page–509 of the paper book. He submitted, PMS and investment banking services being fee based are functionally different from investment advisory services.

5 FIL Capital Advisors India Pvt. Ltd. Further, referring to the annual report learned Sr. Counsel submitted, it is offering PMS products. He submitted, the reference to investment advisory services in the annual report is in relation to India Infrastructure Opportunities Fund Ltd. which actually is a PMS. He submitted, certain functions performed by this company such as investment PMS and brokerage are not performed by an investment advisor. Further, referring to the Profit & Loss account, he submitted, though, the company is engaged in a number of activities but the revenue is reported under one segment. Finally, the learned Sr. Counsel submitted, the functions performed, assets employed and risk undertaken by this company being totally different from the assessee, it cannot be treated as comparable. In support of such contention, learned Sr. Counsel relied upon the following decisions:– i) AGM India Advisors Pvt. Ltd. v/s DCIT, ITA no.4757/Mum./ 2015, A.Y. 2010–11, order dated 18th May 2016; ii) Carlyle India Advisors Pvt. Ltd., ITA no.1040/Mum./2015, A.Y. 2010–11, order dated 18.11.2015; iii) Bain Capital Advisors (India) Pvt. Ltd. v/s DCIT, ITA no. 413/Mum./2015, A.Y. 2010–11, order 15.5.2015; iv) Sparkles Dhandho Advisors P. Ltd. v/s ITO, Mum./2015, order dated 31.12.2015; v) CIT v/s Carlyle India Advisors Pvt. Ltd., 32 taxmann.com 23, A.Y. 2007–08; vi) General Atlantic Pvt. Ltd. v/s ACIT, ITA no.7638/Mum./2011 order dated 17.5.2013; vii) Goldman Sachs India Securities Pvt. Ltd. v/s CIT, 69 taxmann.com 19;

6 FIL Capital Advisors India Pvt. Ltd.

3. Learned Departmental Representative relied upon the observations of the Transfer Pricing Officer / DRP.

“7. We find that the assessee objected to the inclusion of ICRA–0 and IDFC on the ground that the TPO had applied no scientific method in arriving at the said two companies that the companies had been cherry – picked by the TPO and he had not furnished the process applied by which he had come to select the said two companies, that such an approach to select comparables was impressible in law and on that count alone the said two companies should be rejected, that the FIRST APPELLATE AUTHORITY had rejected ICRA–O as comparable on investment advisory servies rendered by the assessee and had stated assessee’s knowledge process outsourcing division provided financial and analytical services and support of clients in the areas of Data Extraction, Aggregation, Electronic Conversion of Financial Statements, Validation and Analysis, Accounting and Finance, Research and Analytics, that the company was not engaged in investment advisory or consultancy services, that the A.O. was directed to exclude ICRA–O from the final set of comparable companies, that he had held that it was functionally not comparable to the assessee. Charging of fees by ICRA–O did not mean that it was a valid comparable to the assessee. As per the settled principles of TP for a company to be treated as a valid comparable the functions performed, assets employed and risks assumed have to be comparable and not nomenclatures in the annual accounts. We would like to refer to Pg.507 of the PB in case of ICRA–O and it reads as under:– “ICRA Online Limited is a leading information services, outsourcing and technology solutions provider and caters for some of the biggest names in the financial services sector in (India) and abroad, which is a testimony to its product quality, commitment and credibility.” From the above description it is clear that ICRA–O operated in two strategic lines of business, i.e., knowledge process outsourcing and information services and technology solutions, with a list of reputed global and domestic clients. Note c(iii) on Pg.507 of the PB also proves that the activities performed by the company under the business line “Outsourced Services” were in the nature of “maintenance and management of data” and 8 FIL Capital Advisors India Pvt. Ltd. therefore cannot be compared with the assessee. As far as IDFC is concerned, we would like to mention that a portfolio manager is a body corporate who pursuant to a contract or arrangement with the client would advises or direct or undertake on behalf of the client–whether as a discretionary portfolio manager or otherwise. FAR analysis of a portfolio manager cannot be compared with an assessee engaged in the business of providing investment advisory services. The Tribunal has in the cases discussed at paragraph 6.d.a. held that IDFC was not a valid comparable. Considering the above discussion, we are of the option that the order of the FIRST APPELLATE AUTHORITY and exclude both the comparables does not suffer from any legal or factual infirmity. So, confirming his order, we decide the issue against the AO.”

ICRA ONLINE LIMITED

9 FIL Capital Advisors India Pvt. Ltd. year, the learned Sr. Counsel submitted, the financials does not indicate the kind of service rendered by the outsource service segment. As per the information provided in the web site of the company, it has two strategic lines of business viz. (i) knowledge process outsourcing (KPO) and information service and technology solutions. He submitted, the KPO segment as per the information available, provides analytical service and support to clients in the areas of data extraction, aggregation, electronic conversion of financial statements, validation and analysis, accounting and finance, etc. He submitted, performance of the aforesaid activities make the company financially different from the assessee, hence, cannot be treated as a comparable. In support of his contention, the learned Sr. Counsel referred to the following case laws:– i) Carlyle India Advisors Pvt. Ltd., ITA no.1040/Mum./2015, A.Y. 2010–11, order dated 18.11.2015; and ii) AGM India Advisors Pvt. Ltd. v/s DCIT, ITA no.4757/Mum./ 2015 and ITA no.4801/Mum./2015, A.Y. 2010–11, order dated 18.5.2016.

10 FIL Capital Advisors India Pvt. Ltd. of this company as well as its financials, we have noted that the functions undertaken by the company are totally different from the assessee. Therefore, the company fails in the FAR analysis itself. For this reason, in the cases relied upon by the learned Sr. Counsel, the Tribunal has held the aforesaid company not comparable to an investment advisory service provider. In this context, we refer to the observations of the Tribunal in AGM India Advisors Pvt. Ltd. (supra) reproduced in Para–4 herein above. Accordingly, we hold that this company is not comparable to the assessee.

MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD. (MOIAPL)

11 FIL Capital Advisors India Pvt. Ltd. / arranger / sole book runner, etc., for various investment banking deals during the period from April 2009 to March 2010 and has earned investment banking fee for the same. He, therefore, submitted MOIAPL is not comparable to a non–binding investment advisory and related service provider like the assessee. In support of such contention, learned Sr. Counsel relied upon a number of decisions of the Tribunal, as well as the Hon'ble Jurisdictional High Court as under:– i) AGM India Advisors Pvt. Ltd. v/s DCIT, ITA no.4757/Mum./ 2015 and ITA no.4801/Mum./2015, A.Y. 2010–11, order dated 18.5.2016; ii) Carlyle India Advisors Pvt. Ltd., ITA no.1040/Mum./2015, A.Y. 2010–11, order dated 18.11.2015; iii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Mum./2015, A.Y. 2010–11, order dated 25.2.2016. iv) Bain Capital Advisors (India) Pvt. Ltd. v/s DCIT, ITA no. 413/Mum./2015, A.Y. 2010–11, order 15.5.2015; v) General Atlantic Pvt. Ltd. v/s DCIT, ITA no.1019/Mum./ 2014, A.Y. 2009–10, order dated 6.11.2015; vi) Wells Fargo Real Estate Advisors Pvt. Ltd. v/s DCIT, ITA no.1093/Mum./2014, A.Y. 2009–10, order dtd. 27.5.2015; vii) CIT v/s Carlyle India Advisors Pvt. Ltd., 32 taxmann.com 23, A.Y. 2007–08; viii) General Atlantic Pvt. Ltd. v/s DCIT, 68 taxmann.com 88, A.Y. 2006–07; and ix) Goldman Sachs India Securities P. Ltd. v/s CIT, 69 taxmann.com 19, A.Y. 2007–08.

12 FIL Capital Advisors India Pvt. Ltd. 10. Learned Departmental Representative submitted, if ICRA Management Consulting Services Ltd., which is also engaged in similar activity, is considered as a comparable to the assessee, then this company should also be considered as a comparable.

13 FIL Capital Advisors India Pvt. Ltd. “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 given advises on cross boarder 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 Jurisdictional High Court. Thus, in view of plethora 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.”

14 FIL Capital Advisors India Pvt. Ltd.

KSHITIJ INVESTMENT ADVISORy COMPANY LIMITED

15 FIL Capital Advisors India Pvt. Ltd. submitted, as a result of such realignment the entire business was re– structured. Referring to the Profit & Loss account of the company for the financial year 2010–11, the learned Sr. Counsel submitted, it has earned no revenue from investment advisory business in pursuance to realignment and its employees have also been transferred. He submitted, the company has operated only for nine months during the financial year 2009–10, hence, cannot be compared to the assessee. In support of his contention, he relied upon the following decision:– i) Carlyle India Advisors Pvt. Ltd., ITA no.1040/Mum./2015, A.Y. 2010–11, order dated 18.11.2015; and ii) AGM India Advisors Pvt. Ltd. v/s DCIT, ITA no.4757/Mum./ 2015 and ITA no.4801/Mum./2015, A.Y. 2010–11, order dated 18.5.2016;

“22. We have carefully considered the rival stands on the issue of exclusion of Kshitij Investment Advisory Co. Ltd. from the final set of comparables. The first and the foremost resistance articulated by the Revenue to oppose the exclusion of the said concern from the final set of comparables is the fact that such concern was included by the assessee itself as a comparable in its transfer pricing study. As per the Revenue, since the said concern has been adopted by the assessee as a comparable, it is impermissible for the assessee to raise a plea asking for its exclusion in the process of determination of average margins under the TNM method. In our considered opinion, the proposition being canvassed by the Revenue is not absolute, but it has to be considered in the facts and circumstances of each case. No doubt in a situation of the type before us, the burden lies on the assessee to justify exclusion of Kshitij Investment Advisory Co. Ltd., considering the fact that initially assessee had taken it as a good comparable. Our aforesaid approach is founded on a well accepted proposition that in the course of determination of correct tax liability, it is impermissible for the Revenue to take advantage of an ignorance or mistake of the assessee in offering certain amount as income, which is more than the legally due amount. Notably, there cannot be a estoppel against the statute and it is a trite law that no tax can be levied or collected from a subject except by an authority of law. We may hasten to add here that we are not staying that on each and every aspect of the assessment declared in the return of income, an assessee is entitled to turn around and argue differently before the income tax authorities; rather, there has to be justifiable reasons shown by the assessee, duly supported by law or facts, whereby the change in stand is marited. In the 17 FIL Capital Advisors India Pvt. Ltd. present case, what the assessee is claiming is that there has been a restructuring / realingment of investment advisory business being carried out by Kshitij Investment Advisory Co. Ltd. which has impacted the financial results thereby rendering the said concern as an unfit comparable. The proposition being canvassed by the assessee is supported by the decision of Hyderabad Bench of the Tribunal in the case of Capital IQ Information System (India) Pv.t Ltd. (supra). In fact, it is quite well understood that in a year where realignment / restructuring of business takes place, such year is often a peculiar economic year in the history of a concern and in such a situation, it would be in the interest of justice and fair play that such a concern is not treated as a comparable. In fact, in principle, we do not find any disagreement on the part of the TPO also on this aspect. However, what the TPO has stated is that in the present case, the realignment / restructuring is in the same line of business and, therefore, such restructuring / realignment does not result in any change in the activity of business. Therefore, according to the Revenue, there would be no impact on the financial results so as to make it incomparable with the tested transactions. We have carefully considered the aforesaid plea set up by the Revenue and in this context, we may briefly refer to the “Business Review” outlined in the Directors Report of the said concern, placed at page 536 of the paper book. It is stated therein that the investment advisory business has been realigned and all the employees have been transferred to Everstone Investment Advisors Pvt. Ltd. during the year under consideration to Everstone Investment Advisors Pvt. Ltd. during the year under consideration w.e.f. 1.1.2010. The note also suggests that the said concern did not enter into any non– compete agreement with Everstone Investment Advisors Pvt. Ltd. but was free to pursue any activity, including the activity in relation to investment advisory services. The aforesaid aspect hs been highlighted by the Revenue to say that the said concern continues to be in the business of rendering investment advisory services and, therefore, the restructuring does not impact the comparability of the concern. In our considered opinion, the approach of the Revenue in this context is quite flawed. Firstly, it is not disputed that the activity of investment advisory services has been realighed which included the transfer of all employees to Everstone Investment Advisory Pvt. Ltd. The averments in the Director’s Report suggest that post realignment, the concern is only evaluating its options to commence business operations either in some other line or in the similar line of investment advisory services. What we are trying to emphasize is that there is no averment in the Directors Report to suggest that the said concern has actually carried out any investment advisory services post–realignment w.e.f. 1.1.2010. In fact, in the course

18 FIL Capital Advisors India Pvt. Ltd. of hearing before us, the ld. Representative for the assessee pointed out that a perusal of the annual report for subsequent financial year of 2010–11 showed no such operations by the said concern. Therefore, considering the aforesaid fact situation, the instant financial year of the said concern is containing peculiar economic circumstances and the same has to be taken into consideration while evaluating the rationale for its inclusion as a comparable. Before us, the Ld. Representative also pointed out that the said restructuring / realignment which has taken place w.e.f. 1.1.2010, did impact the financial results inasmuch as the income from operations of the said concern for the year under consideration reduced to ` 17,23,10,815 from ` 26,47,96,102 in the immediately preceding year. Considering the entire conspectus of facts and circumstances, in our view, the assessee company is justified in asserting that Kshitij Investment Advisory Co. Ltd. deserves to be excluded from the final set of comparables on account peculiar economic circumstances during the year under consideration. Thus, on this aspect also, assessee succeeds.”

19 FIL Capital Advisors India Pvt. Ltd.

20 FIL Capital Advisors India Pvt. Ltd. business and operations, geographic research discussing the regulations laid out in the bio–generics globally. It has undertaken market research in respect of various products of the proposed investee company. It has also undertaken the business and operation analysis of the proposed investee company. The learned Sr. Counsel submitted, the company has been accepted as a comparable in assessee’s own case by the Transfer Pricing Officer and the DRP in assessment year 2009–10. He, therefore, submitted, the company should be included as a comparable to the assessee. In support of such contention, learned Sr. Counsel relied upon the following decisions. i) Sandstone Capital Advisors Pvt. Ltd. v/s ACIT, ITA no. 6315/Mum./2012, order dated 6.2.2013; ii) Carlyle India Advisors Pvt. Ld. V/s ACIT, Mum./2011, order dated 4.4.2012; iii) General Atlantic Pvt. Ltd. v/s DCIT, ITA no.8914/Mum./ 2010, dated 31.1.2013; iv) AGM India Advisor Pvt. Ltd. v/s DCIT, ITA no.4757/Mum./ 2015, dated 18.5.2016; v) Temasec Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Mum./2015, A.Y. 2010–11 order dated 25.2.2016; and vi) Blackstone Advisors India Pvt. Ltd. v/s DCIT, ITA no.1581/Mum./ 2014, order dated 9.3.2016.

21 FIL Capital Advisors India Pvt. Ltd. A.Y. 2007–08, has also dismissed the Department’s appeal on the issue.

22 FIL Capital Advisors India Pvt. Ltd. Advisors India Pvt. Ltd. (supra), the learned Departmental Representative submitted, these decisions pertained to different assessment years and principles of res judicata does not apply to the income–tax proceedings. For such proposition, he relied upon the decision of the Hon'ble Kerala High Court in CIT v/s Kalpetta Estates Ltd, [1995] 211 ITR 635 (Ker.).

23 FIL Capital Advisors India Pvt. Ltd. binding investment advisory service in various sectors such as infrastructure, retail, telecommunication and networking equipment, health care, financial intermediaries, design and engineering related to infrastructure, media and communication. Thus, as could be seen, though, the service provided by the assessee covers the wide spectrum of activities, however, the nature of service is virtually one viz. advisory services. The same is the case with the comparable. Though, it is alleged by the learned Departmental Representative, the comparable is providing service through various sectors, however, the nature of service is advisory. We have also noted that absolutely similar argument was advanced by the learned Departmental Representative in relation to this comparable in case of Temasec Holdings Advisors India Pvt. Ltd. (supra) in A.Y. 2010–11. The Tribunal, after considering the submissions of the learned Departmental Representative and also the proposition advanced by him in relation to the principles of res judicata and the decision of Kalpetta Estates Ltd. (supra) relied upon by him in this regard, ultimately treated this company as a good comparable observing as under:–

“20. At the outset, this comparable was subject matter of consideration before the Tribunal in AY 2008-09 & 2009-10, wherein this company was held to be good comparable both on the ground of functional similarity and in view of principles of consistency as it was held to be a good comparable by the TPO in the earlier years. From the perusal of the annual report, which is 24 FIL Capital Advisors India Pvt. Ltd. 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 has 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 assessee 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 ranging from 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 has participated in various international forums, partnered with foreign company in multiple projects and has a very big client base unlike assessee. 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 assessee 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 has 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 has 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-à-vis the functions performed by ICRA. Hence on functional level it is a good comparable. As stated earlier, in the earlier years, the Transfer Pricing Officer has accepted ICRA to be a comparable and in later years the Tribunal in AY 2008-09 & 2009-10 has held ICRA Management to be good comparable qua the functions of the assessee 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 25 FIL Capital Advisors India Pvt. Ltd. the earlier years. There cannot be a pick and choose of comparables every year unless there are some material difference in facts and 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.”

IDC INDIA LIMTED

26 FIL Capital Advisors India Pvt. Ltd. functions which is functionally comparable to advisory support services rendered by the assessee. He submitted, the activities performed with respect to research and survey by the company involves analysis of the business and operations of a company its profitability, operational efficiency, future outlook, etc., which are similar to the functions and activities performed by the assessee for rendering non–binding investment advisory and related services. He submitted, in assessee’s own case for the assessment year 2009–10, the company has been accepted as a comparable by the Transfer Pricing Officer / DRP. Therefore, there is no reason to exclude the same in the impugned assessment year. In support of his contention, learned Sr. Counsel relied upon the following decisions:– i) AGM India Advisors Pvt. Ltd. v/s DCIT, Mum./2015 and ITA no.4801/Mum./2015 A.Y. 2010–11; ii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no. 776/Mum./2015, A.Y. 2010–11, order dated 25.2.2016. iii) Temasek Holdings Advisors (I) Pvt. Ltd. v/s DCIT, ITA no. 968/Mum./2014, A.Y. 2009–10; iv) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no. 6315/ Mum./2012, A.Y. 2008–09; v) Sandstone Capital Advisors Pvt. Ltd. v/s ACIT, ITA no.6315/ Mum./2012, A.Y. 2008–09; vi) Carlyle India Advisors Pvt. Ltd. v/s DCIT, ITA no.7367/Mum./ 2012, A.Y. 2008–09; vii) Carlyle India Advisors Pvt. Ltd. v/s ACIT, ITA no.7901/ Mum./2011, A.Y. 2007–08;

27 FIL Capital Advisors India Pvt. Ltd. viii) General Atlantic Pvt. Ltd. v/s ACIT, ITA no.7638/Mum./2011, A.Y. 2007–08.

i) Tevapharm Pvt. Ltd. ITA no.6623/Mum./2011; and ii) Actis Advisors Pvt. Ltd. v/s ACIT, ITA no.1998/Del./2014.

29 FIL Capital Advisors India Pvt. Ltd. Representative, Tribunal included this company as a comparable holding as under:–

“22. 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 has held to be a good comparable, firstly, 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 have already discussed the functions performed by the IDC India Ltd while dealing with Ld. Counsel’s argument that functions of advisory services are quite similar to the functions of the assessee and, therefore, we accept the assessee’s contention that this comparable cannot be rejected. Accordingly, same is directed to be included in the comparability list.”

30 FIL Capital Advisors India Pvt. Ltd. case for the assessment year 2009–10, this company has been accepted as a comparable by the Transfer Pricing Officer / DRP. That being the case, we do not see any justifiable reason for excluding this company. As far as the decision rendered in case of Tevapharm Pvt. Ltd. (supra), after carefully reading the said order, we have noted that nowhere the Tribunal has held that IDC India Ltd. is a product company. On the contrary, it was excluded since the Tribunal found it functionally dissimilar to that assessee. The decision of Actis Advisors Pvt. Ltd. (supra) is also factually distinguishable, hence, would not be apply. Therefore, respectfully following the decisions of the Co– ordinate Bench of the Tribunal referred to above, we hold that IDC India Ltd. is a comparable to the assessee.

INFORMED TECHNOLOGIES LIMITED

i) Temasek Holdings Advisors (I) P. Ltd. v/s DCIT, ITA no. 968/Mum./2014, A.Y. 2009–10 order dated 27.6.2014; and ii) Temasek Holdings Advisors (I) Pvt. Ltd. v/s DCIT, ITA no. 4203/Mum./2012, A.Y. 2008–09 and ITA no.6504/Mum./ 2012, A.Y. 2007–08, order dated 30.08.2013.

32 FIL Capital Advisors India Pvt. Ltd. Therefore, the learned Departmental Representative cannot argue rejection of the company by applying A different criteria.

“(v) Informed Technologies Ltd. This company mostly offers range of data management services to the financial sector in USA. It collects and analyses data of financial fundamentals, corporate governance and capital market. It outsource services i.e., BPO services consisting of financial data base and back office activities for research and advisory reports. Thus, the data outsourcing charges are mostly related to analysing of data based on which advise is given for the investment purpose in India. Moreover, this company has been accepted by the TPO in the year 2009–10. Thus, it is a good comparable.”

33 FIL Capital Advisors India Pvt. Ltd. the case, in our considered opinion, the company should be treated as comparable to the assessee.

KINETIC TRUST LIMITED

“The company concentrated on its main business activity of corporate consultancy and financial services. The company results have improved in a modest way as compared to previous year result. On the basis of its professional strength and expertise in consultancy the company proposes to make all its efforts to sustain the trend of growth at a good pace in the coming years.”

34 FIL Capital Advisors India Pvt. Ltd. Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Mum./2015, A.Y. 2010– 11, order dated 25th February 2016.

35 FIL Capital Advisors India Pvt. Ltd. while rejecting this company the Transfer Pricing Officer has not applied the turnover filter but has rejected it on the basis of functions performed. The learned Sr. Counsel relies upon the decision of the Tribunal, Delhi Bench, in Nortel Network India Pvt. Ltd. (supra), in the absence of application of turnover filter by either of the parties a company cannot be rejected on account of low turnover. He submitted, the aforesaid decision of the Tribunal was also affirmed by the Delhi High Court in Nortel Network India Pvt. Ltd., ITA no.3043/2015. He submitted, the Tribunal again in case of Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, ITA no.776/Mum. /2015, A.Y. 2010–11, order dated 25th February 2016, after considering almost similar argument advanced by the learned Departmental Representative had accepted this company as a comparable. Learned Sr. Counsel further submitted if the Transfer Pricing Officer applies the lower turnover filter, then, he must apply higher turnover filter. In this context, he relied upon the decision of the Tribunal, Delhi Bench, in DCIT v/s Mckinsey Knowledge Centre India Pvt. Ltd. ITA no.2195/Del./2011, dated 13th Sept. 2013, which was subsequently confirmed by the Hon'ble Delhi High Court in the case of same assessee in an appeal preferred by the Department registered as vide judgment dated 27th March 2015.

37 FIL Capital Advisors India Pvt. Ltd. 11, order dated 25th February 2016, the co–ordinate bench after considering virtually identical argument advanced by the Department accepted this company as comparable. The relevant observations of the Bench is reproduced hereunder for the sake of convenience:–

“(ii) Kinetic Trust Ltd. (Rejected by the TPO):-Mr. Porus Kaka, submitted that the TPO has observed that in the annual report of the Kinetic Trust, does not specify that the said company is engaged in the investment advisory; further the said company is NBFC registered with RBI; and lastly, its turnover is only Rs. 20 lakhs. To counter this TPO’s observation, Mr. Kaka pointed out that firstly, Directors’ report for financial year 2009-10 specifically mentions that the company has concentrated on its main activity of a corporate consultancy services and financial services. This is evident from Directors’ report given at page 193 of the paper book. Merely because the said company is NBFC, the same does not change the nature of activities undertaken by the company i.e., Consultancy Services. Secondly, while selecting the list of comparables in search criteria, the assessee has not considered the turnover criteria as one of the factor in determining or streamlining the selection of the companies. It has not cherry picked the comparables by inserting any kind of lower or higher turnover filter. The reliance placed by the TPO on the decision of Tribunal in the case of Trilogy E Business Software P Ltd vs DCIT (ITA No. 1054/Bang/2011) is not correct as the Tribunal's decision was based on the facts and in that context it has highlighted the importance to apply the turnover over filter ranging between Rs.1 crore to Rs.200 crores. The said decision does not implicate that the range of Rs.1 crore to Rs.200 crores is to be applied essentially in all the cases. Thus, the decision of the said Tribunal cannot be applied to the facts of the present case. On the contrary in the case of Nortel Networks India P Ltd, reported in [2014] 44 taxman.com 46 the Delhi Tribunal has held that, if the functional profile of the comparable is the same with that of the assessee then, it cannot be excluded from the list of the comparables merely for the reason of low turnover. He submitted that the said decision of the Tribunal has been now been upheld by the Hon’ble High Court vide order dated 24.02.2015 in wherein, the Hon’ble High Court observed that, whether the turnover filter is appropriate one and applicable, cannot be answered in the abstract and is entirely fact dependent. Lastly, the Tribunal in assessee’s own case for the assessment year 2008-09 & 2009-10 has accepted the Kinetic Trust Ltd as a comparable company so far as the functions

38 FIL Capital Advisors India Pvt. Ltd. performed by the assessee. The Ld. TPO in utter disregard to the Tribunal’s order has stated that the said decision of the ITAT cannot be accepted, because the finding was given on the ground that the TPO has accepted this comparable in the earlier years. This cannot be the ground for rejection, rather the Kinetic Trust Ltd is to be included as the comparable company following judicial precedence and consistency in view of the Tribunal orders for two consecutive earlier years.”