CARYLE INDIA ADVISORS P.LTD, MUMBAI V. ITO 14(1)(2), MUMBAI

ITA 2366/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2779 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2012-2013
• Appeal Filed On: 04-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MUKESH BHUTANI; SHREYASH SHAH A R S
• Keywords: Transfer pricing; Search and seizure; International transaction; Rule of consistency; Wholly owned subsidiary; Revised return
• Section: 143(3); 234B; 10B; 143(1)

Judgement Text

P A G E | 1 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI R.C.SHARMA , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO S . 2366 & 6321 /MUM/2017 (ASSESSMENT YEAR S : 2012 - 13 & 2013 - 14 ) CA R LYLE INDIA ADVISORS PRIVATE LIMITED, 1 ST FLOOR,QUADRANT A , THE IL & FS FINAN C IAL CENTRE,PLOT C - 22, G BLOCK , BANDRA KURLA COMPLEX, MUMBAI - 400 051 VS. INCOME TAX OFFICER, 14(1)(2) ROOM NO. 457, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 PAN AABCC4522F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY: S /S HRI MUKESH BHUTANI & SHREYASH SHAH , A .R S RESPONDENT BY: S /S HRI MANOJ KUMAR & RAVI SHANKAR , D .R S DATE OF HEARING: 24 .12.2018 DATE OF PRONOUNCEMENT: 27 .02 .2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER S PASSED BY THE A.O UNDER SEC.143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT) , DATED 10.02.2017 & 07.09.2017 FOR A.Y. 2012 - 13 AND A.Y. 2013 - 14, RESPECTIVELY. AS THE ISSUES INVOLVED IN THE CAPTIONED APPEALS ARE INEXTRICABLY INTERWOVEN AND INTERLINKED, THEREFORE, THE Y ARE BEING TAKEN UP AND DISPOSED OFF TOGETHER BY WAY OF A CONSOLIDATED ORDER . WE SHALL FIRST ADVERT TO THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2012 - 13. P A G E | 2 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) THE ASSESSEE ASSAILING THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13) OF THE I.T. ACT HAS RAISED BEFORE US THE FOLLOWING GROUND S OF APPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN ASSESSING THE INCOME OF THE APPELLANT FOR THE RELEVANT AY AT INCOME OF RS.23,03,13,353/ - , AS AGAINST RETURNED INCOME OF RS.11,41,30,410/ - . 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / LEARNED TRANSFER PRICING OFFICER ('TPO') HAVE ERRED IN MAKING TRANSFER PRICING ADJUSTMENTS OF RS.11,61,82,943/ - TO THE TRANSFER PRICE OF THE INTERNATIONAL TRANSACTION PERTAINING TO PROVISI ON OF NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES BY THE APPELLANT, ALLEGING THAT THE SAME TO BE NOT AT ARM'S LENGTH IN TERMS OF THE PROVISIONS OF SECTIONS 92C(1) AND 92C(2) OF THE ACT, READ WITH RULE 10D OF THE INCOME - TAX RULES,1962 ( THE RULES ). IN DOING SO, THE LEARNED A.O LEARNED TPO ERRED AS FOLLOWS: 2.1. ARBITRARILY REJECTING THE ECONOMIC ANALYSIS/ TRANSFER PRICING STUDY UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE; 2.2. IGNORING THE PROVISIONS OF RULE 1013(4) OF THE RULES AND JUDICIAL PRONOUNCEMENTS, WHICH ADVOCATE USAGE OF MULTIPLE YEAR DATA OF COMPARABLE COMPANIES FOR THE PURPOSE OF DETERMINATION OF THE ARM'S LENGTH PRICE ; 2.3. REJECTING OBJECTIONS RAISED BY THE APPELLANT IN RELATION TO SELECTION/REJECTION OF COMPARABLE COMPANIES; 2.4. REJECTING ICRA MANAGEMENT CONSULTING SERVICES LIMITED, IDC INDIA LIMITED AND MECKLAI FINANCIAL SERVICES LIMITED AS COMPARABLE COMPANIES FOR BENCHMARKING THE INTERNATIONAL TRANSACTION PERTAINING TO NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES; 2.5 ARBITRARILY SELECTING LADDER - UP CORPORATE ADVISORY PRIVATE LIMITED AS A COMPARABLE COMPANY FOR BENCHMARKING THE INTERNATIONAL TRANSACTION PERTAINING TO NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES; AND 2.6. NOT GRANTING THE BENEFIT OF ECONOMIC/ RISK ADJUSTMENTS. 3. T HAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN LEVYING INTEREST UNDER SECTIONS 234B, 234C AND 234D OF THE ACT. THE APPELLANT CLAIMS RELIEF ON THE ABOVE GROUNDS AND THEREBY DELETING THE ADJUSTMENTS MADE BY THE LEARNED A O IN THE FINAL ASSESSMENT ORDER. THE APPELLANT CRAVES FOR LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE HON BLE INCOME - TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 2. BRIEFLY STATED, THE ASSESSEE WHICH I S A COMPANY INCORPORATED IN INDIA AND IS A SUBSIDIARY OF CARLYLE ASIA INVESTMENT ADVISORS LTD. (FOR SHORT CARLYLE HONG KONG) IS ENGAGED IN RENDERING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES TO CARLYLE HONG P A G E | 3 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) KONG. THE ASSESSEE HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2012 - 13 ON 26.11.2012, DECLARING TOTAL INCOME AT RS. 11 , 41,30,410/ - . THE RETURN OF INCOME OF THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O MADE A REFERENCE UNDER SEC.92CA(I) OF THE I.T. ACT TO THE AS S ISTANT COMMISSIONER OF INCOME TAX , TRANSFER PRICING OFFICE - 1(3)(1), MUMBAI (FOR SHORT TPO) FOR COMPUTATION OF THE ARMS LENGTH PRICE (FOR SHORT ALP) OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 4. THE TPO IN THE COURSE OF THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE WHICH WAS ENGAGED IN PROVIDING INVESTMENT ADVISORY SERVICES TO ITS ASSOCIATE ENTERPRISE (FOR SHORT A.E) HAD USED TRANSACTIONAL NET MARGIN METHOD (FOR SHORT TNMM) FOR COMPUTING THE ALP OF T HE SAID INTERNATIONAL TRANSACTIONS. IT WAS OBSERVED BY HIM THAT THE P ROFIT L EVEL I NDICATOR ( FOR SHORT PLI ) USED BY THE ASSESSEE WAS O PERATING PROFIT TO O PERATING COST. FURTHER, IT WAS NOTICED BY HIM THAT AS PER THE TP STUDY REPORT THE ASSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS HAD SELECTED THREE COMPARABLES VIZ. (I) ICRA MANAGEMENT CONSULTING SERVICES LTD; (II) IDC (I NDIA ) LTD; AND (III) MECKLA I FINANCIAL SERVICES LTD. ON THE BASIS OF THE AVERAGE MARGIN OF 9.33% OF THE AFOREMENTIONED C OMPARABLES , IT WAS CLAIMED BY THE ASSESSEE THAT ITS MARGIN OF 15% WAS WELL WITHIN THE ARMS LENGTH. THE TPO REJECTED THE AFORESAID THREE COMPANIES AS COMPARABLE S BY APPLYING THE EXPORT TURNOVER FILTER . APART THEREFROM, THE TPO BEING OF THE VIEW THAT THE ASS ESSEE WAS A HIGH E ND IT E S/ HIGH END KPO SERVICE PROVIDER ADOPTED THE FOLLOWING THREE COMPANIES FROM THE IT E S/KPO P A G E | 4 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) SECTOR AS COMPARABLES FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE : SR. NO. NAME OF THE COMPANY OP/TC 1. E - CLERX SERVICES LIMITED 61.21% 2. ACROPETAL TECHNOLOGIES LIMITED (SEGMENT: HEALTHCARE) 29.78% 3. EXCEL INFOWAYS LIMITED (SEGMENT: BPO) 49.38% AVERAGE 46.79% ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE TPO APPLIED THE AVERAGE MARGIN O F 46.79% (OPERATIONAL PROFITS TO TOTAL COSTS) OF THE AFOREMENTIONED COMPARABLES AND REWORKED THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE, AS UNDER: PARTICULARS AMOUNT IN RS. OPERATING INCOME (A) 57,12,61,546 LESS: OPERATING EXPENSES (B) 49,67,80,235 OPERATING PROFIT (A - B)=C 74,481,311 OP TO TC 15.00% ARMS LENGTH PRICE (OP/TC) 46.79% HENCH ARMS LENGTH OP =D=46.79%X B 23,24,43,472 ARMS LENGTH OPERATING I NCOME =E= (D +B) 72,92,23,707 ADJUSTMENT= (E - A) 15,79,62,161 ACCORDINGLY, AN ADJUSTMENT OF RS.15,79,62,161/ - WAS MADE BY THE TPO TO THE OPERATING INCOME THAT WAS RECEIVED BY THE ASSESSEE FROM ITS AE ON ACCOUNT OF PROVISION OF NON - BINDING INVESTMENT ADVISORY SERVICES. 5. THE AO AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 29.01.2016 PASSED A DRAFT ORDER UNDER SEC.143(3) R.W.S 144C(1), DATED 07.03.2016 , WHEREIN IT WAS PROPOSED TO ASSESS ITS TOTAL INCOME AT RS. 27,20,92,571/ - AFTER MAKING A TP ADJUSTMENT OF RS. 15,79,62,161/ - AS SUGGESTED BY THE TPO . P A G E | 5 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 6. AGGRIEVED, THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL - 1, MUMBAI (FOR SHORT DRP). IN THE COURSE OF THE PROCEEDINGS BEFORE THE DRP THE ASSESSEE ASSAILED T HE SELECTION OF THE THREE COMPARABLES BY THE TPO FROM THE IT E S/KPO SECTOR VIZ. (I) E - CL ERX SERVICES ITD; (II) ACROPETAL TECHNOLOGIES LTD.(HEALTH CARE SEGMENT); AND (III) EXCEL INFOWAYS LTD. (SEGMENT: BPO). THE DRP DID FIND FAVOUR WITH THE CONTENTION OF THE ASSESSEE THAT AS IT WAS INVOLVED IN THE BUSINESS OF PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES, THEREFORE, T HE TPO WAS IN ERROR IN RE - CHARACTERING THE ASSESSEE AS A HIGH E ND IT E S/ HIGH END KPO ENTITY. APART THEREFROM, THE DRP WAS ALSO NOT PERSUADED TO SUBSCRIBE TO THE EXPORT TURNOVER FILTER THAT WAS ADOPTED BY THE TPO AND DIRECTED HIM NOT TO CONSIDER THE SAME. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE DRP REJECTED THE AFORESAID THREE COMPANIES WH ICH WERE SELECTED BY THE TPO AS COMPARABLES FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. FURTHER, THE DRP SOUGHT A REMAND REPORT FROM THE TPO AND CALLED UPON HIM TO IDENTIFY COMPARABLES A FTER CONSIDERING THAT THE ASSESSEE WAS A NON - BINDING INVESTMENT ADVISORY SERVICE PROVIDER. T HE DRP ALSO DIRECTED THE TPO NOT TO CONSIDER THE EXPORT TURNOVER FILTER AS IT WAS NOT A RELEVANT FILTER SINCE THE SERVICES WERE RENDERED BY THE ASSESSEE FOR THE AE IN INDIA AND THE INVESTMENTS WERE ALSO TO BE MADE IN INDIA. 7. THE TPO IN HIS REMAND REPORT SELECTED THE FOLLOWING COMPANY AS A COMPARABLE: NAME OF THE COMPANY PLI (%) LADDER - UP CORPORATE ADVISORY PVT. LTD. 38.38 THE DRP DID NOT FIND FAVOUR WITH THE CONTENTION ADVANCED BY THE ASSESSEE THAT AS THE AFORESAID COMPA NY VIZ. M/S LADDER U P CORPORATE ADVISORY PVT. LTD. WAS ENGAGED IN THE BUSINESS OF MERCHANT P A G E | 6 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) BANKING/INVESTMENT BANKING, IT THUS COULD NOT BE CONSIDERED AS A COMPARABLE TO A COMPAN Y ENGAGED IN RENDERING INVESTMENTS ADVISORY SERVICES. APART THEREFROM, IT WAS OBSERVED BY THE DRP THAT THE ITAT, DELHI I BENCH IN THE CASE OF AVENUE ASIA ADVISORS PVT. LTD. VS. DCIT, CIRCLE 2(1), NEW DEL HI (ITA NO. 6638/DEL/2013 ; DATED 22.01.2016 ) HAD HELD THAT THE SAID COMPARABLE VIZ. LADDERUP CORPORATE ADVISORY PVT. LTD. WAS A GOOD COMPARABLE IN THE CASE OF A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING INVESTMENT ADVISORY SERVICES. ON THE BASIS OF ITS AFORESAID OBSERVATIONS IT WAS CONCLUDED BY THE DRP THAT AS THE ASSESSEE HAD NOT BEEN ABLE TO JUSTIFY ITS BENCHMARKING BY PLACING ON RECORD ANY VALID/GOOD COMPARABLE, THEREFORE, THE AFOREMENTIONED COMPANY VIZ. LADDERUP CORPORATE ADVISORY PVT. LTD. WHICH WAS FUNCTIONALLY SIMILAR IN SOME ASPECT S WAS R IGHTLY SELECTED BY THE TPO AS A GOOD COMPARABLE. 8. T HE TPO BY HIS ORDER DATED 24.01.2017 GAVE EFFECT TO THE DIRECTIONS OF THE DRP AND BENCHMARK ED THE INVESTMENT ADVISORY SERVICES PROVIDED BY THE ASSESSEE DURING THE YEAR BY TAKING M/S LADDERUP CORPORATE ADVISORY PVT. LTD. AS A COMPARABLE. ON THE BASIS OF THE AFORESAID DELIBERATIONS THE TPO WORKED OUT THE ADJUSTMENTS TO THE ALP IN RESPECT OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AT RS.11,61,82,943/ - . 9. THE A.O AFTER RECEIVING THE ORDER OF THE TPO, DATED 24.01.2017, THEREIN GAVE EFFECT TO THE SAME AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 23,03,13,353/ - , VIDE HIS ASSESSMENT ORDER PASSED UNDER SEC.143(3) R.W.S 144C(13) , DATED 10.02.2017 AFTER MAKING T P ADJUSTMENT OF RS.11,61,82,943/ - AS SUGGESTED BY THE TPO . 10. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S. 144C(13), DATED 10.02.2017 HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (F OR SHORT P A G E | 7 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) A.R) FOR THE ASSESSEE TOOK US THROUGH THE FACTS OF THE CASE . I T WAS SUBMITTED BY THE LD. A.R THAT THOUGH THE TPO HAD RE - CHARACTERIZED THE ASSESSEE AS A HIGH END ITES/HIGH END KPO ENTITY , HOWEVER THE DRP DULY APPRECIATING THAT THE ASSESSEE WAS PR OVIDING NON - BINDING INVESTMENT ADVISORY SERVICES HAD VACATED THE SAID VIEW . IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE DRP HAD ALSO DIRECTED THE TPO NOT TO CONSIDER THE EXPORT TURNOVER FILTER AS THE SERVICES RENDERED BY THE ASSESSEE WERE FOR THE AE I N INDIA AND THE INVESTMENTS ALSO WERE TO BE MADE IN INDIA. THE LD. A.R ASSAIL ED THE SELECTION OF L ADDERUP C ORPORATE A DVISORY P RIVATE LIMITED AS A COMPARABLE BY THE TPO /DRP. IT WAS SUBMITTED BY THE LD. A.R THAT THE AFOREMENTIONED COMPANY VIZ. L ADDERUP C ORPORATE A DVISORY P RIVATE LIMITED WHICH WAS ENGAGED IN MERCHANT BANKING AND INVESTMENT BANKING ACTIVITY WAS FUNCTIONALLY DIFFERENT AND THUS COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE . IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE AFOREMENTIONED COMPANY WAS FUNCTIONALLY DIFFERENT THE LD. A.R TOOK SUPPORT OF THE FACT THAT THE TPO IN HIS REMAND REPORT IN THE ASSESSES OWN CASE FOR A.Y 2013 - 14 HAD REJECTED IT AS A COMPARABLE FOR THE REASON THAT IT WAS CARRYING MERCHANT BANKING AC TIVITY. I T WAS SUBMITTED BY THE LD. A.R THAT THE TPO WHILE CONCLUDING AS HEREINABOVE THAT LADDERUP CORPORATE ADVISORY PVT. LTD. WAS FUNCTIONALLY DIFFERENT AS IN COMPARISON TO THE ASSESSEE HAD RELIED ON THE ITAT ORDER PASSED IN THE ASSESSES OWN CASE FOR A.Y . 2007 - 08, WHEREIN THE SAID COMPANY WAS REJECTED AS A COMPARABLE. FURTHER, IT WAS SUBMITTED BY THE LD. A.R THAT THE AFOREMENTIONED COMPANY VIZ. LADDERUP CORPORATE ADVISORY PVT. LTD . WAS REJECTED AS A COMPARABLE BY A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. TEMASEK HOLDINGS ADVISORS (P. LTD.) (2014) 47 TAXMANN.COM 311 (MUM) . IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE WAS ADMITTEDLY ENGAGED IN BUSINESS OF PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES, THEREFORE, THE P A G E | 8 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) TPO/DRP HAD ERRED IN SELECTING LADDERUP C ORPORATE A DVISORY PVT. LTD. WHICH WAS ENGAGED IN MERCHANT BANKING AND INVESTMENT BANKING ACTIVITY AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION THAT A COMPANY ENGAGED IN MERCHANT BANKING AND INVESTMENT BANKING ACTIVITY CANNOT BE COMPARED TO A COMPANY PROVIDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES, RELIANCE WAS PLACED BY THE LD. A.R ON THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AVENUE ASIA ADVISORS (P ) LTD. VS. DCIT (2017) 85 TAXMANN.COM 311 (DEL) . IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AVENUE ASIA ADVISORS (P) LTD. VS. DCIT (2017) 85 TAXMANN.COM 311 ( DELHI) HAD SPECIFICALLY REJECTED THE AFOREMENTIONED COMPANY VIZ. LADDERUP CORPORATE ADVISORY SERVICES PRIVATE LIMITED AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF A COMPANY WHICH WAS PROVIDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES, FOR THE REASON THAT IT WAS ENGAGED IN THE BUSINESS OF MERCHANT BANKING . ON THE BASIS OF HIS AFORESAID CONTENTION IT WAS SUBMITTED BY THE LD. A.R THAT THE AFOREMENTIONED COMPANY VIZ. LADDERUP CORPORATE ADVISORY SERVICES PRIVATE LTD. BEING FUNCTION ALLY DIFFERENT FROM THE ASSESSEE WAS THUS LIABLE TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 11. THE LD. A.R FURTHER ASSAILED THE EXCLUSION OF THE THREE COMPANIES WHICH WERE SELECTED BY THE ASSESSEE AS COMPARABLE S VIZ. (I) IDC ( INDIA ) LTD; (II) ICRA MANAGEMENT CONSULTING SERVICES LTD; AND (III) MECKLAI FINANCIAL SERVICES LTD. THE CONTENTION S ADVANCED BY THE LD. A.R IN RESPECT OF THE AFOREMENTIONED THREE COMPARABLES WHICH WERE SELECTED BY THE ASSESSEE BUT WERE EXCLUDED BY THE TPO ARE AS UNDER: (A) IDC ( INDIA ) LTD: - P A G E | 9 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) IT WAS SUBMITTED BY THE LD. A.R THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. (NOW KNOWN AS CYBER MEDIA RESEARCH LTD) BEING FUNCTIONALLY SIMILAR TO THE ASSESSEE WAS RIGHTLY SELECTED BY THE ASSESSEE AS A COMPARABLE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS IN THE TP STUDY REPORT. IT WAS SUBMITTED BY THE LD. A.R THAT THE SAID COMPANY VIZ. IDC ( INDIA ) LTD. HA S BEEN APPROVED BY THE HONBLE HIGH COURT OF BOMBAY AS A GOOD COMPARABLE IN THE ASSESSES OWN CASE FOR A.Y . 2007 - 08 VIZ. CIT - 10, MUMBAI VS. M/S CARLYLE INDIA ADVISORS PVT. LTD. [ITA (L) NO. 1286 OF 2012; DATED 22.02.2013 ] . IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN THERE HAD BEEN NO SHIFT IN THE FACTS OF THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION I.E A.Y 2012 - 13 AS IN COMPARISON TO TH OSE FOR A.Y. 2007 - 08 , THUS THERE W AS NO JUSTIFIABLE REASON ON THE PART OF THE TPO/DRP TO HAVE EXCLUDED THE SAID COMPANY FROM THE FINAL LIST OF COMPARABLES. IT WAS THE CONTENTION OF THE LD. A.R THAT THOUGH THE NAME OF THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. WAS WITH EFFECT FROM 28.02.2011 CHANGED TO CYBER MEDIA RESEARCH LTD. , HOWEVER THERE WAS NEITHER ANY CHANGE IN ITS FUNCTIONAL PROFILE NOR ANY MATERIAL WAS PLACED ON RECORD BY THE LOWER AUTHORITIES TO DISLODGE THE SAID FACTUAL POSITION. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. WAS HELD BY THE TRIBUNAL AS A SUITABLE COMPARABLE FOR BENCHMARKING THE ALP OF AN ASSESSEE WHICH WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES WHILE DISPOSING OFF THE APPEAL IN THE CASE OF TPG CAPITAL INDIA (P) LTD. VS. DCIT (2017) 79 TAXMANN.COM 101 (MUM) . ON THE BASIS OF THE AFORESAID CONTENTION S IT WAS THE CLAIM OF THE LD. A.R THAT THE LOWER AUTHORITIES HAD ERRED IN EXCLUDING IDC ( INDIA ) LTD. FROM THE FINAL LIST OF COMPARABLES. P A G E | 10 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) (B). MECKLAI FINANCIAL SERVICES LTD : THE LD. A.R TAKING US THROUGH THE FUNCTIONAL PROFILE OF THE AFORESAID COMPANY VIZ. MECKLAI FINANCIAL SERVICES LTD. SUBMITTED THAT THE SAID COMPANY WAS ENGAGED IN RENDERING FOREX ADVISORY SERVICES. IT WAS SUBMITTED BY THE LD. A.R THAT THE FUNCTION S PERFORME D BY FOREX ADVISORS WERE SIMILAR TO THOSE OF A NON INVESTMENT ADVISORS. IN ORDER TO BUTTRESS HIS CONTENTION THAT THE AFOREMENTIONED COMPANY VIZ. MECKLAI F INANCIAL SERVICES LTD. WAS RIGHTLY SELECTED BY THE ASSESSEE AS A COMPARABLE THE LD. A.R RELIED ON THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF AGM INDIA ADVISORS (P) LTD. VS. DCIT (2016) 70 TAXMANN.COM 219 (MUM) . IT WAS SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL IN THE AFOREMENTIONED CASE HAD OBSERVED THAT THE AFOREMENTIONED COMPANY VIZ. MECKLAI FINANCIAL SERVICES LTD. WAS ACCEPTED BY THE TPO AS A VALID COMPARABLE IN THE CASE OF AN ASSESSEE PROVIDING INVESTMENT ADVISORY. T HE LD. A.R TAKING SUPPORT OF THE AFORESAID FACTS SUBMITTED THAT THE LOWER AUTHORITIES HAD ERRED IN EXCLUDING THE AFORESAID COMPANY FROM T HE FINAL LIST OF COMPARABLES. (C). ICRA MANAGEMENT CONSULT ING SERVICES LTD : THE LD. A.R SUBMITTED THAT THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. WAS INTO ADVISORY AND MANAGEMENT CONSULTANCY. IT WAS AVERRED BY THE LD. A.R THA T IN MANAGEMENT CONSULTANCY AND INVESTMENT ADVISORY COMMON FU NCTI ONS ARE INVOLVED VIZ. (I) R ESEARCH ING ; (II) ANALYSING; (III) PRESENTING THE INFORMATION BY WAY OF A REPORT; (IV) MAKING RECOMMENDATIONS BASED ON THE ANALYSIS AND REPORT S ; AND (V) MONITORING THE SOLUTION AND ADVICE GIVEN . ON THE BASIS OF THE AFORESAID FAC TS IT WAS SUBMITTED BY THE LD. A.R THAT A COMPANY PROVIDING MANAGEMENT CONSULTANCY CAN SAFELY BE COMPARED WITH AN INVESTMENT ADVISORY COMPANY. IN ORDER TO DRIVE HOME HIS CONTENTION THAT ICRA M ANAGEMENT CONSULTING SERVICES LTD. P A G E | 11 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) COULD SAFELY BE CONSIDERED AS A COMPARABLE IN THE CASE OF A COMPANY PROVIDING INVESTMENT CONSULTANCY SERVICES, RELIANCE WAS PLACED BY THE LD. A.R ON THE ORDER OF THE TRIBUNAL IN THE CASE OF TEMASEK HOLDINGS ADVISORS (I) ( P.) LTD. VS. ITO, [ITA NO. 1429/MUM/2017] . IT WAS SUBMITTED BY THE LD. A.R THAT IN THE AFOREMENTIONED CASE THE TRIBUNAL HAD ACCEPTED THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. AS A COMPARABLE IN THE CASE OF THE ASSESSEE BEFORE THEM WHICH WAS PROVIDING INVESTMENT ADVISORY SERVICES. ON THE BASIS OF THE AFORESAID DELIBERATIONS IT WAS THE CLAIM OF THE LD. A.R THAT THE LOWER AUTHORITIES HAD ERRED IN EXCLUDING ICRA MANAGEMENT CONSULTING SERVICES LTD. FROM THE FINAL LIST OF COM PARABLES. 1 2 . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) AT THE VERY OUTSET SUBMITTED THAT AS THE COMPAN IES SELECTED BY THE ASSESSEE AS COMPARABLES WERE HAVING DIFFERENT FUNCTIONAL PROFILE S , THEREFORE, THE TPO HAD RIGHTLY EXCLUDED TH E SAME FROM THE FINAL LIST OF COMPARABLES. IT WAS SUBMITTED BY THE LD. D.R THAT IDC ( INDIA ) LTD. WHICH WAS A WHOLLY OWNED SUBSIDIARY OF CYBER MEDIA (I) LTD. AND WAS ENGAGED IN RESEARCH AND SURVEY SERVICES AND PRODUCTS WAS ADMITTEDLY HELD BY THE TRIBUNAL AS A COMPARABLE IN THE ASSESSES OWN CASE FOR A.Y 2007 - 08 . HOWEVER, IT WAS SUBMITTED BY THE LD. D.R THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. WHOSE NAME WAS WITH EFFECT FROM 28.02.2011 CHANGED TO CYBER MEDIA RESEARCH LTD. HAD THEREAFTER REMAINED NO LONGER FUNCTIONALLY COMPARABLE. IT WAS THUS AVERRED BY THE LD. D.R THAT AS THE AFOREMENTIONED COMPANY VIZ. IDC INDIA LTD. DURING THE YEAR UNDER CONSIDERATION I.E A.Y 2012 - 13 HAD A DIFFERENT FUNCTIONAL PROFILE AS IN COMPARISON TO THE ASSESSEE , THUS IT WA S RIGHTLY REJECTED A S A COMPARABLE BY THE TPO . IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. WAS FUNCTIONALLY DIFFERENT, IT WAS SUBMITTED BY THE LD. D.R THAT THE SAME COULD SAFELY BE GATHERED FROM A PERUSAL OF THE FACT THAT WHILE P A G E | 12 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) FOR THE EMPLOYEE COST IN THE CASE OF THE SAID COMPANY WAS WITHIN THE RANGE OF 29.9% TO 52% DURING THE YEAR UNDER CONSIDERATION WHILE FOR THAT IN THE CASE OF THE ASSESSE WORKED OUT AT 82%. FURTHER, THE LD. D.R IN ORDER TO BUTTRESS HIS CL AIM THAT IDC ( INDIA ) LTD. COULD NOT BE ADOPTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE TOOK SUPPORT OF THE LOW EXPORT REVENUE OF 8.35% OF THE AFOREMENTIONED COMPANY DURING THE YEAR UNDER CONSIDERATION. APART THEREFROM, THE LD. D.R SUBMITTED THAT AS THE COMPANY VIZ. IDC ( INDIA ) LTD. HAD TURNED INTO A PERSISTENT LOSS MAKING COMPANY SINCE A.Y. 2012 - 13 ONWARDS, HENCE IT COULD NOT BE TAKEN AS A GOOD COMPARABLE DURING THE YEAR UNDER CONSIDERATION. IT WAS ALSO AVERRED BY THE LD. D.R THAT AS THE REVENUE OF THE AFOREMENTIONED COMPANY VIZ. IDC INDIA LTD. HAD DRASTICALLY FALLEN IN A.Y. 2012 - 13 AS IN COMPARISON TO THE PREVIOUS YEAR S , THUS APPLYING THE TURNOVER FILTER OF 1/10 TO 10 TIMES THE SAID COMPANY OUGHT TO BE REJECTED AS A COMPARABLE. LASTLY, THE LD. D.R IN ORDER TO SUPPORT HIS CONTENTION THAT IDC ( INDIA ) LTD. WAS NOT A GOOD COMPARABLE , SUBMITTED THAT THE SAME COULD SAFELY BE GATHERED FROM THE FACT THAT THE ASSESSE E ITSELF HAD NOT SELECTED THE SAID COMPANY AS A COMPARABLE IN THE IMMEDIA TELY SUCCEEDING YEAR I.E A.Y. 2013 - - 14. 1 3 . THE LD. D.R FURTHER ADVERTING TO THE EXCLUSION OF ICRA MANAGEMENT CONSULTING SERVICES LTD. FROM THE FINAL LIST OF COMPARABLES , SUBMITTED THAT AS THE SAME WAS NOT FUNCTIONAL LY COMPARABLE, HENCE THE LOWER AUTHORIT IES HAD RIGHTLY DECLINED TO INCLUDE THE SAME IN THE FINAL LIST OF COMPARABLES. IT WAS SUBMITTED BY THE LD. D.R THAT IN THE CASE OF THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. THE AVERAGE SALARY PER EMPLOYEE WAS IN THE RANGE OF RS.10 TO 25 LACS PER YEAR AS AGAINST THE AVERAGE SALARY OF RS.243 LACS PER ANNUM IN THE CASE OF THE ASSESSEE. THE LD. D.R TAKING SUPPORT OF THE LOW EMPLOYEE REMUNERATION IN THE CASE OF THE AFOREMENTIONED COMPANY SUBMITTED THAT THE SAME CLEARLY REVEALED P A G E | 13 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) LOW VALUE ADDITION IN THE FUNCTIONS PERFORMED BY ITS EMPLOYEE S . FURTHER, IT WAS SUBMITTED BY THE LD. D.R THAT THERE WAS SUBSTANTIAL DIFFERENCE IN EMPLOYEE COST TO TOTAL COST DURING THE YEAR I.E 82% IN THE CASE OF THE ASSESSEE AS COMPARE D TO 50% IN THE CASE OF ICRA MANAGEMENT CONSULTING SERVICES LTD. IT WAS FURTHER SUBMITTED BY THE LD. D.R. THAT UNLIKE THE ASSESSEE AS THERE WAS SUBSTANTIAL SUB - CONTRACTING OF 24% WORK BY ICRA MANAGEMENT CONSULTING SERVICES LTD. DURING THE YEAR, THUS T HE SAME CLEARLY REVEALED ITS DIFFERENT BUSINESS MOD E L AS IN COMPARISON TO THAT OF THE ASSESSEE. APART THEREFROM, IT WAS AVERRED BY THE LD. A.R THAT AS IN THE CASE OF THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. THERE WERE FLUCTUATING PROFITS DURING THE PERIOD A.Y. 2007 - 08 TO A.Y. 2012 - 13 WHILE FOR IN THE CASE OF THE ASSESSEE THERE WERE STABLE PROFIT MARGIN S , THUS THE SAID COMPANY COULD NOT HAVE BEEN FEASIBLY TAKEN AS A GOOD COMPARABLE FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION . FURTHER, THE LD. D.R. SU BMITTED THAT AS THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD LOW EXPORT EARNING S OF 9.3%, HENCE THE SAME FAILED THE EXPORT TURNOVER FILTER OF 75% AND THUS COULD NOT HAVE BEEN SELECTED AS A COMPARABLE. THE LD. D.R ALSO SUBMITTED THAT AS THE AFOREMENTIONED COMPANY UNLIKE THE ASSESSEE HAD R&D FUNCTIONS AND OWNED A ND DEVELOPED INTANGIBLE S (I.E IMAC S RISK SCORER AND IMACS C - CUBE SOFTWARE) , THUS ON THE SAID GROUND ALSO THE SAME WAS LIABLE TO BE REJECTED AS A COMPARABLE. IT WAS ALSO THE CLAIM OF THE LD. D.R THAT THE AFOREMENTIONED COMPANY WAS SUBSTANTIALLY AT A FUNCTIONAL VARIANCE AS IN COMPARISON TO T HE ASSESSEE. ON THE BASIS OF HIS AFORESAID CONTENTION IT WAS AVERRED BY THE LD. D.R THAT THE LOWER AUTHORITIES HAD RIGHTLY REJECTED ICRA MANAGEMENT CONSULTING SERVICES LTD. FROM THE FINAL LIST OF COMPARABLES. P A G E | 14 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 1 4 . INSOFAR, EXCLUSION OF M ECKLAI F INANCIAL S ER VICES LTD. BY THE TPO/DRP FROM THE FINAL LIST OF COMPARABLES WAS CONCERNED , IT WAS SUBMITTED BY THE LD. D.R THAT AS THE FAR OF THE SAID COMPANY WAS NOT COMPARABLE, HENCE THE SAME NOT BEING A VALID COMPARABLE IN THE CASE OF THE ASSESSEE WHICH WAS PROVIDING INVESTMENT ADVISORY WAS RIGHTLY EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 1 5 . THE LD. A .R REBUTTED THE AFORESAID CONTENTIONS ADVANCED BY THE REVENUE. IT WAS SUBMITTED BY THE LD. A.R THAT THE CONTENTION OF THE REVENUE THAT FUNCTIONS OF IDC ( INDIA ) LTD. HAD CHANGED SUBSEQUENT TO 28.02.2011 WAS ABSOLUTELY MISCONCEIVED AND GROSSLY INCORRECT. IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION IT WAS SUB MITTED BY THE LD. A.R THAT A PERUSAL OF THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY FOR A.Y. 2007 - 08 AND A.Y. 2012 - 13 REVEALED THAT THE COMPANY IN BOTH THE YEAR S WAS ENGAGED IN RESEARCH AND SURVEY SERVICES. ON THE BASIS OF HIS AFORESAID CONTENTIONS I T WAS THE CLAIM OF THE LD. A.R THAT THE FUNCTIONAL PROFILE OF IDC ( INDIA ) LD. (NOW KNOWN AS CYBER MEDIA RESEARCH LIMITED) HAD NOT WITNESSED ANY CHANGE FROM A.Y. 2007 - 08 TILL A.Y. 2012 - 13. IT WAS THE CONTENTION OF THE LD. A.R THAT THOUGH THE NAME OF IDC ( INDIA ) LTD. WAS CHANGED TO CYBER MEDIA RESEARCH LTD. W.E.F 28.0 2.2011 , HOWEVER NO MATERIAL HA D BEEN BROUGHT ON RECORD BY THE REVENUE TO DEMONSTRATE THAT THERE WAS ANY CHAN GE IN THE FUNCTIONAL PROFILE OF CYBER MEDIA RESEARCH LTD. IT WAS AVERRED BY THE LD. A .R THAT NOW WHEN THERE WAS NO CHANGE IN THE FUNCTIONAL PROFILE OF CYBER MEDIA RESEARCH LTD , THEREFORE, THE ORDER OF THE TRIBUNAL PASSED IN CASE OF THE ASSESSEE FOR A.Y. 2007 - 08 ACCEPTING THE AFORESAID COMPANY VIZ. IDC INDIA LTD. AS A COMPARABLE, WHICH THER EAFTER WAS APPROVED BY THE HONBLE HIGH COURT OF BOMBAY WAS TO BE FOLLOWED. INSOFAR, THE RELIANCE PLACE BY THE LD. D.R ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ONWARD TECHNOLOGIES LTD. VS. DCIT (OSD), RANGE - 8(1), MUMBAI (ITA NO. 7985/MUM/2010; DATED P A G E | 15 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 30. 04.2013) , IT WAS SUBMITTED BY THE LD. A.R THAT IN THE SAID CASE THE TRIBUNAL HAD DEVIATED FROM THE POSITION THAT WAS ADOPTED BY THE TPO IN THE EARLIER YEARS FOR THE REASON THAT THE SAID VIEW WAS FOUND TO BE EXPLICITLY AGAINST THE STATUTORY PROVISION. FURTH ER, THE LD. A.R OBJECTED TO THE SEEKING OF THE APPLICATION OF EMPLOYEE COST FILTER BY THE REVENUE IN THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE TRIBUNAL. IT WAS AVERRED BY THE LD. A.R THAT A NEW FILTER CANNOT BE SOUGHT TO BE APPLIED IN THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE TRIBUNAL. OBJECTING TO THE APPLICATION OF THE EXPORT TURNOVER FILTER BY THE TPO FOR REJECTING THE COMPARABLES SELECTED BY THE ASSESSEE IN ITS TP STUDY REPORT, IT WAS SUBMITTED BY THE LD. A.R THAT AS RI GHTLY OBSERVED BY THE DRP, AS THE SERVICES WERE RENDERED BY THE ASSESSEE FOR THE AE IN INDIA AND THE INVESTMENTS WERE ALSO TO BE MADE IN INDIA, THUS THE EXPORT TURNOVER FILTER WAS NOT RELEVANT IN ITS CASE. THE LD. A.R ADVERTING TO THE CONTENTION ADVANCED B Y THE REVENUE THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. WAS INTO PERSISTENT LOSS MAKING, SUBMITTED THAT THE SAID VIEW HAD BEEN ARRIVED BY THE LD. D.R ON THE BASIS OF THE DATA OF THE SAID COMPARABLE FOR THE SUBSEQUENT YEAR. IT WAS AVERRED BY THE LD. A.R THAT AS PER THE PROVISO TO RULE 10B (4) FOR COMPARABILITY PURPOSE THE DATA FOR THE CURRENT YEAR AND THE PREVIOUS TWO FINANCIAL YEAR S ONLY CAN BE CONSIDERED. ON THE BASIS OF THE AFORESAID SUBMISSIONS IT WAS THE CLAIM OF THE LD. A.R THAT IN ORDER TO DECIDE WHETHER A COMPANY IS PERSISTENTLY LOSS MAKING THE DATA OF THE SUBSEQUENT YEARS CANNOT BE LOOKED INTO . APART THEREFROM , IT WAS SUBMITTED BY HIM THAT AS IDC ( INDIA ) LTD. WAS EARNING PROFITS IN THE PRECEDING TWO YEARS AND HAD SUFFERED LOSS ONLY DURING THE YEAR UNDER CONSIDERATION , THUS IT COULD NOT BE CHARACTERISED AS A PERSISTENT LOSS MAKING COMPANY . THE LD. A.R IN ORDER TO DRIVE HOME HIS CONTENTION THAT DATA FOR SUB SEQUENT YEARS CANNOT BE USED FOR THE PURPOSE OF COMPARABILITY, THEREIN RELIED ON THE ORDER OF THE ITAT, MUMBAI IN THE P A G E | 16 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) CASE OF VODA FO NE INDIA SERVICES (P.) LTD. VS. DCIT (2014) 146 ITD 78 (MUM) . IT WAS SUBMITTED BY THE LD. D.R THAT A SIMILAR VIEW HAD ALSO B EEN TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. GOLDMAN SACH S (INDIA) SECURITIES PVT. LTD. (2016) 240 TAXMANN 736 (BOM) , WHEREIN THE CONTENTION OF THE REVENUE THAT A COMPANY HAS TO BE REJECTED AS A COMPARABLE IF IT WAS SUFFERING LOSS ES IN THE SUBSEQUENT YEARS WAS REJECTED BY THE HIGH COURT AND THE APPEAL OF THE REVENUE WAS DISMISSED. IT WAS SUBMITTED BY THE LD. A.R THAT AS IDC ( INDIA ) LTD. HAD INCURRED LOSS ONLY IN THE CURRENT YEAR AND NOT IN THE PREVIOUS TWO YEARS, THUS IT COULD NOT HA VE BEEN REJECTED AS A COMPARABLE ON THE GROUND THAT IT WAS A PERSISTENT LOSS MAKING COMPANY. THE LD. A.R REBUTTED THE CONTENTION ADVANCED BY THE REVENUE THAT CYBER MEDIA RESEARCH LTD [ EARLIER KNOWN AS IDC ( INDIA ) LTD. ) WAS NOT A GOOD COMPARABLE COULD SAFEL Y BE GATHERED FROM THE FACT THAT THE ASSESSEE HAD NOT SELECTED IT AS A COMPARABLE IN THE IMMEDIATELY SUCCEEDING YEAR VIZ. 2013 - 14 . IT WAS SUBMITTED BY THE LD. A.R THAT THE SAID OBSERVATIONS OF THE REVENUE WERE BASED ON MISCONCEIVED FACTS AND SELF SUITING P REMATURE OBSERVATIONS . IT WAS SUBMITTED BY THE LD. A.R THAT AS CYBER MEDIA RESEARCH LTD HAD FROM A.Y. 2013 - 14 WITNESSED A CHANGE IN ITS BUSINESS , THEREFORE, FOR THE SAID REASON THE ASSESSEE HAD NOT SELECTED IT AS A COMPARABLE IN A.Y. 2013 - 14. 1 6 . THE LD. A.R REBUTTING THE CONTENTIONS ADVANCED BY THE REVENUE AS REGARDS THE SELECTION OF MECKLAI FINANCIAL SERVICES LTD. AS A COMPARABLE BY THE ASSESSEE , SUBMITTED THAT THE REVENUE ITSELF HAD BEEN USING THE AFOREMENTIONED COMPANY VIZ. MECKLAI FINANCIAL SERVICES LTD. AS A COMPARABLE IN THE CASE OF OTHER ASSESSES PROVIDING INVESTMENT ADVISORY SERVICES. P A G E | 17 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 1 7 . THE LD. A.R REBUTTING THE CONTENTIONS ADVANCED BY T HE LD. D.R IN FOR EXCLUSION OF ICRA MANAGEMENT CONSULTING SERVICES LTD. FROM THE FINAL LIST OF COMPARABLES , SUBMITTED THAT THE LATTER HAD F A ILED TO APPRECIATE THAT THE FUNCTIONAL PROFILE OF THE SAID COMPANY WAS SIMILAR TO THAT OF THE ASSESSEE COMPANY. INSO FAR, THE APPLICATION OF EMPLOYEE COST FILTER BY THE REVENUE WAS CONCERNED , IT WAS SUBMITTED BY THE LD. A.R THAT A NEW FILTER CANNOT BE INTRODUCED AT THE STAGE OF THE APPELLATE PROCEEDINGS. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT MERELY BECAUS E THE VALUE OF EMPLOYEE COST WAS HIGH WOULD NOT MEAN THAT THE FUNCTIONS PERFORMED BY THEM WERE BOUND TO BE DIFFERENTLY PLACED. INTERESTINGLY, IT WAS SUBMITTED BY THE LD. A.R THAT THE PERCENTAGE OF EMPLOYEE COST TO TOTAL COST OF THE COMPANY WHICH WAS SELECT ED BY THE TPO AS A COMPARABLE VIZ. LADDERUP CORPORATE ADVISORY WAS 53.28% WHILE FOR THAT OF ICRA MANAGEMENT CONSULTANCY LTD. WAS 50.62%. IN THE BACKDROP OF HIS AFORESAID CONTENTION IT WAS THE CLAIM OF THE ASSESSEE THAT THOUGH A NEW FILTER CANNOT BE INTRODUCED IN THE COURSE OF THE APPELLATE PROCEEDINGS, HOWEVER FOR APPLYING A FILTER OF EMPLOYEE COST A SPECIFIC PERCENTAGE HAS TO BE UNIFORMLY APPLIED ON ALL THE COMPARABLE COMPANIES AND IS NOT SUPPOSED TO BE RESTRICTED TO SELECTIVE COMPARABLES ONLY. THE LD. A.R ALSO REBUTTED THE CONTENTION OF THE REVENUE THAT ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD SUBSTANTIALLY SUB - CONTRACTED 24% OF ITS W ORK DURING THE YEAR, WHICH PROVED THAT ITS BUSINESS MOD E L WAS DIFFERENT AS IN COMPARISON TO THAT OF THE ASSESSEE . IT WAS AVERRED BY THE LD. A.R THAT AS WAS DISCERNIBLE FROM THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY VIZ. ICRA MAN AGEMENT CONSULTING SERVICES LTD. IT HAD INCURRED ONLY 11.79% OF ITS TOTAL OPERATING COST TOWARDS SUB - CONTRACT ING WORK AND NOT 24% AS STATED BY THE COUNSEL FOR THE REVENUE. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE COUNSEL FOR THE REVENUE HAD MOST ARBITRARILY COMPARED THE PERCENTAGE OF SUB - CONTRACTING COST TO THE P A G E | 18 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) TOTAL EMPLOYEE COST. IT WAS SUBMITTED BY THE LD. A.R THAT THE SUB - CONTRACTING COST WAS TO BE CALCULATED AS A PERCENTAGE TO THE TOTAL OPERATING COST AND NOT TO THE TOTAL EMPLOYEE COST. INSOFAR, RELIANCE THAT WAS PLACED BY THE COUNSEL FOR THE REVENUE ON THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT (2015) 377 ITR 0533 (DELHI) WAS CONCERNED, IT WAS SUBMITTED BY THE LD. A.R THAT THE FACTS OF THE SAID CASE WERE DISTINGUISHABLE . IT WAS SUBMITTED BY THE LD. A.R THAT IN THE AFOREMENTIONED CASE AS THE COMPARABLE THEREIN INVOLVED VIZ. VISHAL INFORMATION TECHNOLOGY LTD. HAD A PERCENTAGE OF EMPLOYEE COST TO TOTAL COST OF ONLY 4.32% W HILE FOR THE PERCENTAGE OF HI RE CHARGES, VEN DOR PAYMENTS TO TOTAL COST WAS 87%, THEREFORE, DUE TO THE SAID HUGE VARIATION IT WAS CONCLUDED BY THE HIGH COURT THAT IT COULD NOT BE ACCEPTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE BEFORE THEM. APART THEREF ROM, IT WAS SUBMITTED BY THE LD. A.R THAT UNLIKE THE COMPARABLE INVOLVED IN THE CASE OF RAMP G REEN SOLUTIONS PVT. LTD. (SUPRA) WHEREIN THE PERCENTAGE OF SUB - CONTRACTING COST TO TOTAL COST WAS ONLY 11.7 9 %, THE PERCENTAGE OF EMPLOYEE COST TO TOTAL COST OF ICR A MANAGEMENT CONSULTING SERVICES LTD. WAS 50.62%. IT WAS THUS SUBMITTED BY THE LD. A.R. THAT AS THE PERCENTAGE OF EMPLOYEE COST WAS SUBSTANTIALLY HIGH IN THE CASE OF THE AFOREMENTIONED COMPARABLE VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. , HENCE NO ADVE RSE INFERENCES COULD VALIDLY BE DRAWN BY TAKING SUPPORT OF THE AFOREMENTIONED JUDICIAL PRONOUNCEMENT IN THE CASE OF RAMP G REEN SOLUTIONS PVT. LTD. ( S UPRA). INSOFAR, SUPPORT WAS DRAWN BY THE COUNSEL FOR THE REVENUE ON THE BASIS OF THE EXPORT TURNOVER FILTER THAT WAS APPLIED BY THE TPO FOR JUSTIFYING EXCLUSION OF THE AFOREMENTIONED COMPANY SAME FROM THE FINAL LIST OF COMPARABLES, IT WAS SUBMITTED BY THE LD. A.R THAT AS OBSERVED BY THE D.RP AS THE SERVICES WERE RENDERED BY THE ASSESSEE FOR THE A . E IN INDIA AND THE INVESTMENTS WERE ALSO TO P A G E | 19 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) BE MADE IN INDIA, THEREFORE, THE EXPORT FILTER WAS NOT RELEVANT IN ITS CASE. FURTHER, THE LD. A.R REBUTTED THE CONTENTION OF THE COUNSEL FOR THE REVENUE THAT AS ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD FLUCTUATING PROFITS ACROSS THE YEARS I.E. FROM A.Y. 2007 - 08 TO A.Y. 2012 - 13, THUS IT COULD NOT BE HELD AS A GOOD COMPARABLE. IT WAS SUBMITTED BY THE LD. A.R THAT ADMITTEDLY IN CASE THE FLUCTUATION OF PROFITS IS DRASTIC THEN ONE HAS TO INVESTIGATE INTO ITS COMPARABILITY, HOWEV ER IN THE CASE OF THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. THERE WAS NO SUCH ABNORMAL FLUCTUATION OF MARGINS WHICH WOULD RENDER IT UNFIT FOR BEING SELECTED AS A COMPARABLE. IN ORDER TO FORTIFY HIS AFORESAID CONTENTION IT WAS SUBMITTED BY THE LD. A.R THAT FROM THE YEAR 2007 TO 2013 THE HIGHEST MARGIN OF THE AFORESAID COMPANY WAS 16.40% IN THE YEAR 2007 AND THE LOWEST WAS ( - ) 1.89% IN THE YEAR 2009. IT WAS THUS CLAIMED BY THE LD. A.R THAT AS THE AFORESAID FLUCTUATION OF P ROFITS COULD NOT BE CHARACTERISED AS ABNORMAL, HENCE ON THE SAID GROUND THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULT ING SERVICES LTD. COULD NOT JUSTIFIABLY BE REJECTED AS A COMPARABLE. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE CLAIM OF TH E REVENUE THAT AS ICRA MANAGEMENT CONSULT ING SERVICES LTD. HAD R & D FUNCTIONS AND OWNED AND DEVELOPED INTANGIBLES (I.E IMACS RISK SCORER AND I M A CS C - CUBE SOFTWARE), THUS, IT HAD A DIFFERENT BUSINESS MODEL AND COULD NOT BE INCLUDED AS COMPARABLE IN THE CA SE OF THE ASSESSEE WAS BASED ON MISCONCEIVED FACTS. IT WAS THE CONTENTION OF THE LD. A.R THAT ICRA MANAGEMENT CONSULTING SERVICES LTD. USED THE AFOREMENTIONED TOOL S (I M A CS RISK SCORER & I M A CS C - CUBE SOFTWARE) INTERNALLY TO RENDER CONSULTING AND ADVISORY SE RVICES AND DID NOT EARN ANY PRODUCT INCOME ARISING FROM USING SUCH TOOLS. IN ORDER TO FORTIFY HIS AFORESAID CLAIM THE LD. A.R DREW OUR ATTENTION TO THE A NNUAL REPORT OF THE SAID COMPANY. INSOFAR, THE DIVERSE CONSULTATION SERVICES THAT WERE PROVIDED BY TH E P A G E | 20 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) AFOREMENTIONED COMPANY AS OBSERVED BY THE DRP AND TAKEN SUPPORT OF BY THE COUNSEL FOR THE REVENUE FOR JUSTIFYING REJECTION OF ICRA MANAGEMENT CONSULTING SERVICES LTD. AS A COMPARABLE , IT WAS SUBMITTED BY THE LD. A.R THAT IN TNMM BROAD FUNCTIONALITY HAS TO BE CONSIDERED. IT WAS SUBMITTED BY THE LD. A.R THAT AS ADMITTED BY THE TPO THAT THERE WERE VERY FEW COMPARABLES COMPANIES IN THE INVESTMENT ADVISORY SECTOR, HENCE NON - AVAILABILITY OF COMPARABLES COMPANIES NECESSITATE D TO BROADEN THE S EARCH FOR THEM. ON THE BASIS OF HIS AFORESAID CONTENTION IT WAS SUBMITTED BY THE LD. A.R. THAT AS THE FUNCTIONS UNDERTAKEN BY THE AFORESAID COMPARABLE COMPANY AND THE ASSESSEE REMAINED THE SAME, HENCE THE FUNCTIONAL SIMILARITY WITH THE ASSESSEE STOOD DULLY ESTABLISHED. 18 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE IS RENDERING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES TO ITS PARENT/HOLDING COMPANY, I.E CARLYLE ASIA INVESTMENT ADVISORS LTD., HONG KO NG. THE SERVICES OFFERED BY THE ASSESSE E ARE IN THE NATURE OF IDENTIFYING POTENTIAL INVESTMENT OPPORTUNITIES IN INDIA FOR ITS GROUP. DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAD REPORTED THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS AE IN ITS FORM 3CEB : SR. NO. NATURE OF TRANSACTION AMOUNT OF TRANSACTION (INR) METHOD USED BY ASSESSEE TO DETERMINE ALP AY. 2012 - 13 A.Y. 2012 - 13 1 PROVISION OF INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES 57,12,61,546 TRANSACTIONAL NET MARGIN METHOD (TNMM) P A G E | 21 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) T HE ASSESSEE HAD USED TNMM ANALYSIS FOR COMPUTING THE ALP OF THE INVESTMENT ADVISORY SERVICES PROVIDED TO ITS AE DURING THE YEAR . THE PROFIT LEVEL INDICATOR (PLI) USED BY THE ASSESSEE WAS OPERATING PRO FITS TO OPERATING COST. THE ASSESSES MARGIN WAS 15% AND THE ARITHMETIC MEAN OF THE COMPARABLES SELECTED BY IT IN THE TP STUDY REPORT WAS COMPUTED AT 9.33%. ON THE BASIS OF THE AFORESAID ANALYSIS THE ASS ESSEE HAD CONCLUDED THAT THE INTERNATIONAL TRANSACTIONS WITH ITS AE WERE AT ARMS LENGTH. 19 . WE FIND THAT OUR INDULGENCE HAS BEEN SOUGHT BY THE ASSESSEE IN THE PRESENT APPEAL FOR ADJUDICATING AS TO WHETHER THE A.O/ TPO ARE RIGHT IN LAW AND FACTS OF THE CAS E IN MAKING TRANSFER PRICING ADJUSTMENTS OF RS. 11,61,82,943/ - IN RESPECT OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE LD. A.R IN THE COURSE OF HEARING OF THE APPEAL HAD FOCUSSED ON THREE ISSUES VIZ. (I). THAT AS TO WHETHER THE TPO/DRP WERE RIGHT IN EXCLUDING THE COMPARABLES SELECTED BY THE ASSESSEE IN ITS TP STUDY REPORT FOR BENCHMARKING ITS NON BINDING INVESTMENTS ADVISORY SERVICES RENDERED TO ITS AE; (VI) THAT AS TO WHETHER THE COMPANY VIZ. L ADDER UP CORPORATE ADVISORY PVT. LTD. SELECTED AS A COMPARABLE BY THE TPO IN THE COURSE OF THE REMAND PROCEEDINGS AND ACCEPTED BY THE DRP HAD A FUNCTIONAL PROFILE SIMILAR TO THAT OF THE ASSESSEE ; AND (III). THAT AS TO WHETHER THE TPO/DRP ARE JUSTIFIED IN NOT GRANT ING THE BENEFIT OF ECONOMIC/RISK ADJUSTMENTS TO THE ASSESSEE . 2 0 . WE SHALL FIRST ADVERT TO THE THREE COMPANIES WHICH WERE SELECTED BY THE ASSESSEE AS COMPARABLE S FOR BENCHMARKING THE ALP OF ITS INTERNATIONAL TRANSACTIONS , BUT WERE REJECTED BY THE LOWER AU THORITIES VIZ. (I) IDC INDIA LTD; (II) ICRA MANAGEMENT CONSULTING SERVICES LTD; AND (III) MECKLAI FINANCIAL SERVICES LTD , AS UNDER: P A G E | 22 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) (A). IDC ( INDIA ) LTD. WE FIND THAT IT IS A MATTER OF RECORD THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. WAS HELD AS A GOOD COMPARABLE BY THE TRIBUNAL IN THE ASSESSES OWN CASE FOR A.Y 2007 - 08 I.E CARLYLE INDIA ADVISORS PVT. LTD. VS. ACIT (ITA NO. 2901/MUM/2011; DATED 04.04.2012) . THE AFORESAID ORDER OF THE TRIBUNAL WAS THEREAFTER ON AN APPEAL BY THE REVENUE UPHELD BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT - 10, MUMBAI VS. M/S CARLYLE INDIA ADVISORS PVT. LTD . [ITA ( L ) NO. 1286 OF 2012, DATED 22.02.2013] . IN OUR CONSIDERED VIEW WHERE A PARTY HAS BEEN HELD TO BE A GOOD COMPARABLE IN THE PRECEDING YEARS, THE SAME IN THE ABSENCE OF ANY CHANGE IN THE FUNCTIONAL PROFILE OR FOR OTHER JUSTIFIABLE REASON CANNOT BE WHIMSICALLY DECLINED BY THE REVENUE TO BE ACCEPTED AS A COMPARABLE IN A SUCCEEDING YEAR. WE HAVE DELIBERATED AT LEN GTH ON THE ISSUE UNDER CONSIDERATION AND ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CONTENTION ADVANCED BY THE LD. D.R THAT THE FUNCTIONAL PROFILE OF THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. DURING THE YEAR UNDER CONSIDERATION I.E A.Y 201 2 - 13 HAD CHANGE D AS AGAINST THAT OF A.Y. 2007 - 08. W E FIND THAT THERE IS NEITHER ANY MATERIAL AVAILABLE ON THE RECORD OF THE LOWER AUTHORITIES WHICH WOULD REVEAL THAT THERE HAD BEEN ANY CHANGE IN THE FUNCTIONAL PROFILE OF IDC ( INDIA ) LTD. DURING THE YEAR UNDER CONSIDERATION I.E . A.Y. 2012 - 1 3 AS IN COMPARISON TO A.Y. 2007 - 08, NOR ANY SUCH MATERIAL HAS BEEN PLACED ON OUR RECORD BY THE LD. D.R. TO SUBSTANTIATE HIS SAID CLAIM . RATHER, A PERUSAL OF THE ANNUAL REPORTS OF THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. FOR A.Y. 2007 - 08 AND A.Y. 2012 - 13 REVEALS THAT THE COMPANY IN BOTH OF THE SAID YEARS WAS ENGAGED IN RESEARCH AND SURVEY SERVICES. ON THE BASIS OF OUR AFORESAID DE LIBERATIONS WE ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP IN THE ABSENCE OF ANY SHIFT IN THE FUNCTIONAL PROFILE OF IDC ( INDIA ) LTD. DURING THE YEAR UNDER CONSIDERATION AS IN COMPARISON TO A.Y. 2007 - 08 , WERE THUS IN ERROR IN P A G E | 23 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) EXCLUDING THE SAME FROM THE FIN AL LIST OF COMPARABLES. INSOFAR, RELIANCE PLACED BY THE LD. D.R ON THE DECISION OF THE ITAT, MUMBAI, BENCH, K, MUMBAI IN THE CASE OF M/S ONWARD TECHNOLOGIES LTD. VS. DCIT (OSD), RANGE - 8(1), MUMBAI (ITA NO. 7985/MUM/2010; DATED 30.04.2013) TO BUTTRESS HIS CONTENTION THAT IDC ( INDIA ) LTD . WHICH WAS ACCEPTED BY THE ITAT AS A COMPARABLE IN THE ASSESSES OWN CASE FOR A.Y. 2007 - 08 HAVING BEEN RENDERED AS FUNCTIONALLY INCOMPARABLE COULD NOT BE ACCEPTED AS A COMPARABLE DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2012 - 13 IS CONCERNED , THE SAME IN OUR CONSIDERED VIEW BEING DISTINGUISHABLE ON FACTS WOULD IN NO WAY ASSIST THE CASE OF THE REVENUE. AS OBSERVED BY US HEREINABOVE, IT IS INCORRECT ON THE PART OF THE LD. D . R TO STATE THAT THERE HAS BEEN A CHANGE IN THE FUNCTIONAL PROFILE OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS AGAINST THAT A.Y. 2007 - 08 . I N THE CASE OF ONWARD TECHNOLOGIES LTD. (SUPRA) AS THE VIEW TAKEN BY THE TPO IN THE PRECEDING YEARS WAS FOUND TO BE EXPLICITLY AGAINST THE STATUTORY PROVIS IONS, THUS IT WAS FOR THE SAID REASON THAT THE TRIBUNAL HAD DECLINED TO BE GUIDED BY THE SAID EARLIER VIEW SO TAKEN BY THE TPO. IN OUR CONSIDERED VIEW AS THE FACTS OF THE CASE BEFORE US ARE CLEARLY DISTINGUISHABLE AS AGAINST THOSE INVOLVED IN THE AFOREMENT IONED CASE , THUS THE SAME WOULD IN NO WAY ASSIST THE REVENUE. INSOFAR, THE LD. D.R BY TAKING SUPPORT OF THE EMPLOYEE COST FILTER HAD TRIED TO ESTABLISH THAT THE AFOREMENTIONED COMPANY VIZ. IDC INDIA LTD. WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE IS CONC ERNED , WE ARE NOT PERSUADED TO SUBSCRIBE HIS SAID CONTENTION. IN OUR CONSIDERED VIEW AS IT IS INCORRECT TO SEEK APPLICATION OF A NEW FILTER FOR ANALYSIS OF THE COMPARABLES IN THE COURSE OF THE APPELLATE PROCEEDINGS, THUS THE SEEKING OF THE APPLICATION OF T HE EMPLOYEE COST FILTER BY THE LD. D.R HAS TO BE REJECTED ON THE SAID COUNT ITSELF . OUR AFORESAID VIEW THAT A NEW FILTER CANNOT BE APPLIED IN THE COURSE OF THE APPELLATE PROCEEDINGS IS FORTIFIED BY THE ORDER S OF THE COORDINATE BENCHES OF THE P A G E | 24 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) TRIBUNAL VIZ. (I) NES S TECHNOLOGIES (I) P. LTD. VS. DCIT (2016) 76 TAXMANN.COM 209 (MUM) ; AND (II) DIALOGIC NETWORKS (I) (P) LTD. VS. DCIT (2017) 78 TAXMANN.COM 349 (MUM ) . WE ARE ALSO NOT INCLINED TO ACCEPT THE APPLICATION OF THE EXPORT TURNOVER FILTER IN THE CASE OF THE ASSESSEE. A S OBSERVED BY THE DRP , AS THE SERVICES WERE RENDERED BY THE ASSESSEE FOR ITS AE IN INDIA IN RESPECT OF INVESTMENTS WHICH WERE TO BE MADE IN INDIA , HENCE THE EXPORT FILTER HAD NO RELEVANCE IN THE CASE OF THE ASSESSEE . WE HAVE FURTHER DELIBERA TED ON THE CONTENTION ADVANCED BY THE LD. D.R THAT AS I DC ( INDIA ) LTD. WAS A PERSISTENT LOSS MAKING COMPANY , HENCE THE SAME HAD RIGHTLY BEEN EXCLUDED FROM THE FINAL LIST OF COMPARABLES AND ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE SAME. WE FIND THAT T HE LD. D.R HAS BASED HIS AFORESAID CLAIM BY TAKING SUPPORT OF DATA OF THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD . FOR THE NEXT TWO SUCCEEDING YEARS I.E. A.Y. 2013 - 14 & A.Y. 2014 - 15. AS PER THE PROVISO TO RULE 10B(4), IN ORDER TO DECIDE THE COMPARABILI TY THE DATA FOR THE CURRENT YEAR AND THE PREVIOUS TWO FINANCIAL YEARS OF A COMPANY CAN ONLY BE CONSIDERED. WE THUS ARE OF THE CONSIDERED VIEW THAT AS THE AFORESAID OBSERVATIONS OF THE LD. D.R ARE NOT SUPPORTED BY THE MANDATE OF LAW , THUS THE SAME CANNOT BE ACCEPTED. OUR AFORESAID VIEW THAT THE DATA FOR A SUBSEQUENT CANNOT BE USED TO DECIDE COMPARABILITY FIND S SUPPORT FROM THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF VODA F ONE INDIA SERVICES (P) LTD, VS. DCIT (2014) 146 ITD 78 (MUM) . FURTHER, WE FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. GOLDMAN SACHS (I) SECURITIES PVT. LTD. (2016) 240 TAXMANN.COM 736 (BOM) NOT FINDING FAVOUR WITH THE CLAIM OF THE REVENUE THAT A COMPANY WAS TO BE REJECTED AS A COMPARABLE FOR THE REASON THAT IT WAS E AR N ING LOSS IN SUBSEQUENT YEARS HAD DISMISS ED ITS APPEAL. APART THEREFROM, ON FACTS WE FIND THAT THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. HA D SUFFERED LOSS ONLY DURING THE YEAR UNDER CONSIDERATION AND WAS A P A G E | 25 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) PROFIT MAKING COMPANY IN THE PRECEDING TW O YEARS. ON THE BASIS OF OUR AFORESAID DELIBERATIONS WE ARE OF THE CONSIDERED VIEW THAT THE COMPANY VIZ. IDC ( INDIA ) LTD. COULD NOT HAVE BEEN REJECTED AS A COMPARABLE FOR THE REASON THAT IT HAD SUFFERED A LOSS DURING THE YEAR UNDER CONSIDERATION I.E A.Y. 2 012 - 13. AS REGARDS THE TURNOVER FILTER SOUGH TO BE APPLIED BY THE LD. D.R IN THE COURSE OF THE PROCEEDINGS BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT AS OBSERVED BY US HEREINABOVE , A NEW FILTER CANNOT BE APPLIED AT THE STAGE OF THE APPELLATE PROCEEDINGS BEFORE THE TRIBUNAL. INSOFAR, THE RELIANCE PLACED BY THE LD. D.R ON THE ORDER OF THE ITAT, MUMBAI IN CASE OF JACOB ENGINEERING PVT. LTD. VS. DCIT (ITA NO. 7194/MUM/2012 ) , WE ARE OF THE CONSIDERED VIEW THAT IN THE S AID CASE THE TURNOVER FILTER WAS APPLIED BEFORE THE LOWER AUTHORITIES ITSELF AND ONLY ITS QUANTIFICATION WAS IN DISPUTE BEFORE THE TRIBUNAL. AS REGARDS THE CONTENTION OF THE LD. D.R THAT THE AFOREMENTIONED COMPANY WAS NOT A GOOD COMPARABLE IN THE CASE OF T HE ASSESSEE COULD SAFELY BE GATHERED FROM THE FACT THAT IT WAS NOT SELECTED AS A COMPARABLE BY THE ASSESSEE IN ITS TP STUDY REPORT FOR A.Y. 2013 - 14 , WE FIND THAT THE SAME AS EXPLAINED BY THE LD. A.R WAS FOR THE REASON THAT AS THE BUSINESS OF THE SAID COMPA NY HAD UNDERGONE A CHANGE FROM A.Y. 2013 - 14 , WHICH THUS HAD RENDERED IT FUNCTIONALLY IN COMPARABLE TO THE ASSESSEE , THEREFORE, IT WAS NOT SELECTED AS A COMPARABLE . APART THEREFROM, WE FIND THAT THE ISSUE THAT THE COMPANY VIZ. IDC ( INDIA ) LTD. WHICH WAS ENGA GED IN THE BUSINESS OF RESEARCH AND SURVEY SERVICE AND PRODUCTS COULD SAFELY BE TAKEN AS A COMPARABLE TO A COMPANY PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES HAD BEEN ANSWERED IN THE AFFIRMATIVE BY THE TRIBUNAL IN THE CASE OF TPG CAPITAL INDIA (P) LTD. VS. DCIT, CIRCLE - 3(3), MUMBAI (2017) 79 TAXMANN.COM 101 (MUM) . IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS , WE ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP HAD ERRED IN EXCLUDING THE AFOREMENTIONED COMPANY VIZ. IDC ( INDIA ) LTD. P A G E | 26 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) FROM THE FINAL LIST OF COMPARABLES. WE THUS DIRECT THE AO/TPO TO REWORK THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AFTER INCLUDING IDC ( INDIA ) LTD. AS A COMPARABLE IN THE FINAL LIST OF COMPARABLES. (B). MECKLAI FINANCIAL AND COMMERCIAL SERVICES LTD. WE SHALL NOW ADVERT TO THE EXCLUSION OF MECKLAI FINANCIAL AND COMMERCIAL SERVICES LTD. THAT WAS SELECTED BY THE ASSESSEE AS A COMPARABLE IN ITS TP STUDY REPORT FROM THE FINAL LIST OF COMPARABLES BY THE TPO/DRP. WE FIND THAT THE AFOREMENTIONED COMPANY VIZ. MECKLAI FINANCIAL AND COMMERCIAL SERVICES LTD. IS ENGAGED IN RENDERING FOREX ADVISORY SERVICES AND EARN S INCOME FROM CONSULTANCY SERVICES . IN OUR CONSIDERED VI EW A FOREX ADVISOR UNDERTAKES MULTIPLE FUNCTIONS VIZ. (I) RESEARCH; (II) ANALYSING; (III) PRESENT ING INFORMATION BY WAY OF REPORT; (IV) MAKING RECOMMENDATIONS BASED ON THE ANALYSIS AND REPORT; AND (V) MONITORING THE SOLUTIONS/ADVICE GIVEN. AS THE AFOREMENTIONED SERVICES RENDERED BY THE AFOREMENTIONED COMPANY VIZ. MECKLAI FINANCIAL AND COMMERCIAL SERVICES LTD. IN THE COURSE OF ITS FOREX ADVISORY SERVICES ARE SIMILAR TO THOSE RENDERED BY AN ASSESSE E ENGAGED I N THE BUSINESS OF PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES , HENCE THE SAME IN OUR CONSIDERED VIEW CAN SAFELY BE ADOPTED AS A COMPARA BLE IN THE CASE OF THE ASSESSEE. OUR AFORESAID VIEW STANDS FORTIFIED FROM THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF AGM KNOWLEDGE ADVISORS (P) LTD. VS. DCIT (2016) 70 TAXMANN.COM WHEREIN THE AFOREMENTIONED COMPANY VIZ. MECKLAI FINANCIAL AND COMMERCIAL S ERVICES LTD. WAS ACCEPTED AS A VALID COMPARABLE BY THE TPO IN THE CASE OF THE SAID ASSESSEE WHICH WAS PROVIDING INVESTMENT ADVISORY SERVICES . ON THE BASIS OF OUR AFORESAID DELIBERATIONS, WE ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP HAD ERRED IN EXCLUDING THE AFOREMENTIONED COMPANY VIZ. MECKLAI FINANCIAL AND COMMERCIAL P A G E | 27 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) SERVICES LTD. AS A COMPARABLE FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS DIRECT THE A.O/TPO TO REWORK THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AFTER INCLUDING THE AFOREMENTIONED COMPANY I.E. MECKLAI FINANCIAL AND COMMERCIAL SERVICES LTD. IN THE FINAL LIST OF COMPARABLE S . (C). ICRA MANAGEMENT CONSULTING SERVICES LTD. WE SHALL NOW ADVERT TO THE VALIDITY OF THE ORDERS OF THE TPO/DRP WHEREIN THEY HAD EXCLUDED ICRA MANAGEMENT CONSULTING SERVICES LTD. FROM THE FINAL LIST OF THE COMPARABLES. WE FIND THAT THE A FOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD . IS INTO ADVISORY AND MANA GEMENT CONSULTANCY, WHEREAS THE ASSESSEE IS INTO PROVIDING INVESTMENT ADVISORY SERVICES. IN OUR CONSIDERED VIEW THAT BOTH IN INVESTMENT ADVISORY AS WELL AS IN MANAGEMENT CONSULTANCY SOME COMMON FUNCTIONS ARE INVOLVED VIZ. (I) RESEARCH; (II) ANALYSING; (III ) REPORT ING ; (IV) MAKING RECOMMENDATIONS BASED ON THE ANALYSING AND REPORT; AND (V) MONITORING THE SOLUTIONS/ADVICE GIVEN. INSOFAR, THE LD. D.R HAD BY TAKING SUPPORT OF THE EMPLOYEE COST FILTER TRIED TO DEMONSTRATE THAT THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE, WE ARE AFRAID THAT HIS SAID CONTENTION CANNOT BE ACCEPTED AT THIS STAGE. AS OBSERVED BY US HEREINABOVE, IT IS INCORRECT ON THE PART OF THE LD. D.R TO SEEK APPLICATION OF A NEW FILTER FOR ANALYSIS OF THE COMPARABLES IN THE COURSE OF THE APPELLATE PROCEEDINGS. AC C ORDINGLY, IN CASE IF A FILTER LIKE PERCENTAGE OF EMPLOYEE COST IS APPLIED ONLY TO ONE OR TWO COMPANIES AND NOT TO THE ENTIRE SET OF COMPANIES IN THE SEARCH PROCESS, THEN THE SAME IS BOUND TO LEAD TO DISTORTED RESULTS. WE MAY HEREIN REITERATE THAT OUR VIEW THAT A NEW FILTER CANN OT BE INTRODUCED IN THE COURSE OF THE APPELLATE PROCEEDINGS IS SUPPORTED BY THE ORDERS OF P A G E | 28 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) THE TRIBUNAL IN THE CASE OF VIZ. (I) NESS TECHNOLOGIES (I) PVT. LTD. VS. DCIT (2016) 76 TAXMANN.COM 289 (MUM); AND (II) DIALOGIC NETWORKS (I) PVT. LTD. VS. DCIT (201 7) 78 TAXMANN.COM 349 (MUM). WE THUS NOT BEING PERSUADED TO SUBSCRIBE TO THE CONTENTIONS ADVANCED BY THE LD. D.R IN THE BACKDROP OF THE EMPLOYEE COST FILTER, DECLINE TO ACCEPT THE SAME. WE HAVE DELIBERATED ON THE CONTENTIONS ADVANCED BY THE LD. D.R THAT AS THE AFOREMENTIONED COMPANY I.E. ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD INCURRED SUBSTANTIAL EXPENSES ON SUB - CONTRACTING OF WORK DURING THE YEAR, THUS THE SAME AS PER HIM CLEARLY REVEALED A DIFFERENCE IN THE BUSINESS MOD E L AS AGAINST THAT OF THE ASSE SSEE . FURTHER, THE LD. D.R HAD IN SUPPORT OF HIS AFORESAID CONTENTION RELIED ON THE ORDER OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. VS. CIT (2015) 377 ITR 0533 (DELHI) , WHEREIN IT WAS OBSERVED BY THE HIGH COURT THA T WHERE THE EXPENDITURE INCURRED BY THE COMPANY ON EMPLOYMENT COST DURING THE RELEVANT PERIOD WAS SUBSTANTIALLY LOW FOR THE REASON THAT IT HAD OUTSOURCED MOST OF ITS WORK, THE SAME FOR THE SAID REASON COULD NOT BE SELECTED AS A COMPARABLE AS IT FOLLOWED A DIFFERENT BUSINESS MOD E L. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID CONTENTIONS OF THE LD. D.R AND ARE UNABLE TO ACCEPT THE SAME. INSOFAR, THE CONTENTION OF THE LD. D.R THAT THE AFOREMENTIONED COMPANY I.E. ICRA MANAGEMENT CONSULTING SERVICE S LTD. HAD OUTSOURCED MOST OF ITS WORK, THEREFORE, THE SAME COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IS CONCERNED , THE SAME IN OUR CONSIDERED VIEW IS BASED ON MISCONCEIVED FACTS. AS SUBMITTED B Y THE LD. A.R BEFORE US THE AFOREMENTIONED COMPANY I.E ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD INCURRED SUB - CONTRACTING EXPENSES OF ONLY 11.79% OF THE TOTAL OPERATING COST AND NOT 24% AS CLAIMED BY THE LD. D.R. R ATHER, WE ARE IN AGREEMENT WITH THE LD. A.R THAT THE COUNSEL FOR THE REVENUE INSTEAD OF WORKING OUT THE SUB - CONTRACTING COST AS A PERCENTAGE TO THE TOTAL P A G E | 29 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) OPERATING COST , HAD HOWEVER MOST ARBITRARILY COMPUTED THE SAME IN THE BACKDROP OF THE TOTAL EMPLOYEE COST. WE ARE ALSO PERSUADED TO SUBSCRIBE TO THE CONTENTION OF THE LD. A.R THAT AS IN CASE OF RAMP G REEN SOLUTIONS PVT. LTD. ( S UPRA) THERE WAS HUGE VARIATION BETWEEN THE PERCENTAGE OF EMPLOYEE COST TO TOTAL COST OF 4.32% AS AGAINST THE PERC ENTAGE OF HI RE CHARGES, VENDOR PAYMENTS TO TOTAL COST OF 87%, THUS IT WAS DUE TO THE SAID HUGE VARIATION THAT THE H IGH COURT HAD OBSERVED THAT AS THE SAID COMPANY WAS INTO A DIFFERENT BUSINESS MOD E L , HENCE IT COULD NOT BE SELECTED AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE BEFORE THEM. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT AS IN THE CASE OF THE AFOREMENTIONED COMPANY I.E. ICRA MANAGEMENT CONSULTING S ERVICES LTD. THE PERCENTAGE OF THE EMPLOYEE COST TO TOTAL COST IS 50.62% WHILE FOR THE PERCENTAGE OF SUB - CONTRACTING COST TO TOTAL COST IS ONLY 11.79%, THUS KEEPING IN VIEW THE SUBSTANTIAL HIGH PERCENTAGE OF EMPLOYEE COST NO ADVERSE INFERENCE S ON THE SAID COUNT ARE LIABLE TO BE DRAWN AS REGARDS ITS SELECTION AS A COMPARABLE . APART THEREFROM, WE FIND THAT AS PER THE REVISED SA FE HARBOUR RULES 80% OF THE SUB - CONTRACTING COST IS TO BE CONSIDERED AS THE EMPLOYEE COST, THEREFORE, THE REVISED RATIO OF EMPLOYEE COST TO TOTAL COST IN THE AFOREMENTIONED COMPARABLE I.E ICRA MANAGEMENT CONSULT ING SERV IC ES LTD. WILL BE 60% (APPROX). HENCE , ON THE BASIS OF THE AFOREMENTIONED REVISED RATIO OF EMPLOYEE COST TO TOTAL COST THE AFOREMENTIONED COMPANY I.E ICRA MANAGEMENT CONSULT ING SERVICES LTD. CAN SAFELY BE SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE. AS REGARDS THE CONTENTION OF THE L D. D.R THAT THE AFOREMENTIONED COMPANY I.E ICRA MANAGEMENT CONSULT ING SERVICES LTD. HAD LOW EXPORTS EARNING WHICH JUSTIFIED THE EXCLUSION OF THE SAME FROM THE FINAL LIST OF THE COMPARABLES, THE SAME DOES NOT FIND FAVOUR WITH US. WE ARE OF THE CONSIDERED VI EW THAT AS OBSERVED BY THE DRP THAT AS THE P A G E | 30 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) SERVICES WERE BEING RENDERED BY THE ASSESSEE TO ITS AE IN INDIA AND THE INVESTMENTS ALSO WERE TO BE MADE IN INDIA, THUS THE EXPORT FILTER WOULD NOT BE RELEVANT IN ITS CASE. WE THUS IN TERMS OF OUR AFORESAID OBSERV ATIONS DECLINE TO ACCEPT THE AFORESAID CONTENTION OF THE LD. D.R THAT AS THE ABOVEMENTIONED COMPANY I.E. ICRA MANAGEMENT CONSULT ING SERVICES LTD. HAD LOW EXPORT EARNING S , THUS THE SAME WAS JUSTIFIABLY EXCLUDED FROM THE FINAL LIST OF COMPARABLES. INSOFAR, T HE SUPPORT DRAWN BY THE LD. D.R FROM THE FACT THAT AS ICRA MANAGEMENT CONSULT ING SERVICES LTD. HAD FLUCTUATING PROFITS ACROSS THE YEAR I.E. FROM A.Y. 2007 - 08 TO 2012 - 13, THUS IT WAS NOT A GOOD COMPARABLE IS CONCERNED, THE SAME ALSO DOES NOT FIND FAVOUR WIT H US. ADMITTEDLY, IN CASE THE FLUCTUATION IS DRASTIC THEN ONE HAS TO INVESTIGATE INTO ITS COMPARABILITY. HOWEVER, WE FIND THAT IN THE CASE OF THE AFOREMENTIONED COMPANY I.E ICRA MANAGEMENT CONSULT ING SERVICES LTD. DURING THE PERIOD FALLING ACROSS THE YEARS 2007 - 08 TO 2012 - 13 THE HIGHE ST MARGIN WAS 16.40% IN THE YEAR 2007 AND THE LOWEST WAS ( - ) 1.89% IN THE YEAR 2009. IN OUR CONSIDERED VIEW THE AFORESAID FLUCTUATION OF MARGIN IN THE CASE OF THE AFOREMENTIONED COMPANY CAN BY NO MEANS BE HELD TO BE ABNORMAL WH ICH WOULD JUSTIFY THE REJECTION OF THE SAME AS A COMPARABLE IN THE CASE OF THE ASSESSEE . APART THEREFROM, NO MENTION OF ANY ABNORMALITY IN THE PROFIT MARGINS IS ALSO DISCERNIBLE ON A PERUSAL OF THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY I.E. ICRA MA NAGEMENT CONSULT ING SERVICES LTD. INSOFAR, THE RELIANCE PLACED BY THE LD. D.R ON THE 5 JUDICIAL PRONOUNCEMENTS TO BUTTRESS HIS CLAIM THAT FLUCTUATING PROFIT S WOULD JUSTIFY REJECTION OF A COMPANY AS A COMPARABLE IS CONCERNED , THE SAME IN OUR CONSIDERED VIEW BEING DIFFERENTLY PLACED ARE DISTINGUISHABLE ON FACTS. WE FIND THAT IN ALL THE CASE LAWS THAT HAVE BEEN RELIED UPON BY THE REVENUE IN SUPPORT OF ITS AFORESAID CONTENTION WERE WITNESSED BY ABNORMAL FLUCTUATION OF PROFITS , IN THE BACKDROP OF WHICH THE SAME WERE HELD AS NOT BEING A P A G E | 31 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) GOOD COMPARABLE VIZ. (I) A P T A RA TECHNOLOGIES (P) LTD. ( 2016) 72 TAXMANN.COM 352 (PUNE) [HIGHEST MARGIN: 34.71 & L OWEST MARGIN ( - ) 44.21]; (II) CUMMINS T U RBO TECHNOLOGIES LTD. (2015) 53 TAXMANN.COM 492 [ H IGHEST MARGIN: 34.71 & L OWEST MARGIN: ( - ) 69.07]; (III) P TC SOFTWARE (I NDIA ) (P) LTD. (2014) 52 TAXMANN.COM 351 (PUNE) [ H IGHEST M ARGIN: 80.15 & L OWEST MARGIN ( - ) 4.16]; (IV) ALL S CRIPTS (I NDIA ) (P) LTD. (2015) 62 TAXMANN.OCM 232 (AHD) [ H IGHEST MARGIN 80.15 & L OWEST MARGIN ( - ) 4.4 6]; AND (V) CHRYSCAPITAL INVESTMENTS ADVISORS (I NDIA ) (P) LTD. (2015) 56 TAXMANN.COM 417 (DEL) [ H IGHEST MARGIN 191.58 AND L OWEST MARGIN ( - ) 6.97]. WE THUS IN TERMS OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE LD. D.R WHE REIN HE HAD SOUGHT TO JUSTIFY THE REJECTION OF THE AFOREMENTIONED COMPANY I.E ICRA MANAGEMENT CONSULTING SERVICES LTD. AS A COMPARABLE ON ACCOUNT OF FLUCTUATING PROFITS DOES NOT MERIT ACCEPTANCE AND IS LIABLE TO BE REJECTED. AS REGARDS THE SUPPORT DRAWN BY THE LD. D.R FROM THE FACT THAT AS UNLIKE THE ASSESSEE THE AFORESAID COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD R & D FUNCTIONS AND OWNED AND DEVELOPED INTANGIBLES (I.E I M A CS RISK SCORER & I M A CS C - CUBE SOFTWARE) , THEREFORE , THE SAME WAS RIGHTLY REJECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE , W E HAVE PERUSED THE RECORDS AND ARE UNABLE TO SUBSCRIBE TO THE SAID CLAIM OF THE REVENUE. WE FIND FROM A PERUSAL OF THE A NNUAL REPORT THAT THOUGH ICRA MANAGEMENT CONSULT ING SERVI CES LTD. HAD INTERNALLY USED THE AFOREMENTIONED TOOLS (IMA CS RISK SCORERS & I M A CS C - CUBE SOFTWARE) TO RENDER CONSULTING AND ADVISORY SERVICES, HOWEVER, IT DID NOT EARN ANY PRODUCT INCOME BY USING SUCH TOOLS. WE THUS ARE OF THE CONSIDERED VIEW THAT THE AFO RESAID CONTENTION OF THE ASSESSEE TO JUSTIFY THE EXCLUSION OF ICRA MANAGEMENT CONSULTING SERVICES LTD. AS A COMPARABLE ALSO CANNOT BE ACCEPTED. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTION S ADVANCED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES AS REGARDS THE P A G E | 32 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) INCLUSION/EXCLUSION OF ICRA MANAGEMENT CONSULTING SERVICES LTD. FROM THE FINAL LIST OF THE COMPARABLES AND AFTER NECESSARY DELIBERATIONS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT AS THE SAID COMPANY I S FUNCTIONALLY SIMILAR TO THE ASSESSEE AND NO JUSTIFIABLE REASON HAD BEEN SUBMITTED BY THE REVENUE WHICH COULD PERSUADE US TO CONCLUDE OTHERWISE, THE SAME MERITS INCLUSION IN THE FINAL LIST OF THE COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. BEFORE PARTING, WE MAY HEREIN OBSERVE THAT THE TRIBUNAL IN THE CASE OF TEMASEK HOLDINGS ADVISORS (I) (P) LTD. VS. ITO (ITA NO. 1429/MUM/2017) FOR A.Y. 2012 - 13 HAD CONCLUDED T HAT ICRA MANAGEMENT CONSULTING SERVICES LTD. WAS A GOOD COMPARABLE IN THE CASE OF THE ASSESSEE BEFORE THEM WHICH WAS PROVID ING NON - BINDING INVESTMENT ADVISORY SERVICES. ON THE BASIS OF OUR AFORESAID OBSERVATIONS , WE DIRECT THE A.O/TPO TO REWORK THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESS EE COMPANY AFTER INCLUDING THE AFOREMENTIONED COMPANY I.E. ICRA MANAGEMENT CONSULTING SERVICES LTD. IN THE FINAL LIST OF COMPARABLES. 2 1 . WE SHALL NOW ADVERT TO THE MAINTAINABILITY OF THE ORDER OF THE LOWER AUTHORITIES TO THE EXTENT THEY HA D INCLUDED L ADDE RUP C ORPORATE A DVISORY PVT. LTD. AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT AS THE AFOREMENTIONED COMPANY I.E. LADDERUP CORPORATE ADVISORY PVT. LTD. IS ENGAGED IN MERCHANT BANKING AND INVESTMENT BANKING ACTIVITY, THEREFORE, THE SAME IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. INTERESTING LY, THE AFOREMENTIONED COMPANY WAS REJECTED FUNCTIONALLY BY THE TPO IN HIS REMAND REPORT I N THE ASSESS E S OWN CASE FOR THE IMMEDIATELY SUCCEEDING YEAR I.E. A.Y. 2013 - 14 FOR THE REASON THAT IT WAS CARRYING ON THE MERCHANT BANKING P A G E | 33 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) ACTIVITY. RATHER, WE FIND TH AT THE TPO WHILE REJECTING THE AFOREMENTIONED COMPANY I.E LADDERUP CORPORATE ADVISORY PVT. LTD. AS A COMPARABLE IN A.Y 2013 - 14 HAD RELIED ON THE ITAT ORDER IN THE ASSESSES OWN CASE FOR A.Y. 2007 - 08. APART THEREFROM, WE FIND THAT THE TRIBUNAL IN THE CASE OF TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD. VS. ITO, CIRCLE - 14(3)(1), MUMBAI (ITA NO. 1429/MUM/2017; DATED 03.01.2018 ) FOR A.Y. 2012 - 13 HAD AFTER NECESSARY DELIBERATIONS REJECTED THE AFOREMENTIONED COMPANY I.E. LADDERUP CORPORATE ADVISORY PVT. LTD. AS A CO MPARABLE IN THE CASE OF THE ASSESSEE WHICH WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES. WE FURTHER FIND THAT THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AVENUE ASIA ADVISORS PVT. LTD. VS. DCIT (2017) 85 TAXMANN.COM 311 (DEL) HAD REJECTED LADDER UP CORPORATE ADVISORY PVT. LTD. AS A COMPARABLE IN THE CASE OF THE ASSESSEE WHICH WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES TO ITS A . E. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS BEING OF THE CONSIDERED VIEW THAT AS TH E AFOREMENTIONED COMPANY I.E. LADDERUP CORPORATE ADVISORY PVT. LTD. WHICH WAS CARRYING ON MERCHANT BANKING AND INVESTMENT BANKING ACTIVITY WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE THAT WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES AND THUS COU LD NOT HAVE BEEN SELECTED AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD WRONGLY BEEN SELECTED AS A COMPARABLE FOR BENCHMARKING THE NON - BINDING INVESTMENT ADVISORY SERVICES PROVIDED B Y THE ASSESSEE TO ITS A . E DURING THE YEAR UNDER CONSIDERATION . OUR AFORESAID VIEW THAT A COMPANY CARRYING ON MERCHANT BANKING ACTIVITY CANNOT BE SELECTED AS A COMPARABLE IN THE CASE OF A COMPANY WHICH IS PROVIDING INVESTMENT ADVISORY SERVICES IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. GENERAL ATLANTIC PVT. LTD. (2016) 384 ITR 271 (BOM) . WE THUS IN TERMS OF OUR AFORESAID P A G E | 34 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) OBSERVATIONS DIRECT THE A.O/TPO TO EXCLUDE THE AFOREMENTIONED COMPANY I.E LADDERUP CORPORATE ADVISORY PVT. LTD. FROM THE FINAL LIST OF THE COMPARABLES AND RE COMPUTE THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 2 2 . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS DIRECT THE A.O/TPO TO RE COMPUTE THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AFTER INCLUDING/EXCLUDING THE AFOREMENTIONED COMPAN IES FROM THE FINAL LIST OF THE COMPARABLES. IN CASE THE ALP OF THE ASSESSEE IS FOUND TO BE WITHIN THE SAFE HARBOUR MARGIN OF +/ - 5% OF THE MEAN MARGIN OF THE FINAL LIST OF COMPARABLES THEN NO TP ADJUSTMENT WOULD BE CALLED FOR ITS HANDS OF THE ASSESSEE. 2 3 . THE LD. A.R HAD FURTHER SUBMITTED BEFORE US THAT THE ASSESSEE WHICH BEING A CAPTIVE ENTITY IS A LIMITED RISK BEAR ING ENTITY OPERATES IN A VIRTUALLY RISK FREE ENVIRONMENT, AS IN COMPARISON TO THE COMPARABLES SELECTED BY THE TP O /DRP WHICH ARE ENTREPRENEURS AND UNDERTAKE FULL RANGE OF ECONOMIC RISKS VIZ. MARKET RISK, PRICE RISK, PRODUCT RISK, IDLE - TIME RISK, CREDIT RISK , FOREIGN EXCHANGE FLUCTUATION RISK, TECHNOLOGY OBSOLESCENCE RISK, WARRANTY RISK ETC. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT WITH ECONOMICS GOVERNING THE COMMERCIAL WORLD MARGINS EARNED ARE A RESULT OF THREE INTERPLAYING VARIABLES VIZ. FUNCTIONS PERF ORMED, ASSETS UTILIZED AND RISKS BORNE . IT WAS FURTHER SUBMITTED BY HIM THAT HIGHER THE RISKS UNDERTAKEN HIGHER WOULD BE THE MARGINS. ON THE BASIS OF HIS AFORESAID CONTENTION S IT WAS SUBMITTED BY THE LD. A.R THAT AS THE AS SESSEE BEING A CAPTIVE ENTITY DOES NOT BEAR ANY SUBSTANTIAL ECONOMIC OR BUSINESS RISK AND EARN A VIRTUALLY GUARANTEED STABLE RETURNS, THUS ITS MARGINS CANNOT BE STRAIGHTAWAY COMPARED WITH THE AFOREMENTIONED ENTREPRENEURIAL ENTERPRISES SELECTED BY THE TPO/DRP. IT WAS THE CONTENTION OF THE L D. A.R THAT APPROPRIATE RISK ADJUSTMENTS SHOULD BE DONE TO THE RESULTS OF THE COMPARABLE P A G E | 35 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) COMPANIES TO MAKE AN EQUITABLE COMPARISON. IN SUPPORT IF HIS AFORESAID CONTENTION THE LD. A.R RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PR. CIT VS. M/S WATSON PHARMA PVT. LTD. (ITA NO. 124 OF 2016; DATED 20.06.2018) AND ORDER OF THE ITAT, BANGALORE IN THE CASE OF PHILIPS SOFTWARE CENTER PRIVATE LIMITED (2018 - TIOL - 471](BANG) . PER CONTRA, THE LD. D.R OBJECTED TO THE AFORE SAID CONTENTION S RAISED BY THE COUNSEL FOR THE ASSESSEE. 2 4 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION AND ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE COMPARABLES SELECTED BY THE TPO/DRP HAVE BEEN EXCLUDED BY US FROM THE FINAL LIST OF COMPARABLES, HENCE THE SEEKING OF RISK ADJUSTMENT BY THE ASSESSEE IN THE BACKDROP OF THE FACT THAT THE COMPARABLES SELECTED BY THE TP O /DRP UNLIKE THE ASSESSEE ARE ENTREPRENEURS AND UNDERTAKE FULL RANGE OF ECONOMIC RISKS DOES NO LONGER SUBSISTS AND FOR THE SAID REASON IS REJECTED . 2 5 . THE A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. A.Y. 2013 - 14 ITA NO. 6321/MUM/2017 2 6 . WE SHALL NOW ADVERT TO THE APPEAL OF THE ASSESSEE FOR A.Y. 2013 - 14. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S 144C (13) OF THE I.T. ACT, DATED 07.09.2017 FOR A.Y. 2013 - 14 HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE ASSESSEE HAS ASSAILED THE ORDER PASSED BY THE A.O UNDER SEC. 1 43(3) R.W.S. 144C(13) OF THE I.T. ACT ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO /TRANSFER PRICING OFFICER ('TPO') HAVE ERRED IN MAKING TRANSFER PRICING ADJUSTMENT OF INR 19,46,89,349 / - TO THE INCOME OF THE APPELLANT, THEREBY ASSESSING THE TOTAL INCOME OF THE APPELLANT AT INR 37,90,90,780 / - , AS AGAINST RETURNED INCOME OF INR 18,44,01,430 / - . P A G E | 36 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN ARBITRARILY REJECTING THE ECONOMIC ANALYSIS/ TRANSFER PRICING STUDY UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME - TAX RULES, 1961('RULES'), F OR THE DETERMINATION OF THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN RE - CHARACTERISING THE APPELLANT AS A KNOWLEDGE PROCESS OUTSOURCING SERVICE PROVIDER, AND NOT APPRECIATING THAT IT WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES TO ITS ASSOCIATED ENTERPRISES. 4. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN APPLYING INAPPROPRIATE QUANTITATIVE FILTERS, WHILE DETERMINING THE ARM'S LENGTH PRIC E OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT. 5. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, WHILE DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE APPELLANT, THE LEARNED AO / TPO HAVE ERR ED IN SELECTING COMPANIES, WHICH ARE NOT COMPARABLE TO IT, SINCE THEIR FUNCTIONS, ASSETS AND RISKS ARE DIFFERENT FROM THAT OF THE APPELLANT. 6. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN REJECTING COMPANIES SELEC TED BY THE APPELLANT IN ITS BENCHMARKING ANALYSIS FOR DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY IT. 7. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN INCORRECTLY COMPUTING THE MARGIN OF THE COMPANIES FOR DETERMINING THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT. 8. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN NOT GRANTING THE BENEFIT OF ECONOMIC / RISK ADJUSTMENTS TO THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT. 9. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO / TPO HAVE ERRED IN DISREGARDING THE USE OF MULTIPL E YEAR DATA OF COMPARABLE COMPANIES FOR THE PURPOSE OF DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPELLANT. 10. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO HAS ERRED IN LEVYING INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT. THE APPELLANT CLAIMS RELIEF ON THE ABOVE GROUNDS AND THEREBY DELETING THE ADJUSTMENTS MADE BY THE LEARNED AO IN THE FINAL ASSESSMENT ORDER. THE APPELLANT CRAVES FOR LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE HON'BLE INCOME - TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORD ING TO LAW. P A G E | 37 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) FOR THE ABOVE AND OTHER GROUNDS AND REASONS WHICH MAY BE SUBMITTED DURING THE COURSE OF HEARING OF THIS APPEAL, THE APPELLANT REQUESTS THAT THE APPEAL BE ALLOWED AS PRAYED. 2 7 . BRIEFLY STATED, THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF I NCOME FOR A.Y. 2013 - 14 ON 30.11.2013, DECLARING TOTAL INCOME AT RS. 16,62,89,590/ - . SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 26.03.2015, DECLARING TOTAL INCOME AT RS.18,44,01,430/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCE SSED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O MADE A REFERENCE UNDER SEC. 92CA(1) OF THE I.T. ACT TO TH E DCIT, TRANSFER PRICING OFFICE - 1 (3)(1), MUMBAI (FOR SHORT TPO), FOR COMPUTING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISE (FOR SHORT AE). THE TPO IN THE COURSE OF THE PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD SELECTED THREE COMPANIES AS COMPARABLE S , DETAILS OF WHICH ALONG WITH THE REASON FOR SELECTING THE SAME AS A COMPARABLE BY THE ASSESSEE ARE CULLED OUT AS UNDER: SR. NO. NAME OF THE COMPARABLE COMPANIES REASONS FOR ACCEPTANCE GIVEN BY THE ASSESSE E. 1. ALOMNDZ GLOBAL SECURITIES LTD. ALMONDZ GLOBAL SECURITIES LTD. WAS INCORPORATED IN 1994 AND IS LISTED ON THE BSE AND NSE . THE COMPANIES ACTIVITIES INCLUDE MERCHANT BANKING UNDERWRITING, PORTFOLIO MANAGEMENT, ACTING AS ARRANGER OF DEBTS/BONDS, CORPORATE & INFRASTRUCTURE ADVISORY AND LOAN SYNDICATION. THE COMPANY ALSO HAS A PRIVATE EQUITY ADVISORY WHI CH PROVIDES TRANSACTION STRUCTURING, STRATEGY FORMULATION, TARGET IDENTIFICATION, VALUATIO N S, NEGOTIATIONS, I.E. END - TO - END P A G E | 38 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) EXECUTION. FOR THE PURPOSE OF BENCHMARKING SEGMENTAL ACCOUNTS OF THE COMPANY HAS BEEN USED. 2. CRISIL RISK & INFRASTRUCTURE SOLUTIONS LIMITE D CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LIMITED OPERATES AS A SUBSIDIARY OF CRISIL LIMITED. THE COMPANY IS BASED IN MUMBAI . THE COMPANY OFFERS A WIDE RANGE OF SOLUTION FOCUSED ON INFRASTRUCTURE POLICY, CORPORATE ADVISORY, INTEGRATED RISK MANAGEMENT AND ASSOCIATED CONSULTING SERVICES. ACCORDING, THE COMPANY CAN BE CONSIDERED AS A COMPARABLE FOR BENCHMARKING PURPOSES. 3. ICRA MANAGEMENT CONSULTING SERVICES LTD. ICRA MANAGEMENT CONSULTANCY SERVICES LTD. IS A FULLY OWNED SUBSIDIARY OF ICRA LIMITED. THE COMPANY IS ENGAGED IN ENHANCING COMPETITIVENESS OF THE CLIENTS ACROSS DIFFERENT CONSTITUENTS OF ITS VALUE CHAIN. THE COMPA NY PROVIDES CONSULTING SERVICES IN STRATEGY, PROCESS CONSULTING, AND CORPORATE FINANCE. ACCORDINGLY, THE COMPANY CAN BE CONSIDERED AS A COMPARABLE FOR BENCHMARKING PURPOSES. THE TPO BY APPLYING AN EXPORT FILTER REJECTED THE AFOREMENTIONED COMPARABLES. APART THEREFROM , THE TPO RE - CHARACTERISED THE ASSESSEE AS A HIGH END ITES/ HIGH END KPO ENTITY AND ON THE BASIS OF HIS SAID VIEW SHORT LISTED 5 COMPANIES FROM THE IT E S SECTOR AS COMPARABLE TO THE ASSESSEE, AS UNDER: SR. NO. NAME OF THE COMPANY OP/TC 1. A CCENTIA TECHNOLOGIES LTD. 13.90 2. ECLERX SERVICES LTD. 50.84 3. HARTRON COMMUNICATIONS LTD. 30.37 P A G E | 39 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 4. MPS LTD. 29.71 5. IRIS BUSINESS SERVICES LTD. 27.29 ARITHMETIC MEAN 30.42 THE OBJECTION S RAISED BY THE ASSESSEE AS REGARDS SELECTION OF THE AFOREMENTIONED COMPARABLES DID NOT FIND FAVOUR WITH THE TPO . ACCORDINGLY, BY ADOPTING THE ARMS LENGTH MARGIN OF THE COMPARABLES AT 30.42% (OPERATIONAL PROFITS/TOTAL COST) THE TPO REWORKED THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AT RS. 99, 14,57,885/ - AND SUGGESTED A CONSEQUENTIAL ADJUSTMENT OF RS. 11,72,24,575/ - IN THE HANDS OF THE ASSESSEE. 2 8 . THE A.O ON THE BASIS OF THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 19.10.2016 PROPOSED AN ADDITION OF RS.11,72,24,575/ - AND ASSESSED THE INCOME OF THE ASSESSEE AT RS.30,33,13,505/ - , VIDE HIS DRAFT ORDER PASSED UNDER SEC.143(3) R.W.S. 144C(1), DATED 31.10.2016. 29 . AGGRIEVED, THE ASSESSEE FILED OBJECTIONS WITH THE D ISPUTE R ESOLUTION P ANEL - 1, MUMBAI (FOR SHORT DRP) . I N THE COURSE OF THE PROCEEDINGS BEFORE THE DRP THE ASSESSEE ASSAILED ITS RE - CHARACTERISATION AS A KPO BY THE TPO. HOWEVER, THE CONTENTION S ADVANCED BY THE ASSESSEE AS REGARDS THE RE - CHARACTERISATION OF ITS ACTIVIT IES DID NOT FIND FAVOUR WITH THE DRP WHO UPHELD THE ORDER O F THE A.O TO THE SAID EXTENT. APART THEREFROM, THE DRP PARTLY F OU ND FAVOUR WITH THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE COMPARABLES WHICH WERE SELECTED BY THE TPO AND R EJECTED THREE COMPANIES . RESULTANTLY, THE DRP RETAINED THE FOLLOWING TWO COMPA NIES WHICH WERE SELECTED BY THE TPO AS C OMPARABLE S FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS AES: P A G E | 40 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) NAME OF THE COMPANY PLI (%) E - CLERX SERVICES LTD. 50.84 HARTRON COMMUNICATION LTD. (BPO SEGMENT) 30.37 ALP MARGIN 40.61 3 0 . THE A.O GIVING EFFECT TO THE DIRECTIONS OF THE DRP IN ITS ORDER PASSED UNDER SEC.144C(5), OF THE I.T. ACT, DATED 17.08.2017 MADE A TP ADJUSTMENT OF RS. 19,46,89,349/ - , VIDE HIS ASSESSMENT ORDER PASSED UNDER SEC.143(3) R.W.S. 144C(13), DATED 07.09.20 17 AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 37,90,90,780/ - . 3 1 . AGGRIEVED, THE ASSESSEE HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT TH E TPO/DRP HAD ERRED IN REJECTING THE COMPANIES WHICH WERE SELECTED BY THE ASSESSEE AS COMPARABLES IN ITS TP STUDY REPORT VIZ.(I) ALMONDZ GLOBAL SECURITIES L TD; (II) CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD; AND (III) ICRA MANAGEMENT CONSULTING SERVICES LTD. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE DRP HAD ERRED IN RETAINING TWO COMPANIES WHICH WERE SELECTED BY THE TPO AS COMPARABLE S VIZ. (I) E - C L ERX SERVICES LTD; AND (II) HARTRON COMMUNICATIONS LTD. (BPO SEGMENT). THE LD. A.R SUBMITTED THAT THE DRP HAD ADOPTED AN INCONSISTENT APPROACH AND DESPITE ACCEPTING IN A.Y. 2012 - 13 THAT THE ASSESSEE WAS RENDERING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES, HAD HOWEVER UPHELD THE VIEW TAKEN BY THE TPO THAT THE ASSESSEE WAS A HIGH END IT E S/KPO ENTITY. IT WAS SUBMITTED BY THE LD. A.R THAT AS THERE WAS NO CHANGE IN THE FUNCTIONS PERFORMED, ASSET EMPLOYE D AND RISK ASSUMED BY THE ASSESSEE AS IN C OMPARISON TO THE EARLIER YEARS, THUS THE AFORESAID RE - CHARACTERISATION OF THE ASSESSEE AS A HIGH END IT E S/KPO ENTITY WAS WITHOUT ANY BASIS AND WAS LIABLE TO BE VACATED. IT WAS SUBMITTED BY THE LD. A.R THAT AS IN THE PRECEDING YEARS THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ALSO WAS P A G E | 41 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) RENDERING ITS SERVICES AS A SUB - ADVISOR TO ITS AE , AND THE ULTIMATE DECISION WITH RESPECT TO THE INVESTMENTS WAS TAKEN BY THE GENERAL PARTNERS OF THE FUND WHO MANAGED AND OPERATED THE FUNDS. IN SUM AND SUBSTANCE, IT WAS TH E CONTENTION OF THE LD. A.R THAT THE ASSESSEE AS IN THE EARLIER YEARS WAS PROVIDING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES DURING THE YEAR UNDER CONSIDERATION. IN ORDER TO BUTTRESS HIS AFORESAID CONTENTION IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE HAD ENTERED INTO A SERVICE AGREEMENT EFFECTIVE FROM 01.04.2006 TO RENDER NON - BINDING INVESTMENT ADVISORY TO ITS ASSOCIATE ENTERPRISES ( FOR SHORT A . E ) VIZ. CARLYLE HONG KONG. IT WAS THE CONTENTION OF THE LD. A.R THAT THE AFORE SAID SERVICE AGREEMENT CONTINUED FROM YEAR TO YEAR AND AS SUCH REMAINED IN FORCE FOR THE YEAR UNDER CONSIDERATION I.E. A.Y. 2013 - 14. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y. 2007 - 08 HAD ANALYSED THE AFOREMENTIONED SERVICE AGREEMENT AND HAD CONCLUDED THAT THE ASSESSEE WAS PRO VIDING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES. THE LD. A.R SUBMITTED THAT THE AFORESAID ORDER OF THE TRIBUNAL FOR A.Y. 2007 - 08 WAS THEREAFTER ON APPEAL BY THE REVENUE WAS UPHELD BY THE HONBLE HIGH COURT OF BOMBAY. IT WAS FURTHER SUBMITTED BY HIM THAT AS THERE WAS NO CHANGE IN THE FUNCTIONS PERFORMED , ASSET EMPLOYE D AND RISK ASSUME D (FAR) OF THE ASSESSEE AS IN COMPARISON TO THE EARLIER YEARS, THUS THE DRP HA D ERRED IN UPHOLDING THE RE - CHARACTERISATION OF THE ASSESSEE AS A HIGH END ITES/KPO ENTITY DURING THE YEAR UNDER CONSIDERATION . APART THEREFROM, IT WAS THE CLAIM OF THE LD. A.R THAT THE DRP WHILE DISPOSING OF F THE OBJECTIONS OF THE ASSESSEE FOR A.Y. 2012 - 1 3 HAD OVERRULED THE RE - CHARACTERISATION OF THE ASSESSEE A S A KPO SERVICE PROVIDER BY THE TPO AND HAD HELD THAT THE ASSESSEE WAS PROVIDING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES . THE LD. A.R FURTHER REBUTTING THE OBSERVATIONS OF THE DR P THAT THE TRIBUNAL AND THE P A G E | 42 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) HONBLE HIGH COURT OF BOMBAY HAD NOT CRITICALLY EXAMINED THE FUNCTIONAL CHARACTERISATION OF THE ASSESSE E, THEREIN SUBMITTED THAT THE TRIBUNAL HAD VIDE ITS ORDER PASSED IN THE ASSESSES CASE FOR A.Y. 2007 - 08 HAD ONLY AFTER ANALYSI NG THE SERVICE AGREEMENT CONCLUDED THAT THE ASSESSEE WAS ENGAGED IN PROVIDING NON - BINDING INVESTMENT ADVISORY AND RELATED SUPPORT SERVICES. IT WAS THE CONTENTION OF THE LD. A.R THAT NO W WHEN THE SAME SERVICE AGREEMENT WHICH HAD BEEN ANALYSED BY THE TRIBUNAL IN THE ASSESSES APPEAL FOR A.Y. 2007 - 08 CONTINUED DURING THE YEAR UNDER CONSIDERATION I.E. A.Y. 2013 - 14 , THEREFORE IN THE ABSENCE OF ANY CHANGE IN FACTS AS IN COMPARISON TO THE EARLIER YEARS THE DRP WAS IN ERROR IN ADOPTING AN INCONSISTENT APPROACH AND RE - CHARACTERISING THE ASSESSEE AS A KPO SERVICE PROVIDER . THE LD. A.R IN SUPPORT OF HIS CONTENTION THAT IN THE ABSENCE OF THERE BEING ANY SHIFT IN THE FACTS THE AUTHORITIES CANNOT ADOPT AN INCONSISTENT VIEW, THEREIN RE LIED ON CERTAIN JUDICIAL PRONOUNCEMENTS VIZ. (I) RADHSOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC); (II) CIT VS EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC); AND (III) PR. CIT VS. QUEST INVESTMENT ADVISORS PVT. LTD. [ITA NO. 280 OF 2016 (BOM)] . IT WAS SUB MITTED BY THE LD. A.R THAT THE DRP IN A.Y. 2013 - 14 HAD UPHELD THE RE - CHARACTERISATION OF THE ASSESSEE AS A KPO SERVICE PROVIDER FOR CERTAIN REASONS VIZ. (I) HIGH SALARY COST OF THE EMPLOYEES; (II) MR. NEERAJ BHARDHWAJ JOINING CARLYLE INDIA IN THE CURRENT YEAR AND THE PRESS RELEASE I N THIS REGARD; (III) PURPORTED NON AVAILABILITY OF COMPARABLES (DUE TO APPLICATION OF EXPORT FILTER); AND (IV) THAT THE ITAT/HIGH COURT HAD NOT CRITICALLY EXAMINED THE FUNCTIONAL CHARACTERISATION OF THE ASSESSEE. IT WAS SUBMITTE D BY THE LD. A.R THAT IN A.Y. 2012 - 13 IT WAS ON THE BASIS OF THE SALARY DETAILS THAT THE TPO HAD SOUGHT TO DRAW ADVERSE INFERENCE AND HAD RE - CHARACTERISE D THE ASSESSEE AS A KPO SERVICE PROVIDER, WHICH HOWEVER WAS SET ASIDE BY THE DRP FOR THE REASON THAT TH E TPO HAD FAILED TO SUBSTANTIATE THAT SUCH SALARIES WERE P A G E | 43 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) NOT BE ING PAID TO THE EMPLOYEES IN THE EARLIER YEARS OR THAT THE EMPLOYEES IN INVESTMENT ADVISORY SEGMENT WERE NOT BEING PAID SIMILAR LEVELS OF SALARIES. IT WAS THUS THE CONTENTION OF THE LD. A.R THA T NOW WHEN THE POINT OF HIGH SALARY WAS COMPREHENSIVELY DEALT WITH BY THE DRP IN A.Y. 2012 - 13 , WHEREIN IT WAS OBSERVED BY HIM THAT THE ASSESSEE ON THE SAID COUNT COULD NOT BE HELD TO BE A KPO SERVICE PROVIDER, HENCE THE INCONSISTENT APPROACH ADOPTED BY HIM ON THE SAME ISSUE DURING THE YEAR UNDER CONSIDERATION COULD NOT BE SUSTAINED. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE FAR OF AN ASSESSEE IS REQUIRED TO BE LOOKED INTO QUA THE ACTIVITIES PERFORMED BY T HE EMPLOYEES AND NOT SOLELY ON THE BASIS OF THE REMUNERATION PAID TO THEM . INSOFAR, THE TPO/DRP HAD THE CHARACTERISED THE ASSESSEE AS A KPO SERVICE PROVIDER BY TAKING SUPPORT OF THE FACT THAT MR. NEERAJ BHARDWAJ WHO WAS EARLIER EMPLOYED WITH APAX PARTNER I NDIA ADVISORS PVT. LTD. HAD JOIN ED THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS CONCERNED , IT WAS SUBMITTED BY THE LD. A.R THAT THE SAID FACT IN NO WAY ADVANCE D THE CASE OF THE REVENUE. IT WAS SUBMITTED BY THE LD. A.R THAT THE TRIBUNAL IN THE CASE OF AP A X PARTNER INDIA ADVISORS PVT. LTD. VS. DCIT (2017) 86 TAXMAN.COM 169 (MUM) HAD WHILE DISMISSING ITS RE - CHARACTERISATION BY THE REVENUE AS A KPO OBSERVED THAT AP AX PARTNER INDIA PVT. LTD. (SUPRA) WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES . IN SUM AND SUBSTANCE, IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN AP A X PARTNERS INDIA ADVISORS PVT. LTD (SUPRA) AS OBSERVED BY THE TRIBUNAL WAS A COMPANY RENDERING NON - BINDING INVESTMENT ADVISORY SERVICES, THUS JOINING OF MR. NEERAJ BHARDWAJ (EX - EMPLOYEE OF APAX PARTNERS INDIA ADVISORS PVT. LTD) WOULD IN NO WAY ASSIST THE CLAIM OF THE REVENUE THAT THE ASSESSEE WAS A KPO SERVICE PROVIDER. 32 . THE LD. A.R FURTHER REBUTTED THE OBSERVATIONS OF THE DRP THAT THE ASSESSEE IN ADDITION TO PROVIDING I NVESTMENT ADVISORY SERVICES WAS P A G E | 44 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) ALSO INVOLVED IN CERTAIN ADDITIONAL ACTIVITIES. APART THEREFROM, THE LD. A.R ALSO REBUTTED THE OBSERVATIONS THAT WERE DRAWN BY THE DRP TO JUSTIFY CHARACTERISATION OF THE ASSESSEE AS A KPO SERVICE PROVIDER VIZ. (I) THAT THE A SSESSEE IN THE COURSE OF ITS ACTIVITIES IDENTIFIED SECTORS IN WHICH INVESTMENT SHOULD BE MADE; (II) THAT BASED ON THE RESEARCH WORK THAT WAS CONDUCTED BY THE ASSESSEE THE INVESTMENT S WERE MADE; (III) THAT THE NEGOTIATIONS WERE UNDERTAKEN BY THE ASSESSEE; ( IV) THAT THE SALARIES PAID TO THE EMPLOYEES WERE SUBSTANTIALLY HIGH AND THEY WOULD NOT JOIN THE ASSESSEE MERELY TO GIVE NON - BINDING INVESTMENT ADVICE; (V) THAT THE PRESS RELEASE OF THE ASSESSEE GROUP AS REGARDS THE EXPECTATIONS FROM THE ASSESSES TEAM AFTER MR. NEERAJ BHARDWAJ HAD JOINED ; AND (VI) THAT MR. NEERAJ BHARDWAJ WAS A HIGHLY QUALIFIED PERSON WHOSE SERVICES WERE NOT M E RELY TO BE DEPLOYED FOR ADVISORY PURPOSES. 33. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT AS THE FACTS FOR THE YEAR UNDER CONSIDERATION HAD WITNESSED A CHANGE IN COMPARISON TO THE PRECEDING YEARS, THUS THE VIEW TAKEN BY THE TPO/DRP IN THE SAID EARLIER YEARS WOULD N OT ASSIST THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. FURTHER, IT WAS SUBMITTED BY THE LD. D.R THAT THE FACT THAT THE ASSESSEE WAS A KPO SERVICE PROVIDER COULD SAFELY BE GATHERED FROM THE T.P STUDY REPORT WHEREIN IT WAS MENTIONED THAT THE RE MUNERATION PAID TO THE DIRECTORS WAS DEPENDANT ON THE FUNCTIONS THAT WERE PERFORMED BY THEM. THE LD. D.R SUBMITTED THAT SUCH FACT WAS NOT REPORTED IN THE T.P STUDY REPORT OF THE ASSESSEE FOR THE EARLIER YEARS. ON THE BASIS OF HIS AFORESAID CONTENTION IT WA S CLAIMED BY THE LD. D.R THAT THE HIGH SALARY WHICH WAS PAID BY THE ASSESSEE TO ITS EMPLOYEE REVEAL ED THAT THEY WERE HIGHLY QUALIFIED PROFESSION ALS WHO WERE RENDERING HIGH VALUE ADDED SERVICES. IT WAS FURTHER SUBMITTED BY THE LD. D.R THAT A PERUSAL OF THE FAR GIVEN IN THE T.P. STUDY REPORT OF THE ASSESSEE CLEARLY P A G E | 45 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) REVEALED THAT ALL CRITICAL FUNCTIONS WERE BEING CARRIED OUT BY THE ASSESSEE AND ON THE BASIS OF THE SAME DECISIONS WERE ARRIVED AT BY ITS A . E. APART THEREFROM, THE LD. D.R REITERATED THE OBSERVATIO NS OF THE DRP THAT THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y. 2007 - 08 HAD NOT CRITICALLY EXAMINED THE FUNCTIONAL CHARACTERISATION OF THE ASSESSEE. IN ORDER TO DRIVE HOME HIS CONTENTION THAT IN CASE OF CHANGE OF CIRCUMSTANCES THE AUTHORITIES ARE DULY VESTED WITH THE RIGHT TO TAKE A SHIFT FROM ITS EARLIER VIEW RELIANCE WAS PLACE D BY THE LD. D.R ON THE DECISION OF THE ITAT , MUMBAI IN THE CASE OF ONWARD TECHNOLOGIES LTD. VS. DCIT (2013) 35 TAXMANN.COM 584 (MUM) . 34 THE LD. A.R REBUTTED THE AFORESAID CON TENTIONS SO ADVANCED BY THE COUNSEL FOR THE REVENUE. IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE IDENTIFIED CENTRES AND COMPANIES BASED ON INITIAL CRITERIA PROVIDED BY ITS A . E I.E. CARLYLE HONG K ONG . IT WAS SUBMITTED BY HIM THAT THE ASSESSEE DID NOT IDENTIF Y OPPORTUNITIES IN ANY SECTOR AND STRICTLY RESTRICTED TO THE CRITERIA THAT WAS PROVIDED BY ITS A . E. THE LD. A.R SUBMITTED THAT THE REPORT PREPARED BY THE ASSESSEE WAS FURTHER ANALYSED BY ITS A . E I.E CARLYLE HONG KONG . SUBSEQUENTLY , THE SAID REPORT WOULD BE FORWARDED BY CARLYLE HONG KNG TO CIM , LLC, WHICH IN TURN DID ANOTHER ANALYSIS AND WOULD THEN SEND THE SAME TO THE GENERAL PARTNER. IN SUM AND SUBSTANCE, IT WAS SUBMITTED BY THE LD. A.R THAT THE ASS ESSEE DID NOT UNDERTAKE THE ENTIRE RESEARCH ANALYSIS AND RATHER UNDERTOOK ONLY A PART OF THE ANALYSIS BASED ON THE CRITERIA PROVIDE BY ITS A . E. RATHER, IT WAS SUBMITTED BY THE LD. A.R THAT THE DECISION OF THE GENERAL PARTNER WAS BASED ON THE ANALYSIS PROVI DED BY THE CIM LLC AND THE ASSESSEE WOULD NOT EVEN BE AWARE OF THE REPORT THAT WOULD BE SENT BY CIM LLC TO THE GENERAL PARTNER , WHICH MAY OR MAY NOT INCLUDE WHAT THE ASSESSEE HAD STATED IN ITS REPORT. ON THE BASIS OF HIS AFORESAID SUBMISSIONS IT WAS THE CL AIM OF THE LD. A.R THAT P A G E | 46 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) ALL THE ACTIVITIES WERE NOT CARRIED OUT BY THE ASSESSEE. IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE HAD NO ROLE TO PLAY IN THE NEGOTIATION ASPECT AND ALL THE DECISIONS WERE TAKEN BY THE GENERAL PARTNER. INSOFAR, THE OBSERVATI ONS OF THE LD. D.R THAT THE FACT THAT THE ASSESSEE WAS A KPO SERVICE PROVIDER COULD SAFELY BE GATHERED FROM THE HIGH SALARIES WHICH IT WAS PAYING TO ITS EMPLOYEE S WAS CONCERNED , IT WAS SUBMITTED BY THE LD. A.R THAT THE SAID CONTENTIONS WAS WITHOUT ANY BASIS AS THE FAR OF AN ASSESSEE IS QUA THE ACTIVITIES AND NOT THE SALARIES PAID. 35. THE LD. A.R FURTHER ASSAILED THE APPL ICATION OF THE EXPORT TURNOVER FILTER IN THE CASE OF THE A SSESSEE BY TAKING SUPPORT OF THE VIEW THAT WAS TAKEN BY THE DRP IN THE ASSESSES OWN CASE FOR A.Y. 2012 - 13. IT WAS SUBMITTED BY THE LD. A.R THAT THE DRP HAD DIRECTED THE TPO NOT TO APPLY THE EXPORT FILTER FOR THE REASONS VIZ. (I) . SERVICES WERE RENDERED BY THE ASSESSEE FOR ITS A . E IN INDIA; (II) . THAT THOUGH THE LOCATION OF THE A . E WAS OUTSIDE INDIA THE INVESTMENTS WERE TO BE MADE IN INDIA; AND (III) . THAT THE CASE OF THE ASSESSEE WAS NOT AS THAT OF A SOFTWARE OR IT E S COMPANIES WHERE THE EXPORT S WERE MADE OU TSIDE INDIA AND THE REVENUE WAS GENERATED FROM SUCH EXPORTS. IT WAS THUS SUBMITTED BY THE LD. A.R THAT NOW WHEN IN A.Y. 2013 - 14 THERE HAD BEEN NO CHANGE IN FACTS AS IN COMPARISON TO THE IMMEDIATELY PRECEDING YEAR I.E A.Y 2012 - 13 , THEREFORE, THE DRP WAS IN ERROR IN U PH O LD ING THE APPLICATION OF EXPORT TURNOVER FILTER AS THE SAME CLEARLY MILITATE D AGAINST ITS DIRECTIONS FOR A.Y. 2012 - 13. IN ORDER TO BUTTRESS HIS CONTENTION THAT IN ABSENCE OF ANY CHANGE IN THE FACTS THE PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOW ED , SUPPORT WAS DRAWN BY HIM FROM CERTAIN JUDICIAL PRONOUNCEMENT S VIZ. (I) RADH A SOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC); (II) CIT VS. EXCEL INDUSTRIES LTD (2013) 358 ITR 295 P A G E | 47 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) ( SC) ; AND (III) PR.CIT VS. QUEST INVESTMENTS ADVISORS PVT. LTD. (ITA NO. 280 OF 2016) (BOM) . 36. THE LD. D .R REBUTTING THE AFORESAID CONTENTIONS OF THE ASSESSEE SUBMITTED THAT AS THE EXPORT FILTER WAS A QUALITATIVE FILTER AND GEOGRAPHY IS AN IMPORTANT FACTOR T O CONSIDER DURING THE COMPARABILITY TEST, HENCE THERE WAS NO RESTRICTION TO APPLY THE SAID FILTER ONLY TO KPO/IT E S INDUSTR Y . APART THEREFROM, IT WAS SUBMITTED BY THE LD. D.R THAT THOUGH THE INVESTMENTS WERE MADE IN INDIA THE SERVICES WERE EXPORT ED OUT SIDE INDIA BY THE ASSESSEE TO ITS A . E VIZ. CARLYLE HONG KONG. ACCORDINGLY, IT WAS SUBMITTED BY THE LD. D.R THAT THE EXPORT FILTER WAS AN IMPORT ANT FILTER WHICH WAS REQUIRED TO BE APPLIED IN THE CASE OF THE ASSESSEE. 37. THE LD. A.R FURTHER ASSAILED THE EXCLUSION OF THE COMPARABLE S THAT WERE SELECTED BY THE ASSESSEE AND INCLUSION OF TWO COMPARABLES BY THE TPO/DRP FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. THE LD. A.R ASSAILED THE EXCLUSION OF THE THREE COMPANIES WHICH WERE SELECTED B Y THE ASSESSEE AS A COMPARABLE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS IN THE T.P. STUDY REPORT VIZ. (I) ALMONDZ GLOBAL SECURITIES LTD.; (II) CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD.; AND (III) ICRA MANAGEMENT CONSULTANCY SERVICES LTD. IT WAS SUBMITTED BY THE LD. A.R THAT AS ALMONDZ GLOBAL SECURITIES LTD . WAS PROVIDING CONSULTANCY IN THE FINANCIAL AREAS AND HENCE WAS FUNCTIONALLY COMPARABLE WITH THE ASSESSEE , THEREFORE, IT WAS RIGHTY SELECTED AS A COMPARABLE. IT WAS AVERRED BY THE LD. A.R THAT THE ASSESSEE HAD TAKEN THE MARGIN EARNED BY THE AFOREMENTIONED COMPANY OUT OF ITS CORPORATE AND ADVISORY FEE SEGMENT. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT AS WAS DISCERNIBLE FROM THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY VIZ. ALMON DZ GLOBAL SECURITIES LTD, IT HAD SUSPENDED AL L ACTIVITIES REQUIRING A P A G E | 48 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) MERCHANT BANKING LICENSE FROM 28.12.2011 I.E WAY BACK FROM A.Y. 2012 - 13 AND HAD NOT UNDERTAKEN ANY MERCHANT BANKING ACTIVITIES DURING THE YEAR UNDER CONSIDERATION. IN SUM AND SUBSTANCE, IT WAS THE CONTENTION OF THE LD. A.R THAT THE AFORESAID COMPANY DURING THE YEAR UNDER CONSIDERATION I.E A.Y. 2013 - 14 WAS NOT AUTHORIZED TO UNDERTAKE THE ACTIVIT Y OF ISSUE MANAGEMENT, UNDER WRITER AND PORTFOLIO MANAGER. ON THE BASIS OF THE AFORESAID FACTS I T WAS SUBMITTED BY THE LD. A.R THAT AS THE AFOREMENTIONED COMPANY A LIKE THE ASSESSEE WAS PURELY INTO RESEARCH BASED INVESTMENT ADVISORY DURING THE YEAR UNDER CONSIDERATION , HENCE IT WAS RIGHTLY SELECTED AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TR ANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 38. INSOFAR, THE EXCLUSION OF CRISIL RISK AND INFRASTRUCTURE SOLUTION LTD . AS A COMPARABLE BY THE TPO/DRP WAS CONCERNED , IT WAS SUBMITTED BY THE LD. A.R THAT THE SAID COMPANY WAS A LEADING ADVISOR TO REGULA TORS AND GOVERNMENTS, MULTILATERAL AGENCIES, INVESTORS AND LARGE PUBLIC AND PRIVATE SECTOR FIRMS . IN SUPPORT OF HIS CONTENTION THAT CRISIL RISK AND INFRASTRUCTURE SOLUTION LTD. COULD SAFELY BE SELECTED AS A COMPARABLE TO A COMPANY PROVIDING INVESTMENT ADVISORY SERVICES, THE LD. A.R RELIED ON THE ORDERS OF THE TRIBUNAL VIZ. (I) KITARA CAPITAL PVT. LTD. VS. ITO [ITA NO. 130/MUM/2014]; AND (II). GENERAL ATLANTIC (P) LTD. VS. DCIT (2015) 64 TAXMANN.COM 423 (MUM) , WHEREIN IN BOTH OF TH E SAID CASES THE TPO HIMSELF HAD SELECTED THE AFOREMENTIONED COMPANY VIZ. CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD. AS A COMPARABLE IN THE CASE OF THE SAID ASSESSES WHICH WERE ENGAGED IN PROVIDING INVESTMENT ADVISORY SERVICES. ON THE BASIS OF HIS AFORE SAID CONTENTION IT WAS THE CLAIM OF THE LD. A.R THAT AS CRISIL RISK AND INFRASTRUCTURE SOLUTION LTD. WAS INVOLVED IN PROVIDING ADVISORY SERVICES, HENCE THE SAME HAD WRONGLY BEEN EXCLUDED FROM THE FINAL LIST OF COMPARABLES BY THE TPO/DRP. P A G E | 49 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) 39. THE LD. A.R F URTHER ASSAILED THE EXCLUSION OF ICRA MANAGEMENT CONSULT ING SERVICES LTD. BY THE TPO/DRP FROM THE FINAL LIST OF COMPARABLES. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE AFOREMENTIONED COMPANY WAS PROVIDING ADVISORY AND MANAGEMENT CONSULTANCY WHICH INVOLVED SIMILAR FUNCTIONS AS WERE THERE IN THE CASE OF THE INVESTMENT ADVISORY SERVICES , HENCE THE SAME WAS RIGHTLY SELECTED BY THE ASSESSEE AS A COMPARABLE. THE LD. A.R IN ORDER TO BUTTRESS HIS CLAIM THAT THE AFOREMENTIONED COMPANY WAS RIGHTLY SEL ECTED AS A COMPARABLE DURING THE YEAR UNDER CONSIDERATION RELIED ON THE SUBMISSIONS THAT WERE ADVANCED BY HIM IN THE ASSESSE S APPEAL FOR A.Y. 2012 - 13. APART THEREFROM, THE LD. A.R ALSO REBUTTED THE ADVERSE INFERENCES DRAWN BY THE TPO/DRP IN RESPECT OF INCL USION OF THE AFOREMENTIONED COMPANY AS A COMPARABLE ON SIMILAR GROUNDS. THE LD. A.R FURTHER, ASSAILED THE INCLUSION OF TWO COMPANIES AS A COMPARABLE BY THE TPO/DRP VIZ. (I) E - C LERX SERVICES LTD.; AND (II) HARTRON COMMUNICATIONS LTD. (BPO SEGMENT). THE LD. A.R SEEKING EXCLUSION OF HARTRON COMMUNICATIONS LTD. FROM THE FINAL LIST OF COMPARABLES , SUBMITTED THAT THE SAID COMPANY WAS A LEADING OFFSHORE BUSINESS PROCESS SERVICE PROVIDER IN MEDICAL BILLING ( HEALTH CARE SECTOR ) . IT WAS SUBMITTED BY THE LD. A.R THAT A S IN COMPARISON TO THE AFOREMENTIONED COMPANY AS THE ASSESSEE WAS PROVIDING NON - B INDING INVESTMENT ADVISORY SERVICES, HENCE IT WAS BY NO MEANS COMPARABLE TO IT . APART THEREFROM, IT WAS ALSO SUBMITTED BY THE LD. A.R THAT AS THE AFOREMENTIONED COMPANY HAD F LUCTUATING MARGIN S FROM THE PERIOD A.Y. 2009 - 10 TO A.Y 2013 - 14, HENCE, IT COULD NOT BE SAFELY ADOPTED AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION THAT HARTRON COMMUNICATIO NS LTD. WHICH WAS PROVIDING SERVICES IN THE NATURE OF IT E S/IT SERVICE IN HEALTH CARE SECTOR AND THUS COULD NOT HAVE BEEN P A G E | 50 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) SELECTED AS A COMPARABLE, I T WAS SUBMITTED BY THE LD. A.R THAT DRP DURING THE YEAR UNDER CONSIDERATION HAD REJECTED AS A COMPARABLE A SIMILARLY PLACED COMPANY VIZ. ACCENTIA TECHNOLOGIES LTD. IT WAS SUBMITTED BY THE LD. A.R THAT ON A SIMILAR FOOTING HARTRON COMMUNICATION LTD . WAS ALSO LIABLE TO BE REJECTED FROM THE FINAL SET OF COMP ARABLES FOR FAIR BENCHMARKING OF THE A LP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION . THE LD. A.R IN ORDER TO FORTIFY HIS CLAIM THAT THE AFOREMENTIONED COMPANY HAD A DIFFERENT FUNCTIONAL PROFILE , THEREIN SUBMITTED THAT THOUGH THE WEBSITE OF THE SAID COMPA NY REVEALED THAT IT WAS OFFERING A WIDE RANGE OF BPO, LPO, I.T AND BACK OFFICE SERVICES , HOWEVER THE SEGMENTAL INFORMATION OF THE AFOREMENTIONED COMPANY WAS AVAILABLE ONLY IN RESPECT OF THE OFFICE BACK UP OPERATIONS PROVIDED BY IT. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE LD. A.R THAT AS THE AFOREMENTIONED COMPANY VIZ. HARTRON COMMUNICATION LD. WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AND ITS SEGMENTAL DATA WAS NOT AVAILABLE , HENCE THE SAME WAS LIABLE TO BE REJECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE. 40. THE LD. A.R FURTHER ASSAILED THE INCLUSION OF E - C LERX S ERVICES L IMITED AS A COMPARABLE BY THE TPO/DRP DURING THE YEAR UNDER CONSIDERATION. AT VERY OUTSET, IT WAS SUBMITTED BY THE LD. A.R THAT THE DRP IN THE ASSESSES OWN CASE FOR A.Y. 2 012 - 13 HAD AFTER CONSIDERING THE FUNCTIONS OF THE AFOREMENTIONED COMPANY I.E. E - C LERX SERVICES LTD. HAD OBSERVED THAT THE SAME WAS FUNCTIONALLY NOT COMPARABLE. IT WAS THE CLAIM OF THE LD. A.R THAT WHILE CONCLUDING AS HEREINABOVE IT WAS OBSERVED BY THE DRP THAT AS THE AFOREMENTIONED COMPANY WAS A KPO SERVICE PROVIDER, HENCE THE SAME WAS FUNCTIONALLY DIFFERENT AS IN COMPARISON TO THE ASSESSEE WHICH WAS AN INVESTMENT ADVISORY. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE FACTS FOR THE YEAR UNDER P A G E | 51 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) CONSIDERATION H AD NOT WITNESSED ANY CHANGE AS IN COMPARISON TO THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2012 - 13, HENCE THE DRP WAS IN ERROR IN TAKING A CONTRARY VIEW AND UPHOLD ING THE SELECTION OF THE AFOREMENTIONED COMPANY VI Z . E - CLERX SERVICES LTD. AS A COMPARABLE BY TH E TPO DURING THE YEAR UNDER CONSIDERATION. I T WAS SUBMITTED BY THE LD. A.R THAT AS THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY REVEALED THAT IT WAS INVOLVED IN TO KPO AND BPO ACTIVITIES I.E PROVIDING OPERATIONAL SUPPORT , DATA MANAGEMENT AND ANALYTICS SOLUTIONS, HENCE IT COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE WHICH WAS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES TO ITS A . E. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE AFOREMENTIONED COMPANY VIZ. E - CLERX SERVICES LTD. WAS ALSO INVOLVED IN ONSHORE ACTIVITIES BY PROVIDING SERVICES AT THE CUSTOMERS LOCATIONS AND HAD NOT DISCLOSED SEGMENTAL MARGINS FOR EACH OF ITS SEGMENTS, HENCE FOR THE SAID REASON ALSO I T COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE. THE LD. A.R ALSO TOOK SUPPORT OF THE FACT THAT AS THE AFOREMENTIONED COMPANY HAD DURING THE YEAR UNDER CONSIDERATION ACQUIRED ANOTHER COMPANY VIZ. AGYLIST WHICH WAS INTO CABLE BUSINESS, HENCE THE AFORESAID ACQUISITION OF A COM PANY BEING IN THE NATURE OF AN EXTRAORDINARY EVENT RENDERED THE SAID COMPANY VIZ. E - CLERX SERVICES LTD. AS UNFIT AS A COMPARABLE IN THE CASE OF THE ASSESSEE . THE LD. A.R FURTHER TOOK SUPPORT OF THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF AP A X PARTNERS INDIA ADVISORS (P) LTD. VS. DCIT (2017) 86 TAXMAN.COM 169 (MUM) , WHEREIN IT WAS HELD THAT E - C LERX SERVICES LTD. COULD NOT BE TAKEN AS A COMPARABLE TO A COMPANY PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES. FURTHER, THE LD. A.R ALSO SUBMITTED THAT AS THE RPT PERCENTAGE OF THE AFOREMENTIONED COMPANY WORKED OUT TO 25.55%, I.E. IN EXCESS OF THE RPT FILTER OF 25% THAT WAS APPLIED BY THE TPO, HENCE ON THE SAID P A G E | 52 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) COUNT ALSO IT WAS LIABLE TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 41. WE HAVE HEARD TH E AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE SHALL FIRST ADVERT TO THE MAINTAINABILITY OF THE EXCLUSION OF CERTAIN COMPANIES WHICH WERE SELECTED BY THE ASSESSEE AS C OMPARABLE S IN ITS TP STUDY REPORT, BUT THE SAME NOT FINDING FAVOUR WITH THE TPO/DRP WERE EXCLUDED FROM THE FINAL LIST OF COMPARABLES, AS UNDER: (A) CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD: WE FIND FROM A PERUSAL OF THE NOTES TO THE FINANCIAL STATEMENTS OF CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD. THAT IT IS A LEADING ADVISOR TO REGULA TORS AND GOVERNMENTS, MULTILATERAL AGENCIES, INVESTORS AND LARGE PUBLIC AND PRIVATE SECTOR FIRMS AND IS PROVIDING A COMPREHENSI VE RANGE OF RISK MAN AGEMENT TOOLS, ANALYTICS AND SOLUTIONS TO FINANCIAL INSTITUTION S , BANK S AND CORPORATES . IN OUR CONSIDERED VIEW THE PROVISION OF ADVISORY SERVICES BY THE AFOREMENTIONED COMPANY CAN SAFELY BE HELD TO BE COMPARABLE TO THE INVESTMENT ADVISORY SERVICES THAT WER E PROVIDED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE AFOREMENTIONED COMPANY WAS REJECTED AS A COMPARABLE BY THE TPO/DRP FOR THE REASON THAT IT HAD FAILED THE EXPORT FILTER. WE HAVE DELIBERATED AT LENGTH AND ARE UNABLE TO PERSUADE OURSELVES T O SUBSCRIBE TO THE EXCLUSION OF THE AFOREMENTIONED COMPANY VIZ. CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD. AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION . WE FIND THAT THE DRP HAD IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2012 - 13 DIRECTED THE TPO NOT TO CONSIDER EXPORT FILTER AS IT WAS NOT A RELEVANT FILTER IN THE CASE OF THE ASSESSEE, SINCE THE SERVICES WERE P A G E | 53 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) RENDERED BY THE ASSESSEE FOR THE A . E IN INDIA AND ALSO INVESTMENTS WERE TO BE MADE IN INDIA. IN OUR CONSIDERED VIEW AS THERE IS NO CHANGE IN THE FACTS DURING THE YEAR UNDER CONSIDERATION AS AGAINST THAT OF THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2012 - 13, THEREFORE, UPHOLDING OF THE APPLICA TION OF THE EXPORT FILTER BY THE DRP BY ADOPTING AN INCONSISTENT APPROACH CANNOT BE ACCEPTED. OUR VIEW THAT IN ABSENCE OF ANY CHANGE IN THE FACTS THE PRINCIPLE OF CONSISTENCY HAS TO BE FOLLOWED FIND S SUPPORT FROM THE JUDGMENT S OF THE HONBLE SUPREME COURT IN THE CASE OF (I). RADHSOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) AND (II). CIT VS. EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC) AND THE JUDGMENT OF THE H ONBLE HIGH COURT OF BOMBAY IN THE CASE OF PR. CIT VS. QUEST INVESTMENTS ADVISORY PVT. LTD. (IT A NO. 280 OF 2016) (BOM) . APART THEREFROM, WE FIND THAT CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD. WAS IN ITSELF ACCEPTED BY THE TPO AS A COMPARABLE IN THE CASE OF CERTAIN ASSESSES WHICH WERE PROVID ING INVESTMENT ADVISORY SERVICES VIZ. (I) KITARA CAPITA L PVT. LTD. VS. ITO (ITA NO. 130/MUM/2014; AND (II) GENERAL ATLANTIC (P) LTD. VS. DCIT (2015) 64 TAXAMANN.COM 423 ( MUMBAI ) . WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP HAS ERRED IN EXCLUDING THE AFOREME NTIONED COMPANY VIZ. CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD. FROM THE FINAL LIST OF THE COMPARABLES. IN TERMS OF OUR AFORESAID OBSERVATIONS , WE HEREIN DIRECT THE A.O/TP O TO INCLUDE THE SAID COMPANY VIZ. CRISIL RISK AND INFRASTRUCTURE SOLUTIONS LTD. I N THE FINAL LIST OF COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. (B) ALMONDZ GLOBAL SECURITIES LTD: WE HAVE PERUSED THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY AND FIND THAT THE BUSINESS OF THE ASSESSEE DURING THE YEAR COMPRISED OF PROVIDING CONSULTANCY IN THE FINANCIAL AREAS. THE ASSESSEE HAS P A G E | 54 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) TAKEN THE MARGIN EARNED BY THE AFOREMENTIONED COMPANY UNDER THE SEGMENT OF C ORPORATE F INAN CE AND A DVISORY F EE SEGMENT. AS PER THE ANNUAL REPORT OF THE COMPANY THE SEBI HAD PASSED TWO AD INTERIM EX - PARTE ORDER S ON 28.12.2011 (WHICH WERE CONFIRMED VIDE INTERIM ORDER S DATED 11.09.2012 AND 21.09.2012), AS PER WHICH THE COMPANY WAS PROHIBITED FROM TAKING NEW ASSIGNMENT OR INVOLVEMENT IN ANY NEW ISSUE OF CAPITAL INCLU DING IPO, FOLLOW - ON ISSUE ETC . FROM THE SECURITIES MARKET IN ANY MANNER WHATSOEVER, FROM THE DATE OF THE ORDER TILL FURTHER DIRECTIONS. IN SUM AND SUBSTANCE, THE AFOREMENTIONED COMPANY HAVING BEEN DEBARRED HAD NOT UNDER TAKEN ANY MERCHANT BANKING ACTIVITIES DURING THE UNDER CONSIDERATION VIZ. A.Y. 2013 - 14. WE FIND SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT IN THE BACKDROP OF THE AFORESAID FACTS AS THE AFOREMENTIONED COMPANY I.E. ALMONDZ GLOBAL SECURITIES LTD. WHICH DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2013 - 14 WAS PURELY INTO RESEARCH BASED INVESTMENT ADVISORY , THUS ARE OF THE CONSIDERED VIEW THAT THE SAME WAS RIGHTLY SELECTED AS A COMPARABLE BY THE ASSESSEE. INSOFAR, THE REJECTION OF THE SAID COMPANY AS A COMPARABLE BY THE TPO/DRP IS CONCERNED, WE FIND THAT THE SAME IS FOR THE REASON THAT THE SAID COMPANY HAD FAILED THE EXPORT FILTER. WE ARE UNABLE TO SUBSCRIBE TO THE AFORESAID VIEW SO TAKEN BY THE LOWER AUTHO RITIES AND FOR THE REASONS DISCUSSED AT LENGTH BY US HEREINABOVE , THAT AS OBSERVED BY THE DRP IN THE CASE OF THE ASSESSEE FOR A.Y. 2012 - 13 THE EXPORT FILTER WAS NOT RELEVANT IN THE CASE OF THE ASSESSEE, THUS DO NOT FIND ANY FAVOUR WITH THE SAID OBSERVATION S SO DRAWN BY THE LOWER AUTHORITIES AND ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP HAD WRONGLY REJECTED THE AFOREMENTIONED COMPA NY VIZ. ALMONDZ GLOBAL SERVICES LTD. AS A COMPARABLE IN THE CASE OF THE ASSESSEE. IN TERMS OF OUR AFORESAID OBSERVATIONS , WE DI RECT THE AO/TPO TO INCLUDE THE ABOVEMENTIONED COMPANY VIZ. ALMONDZ GLOBAL SERVICES LTD . , IN THE FINAL LIST OF P A G E | 55 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) COMPARABLES FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. (C) ICRA MANAGEMENT CONSULTING SERVICES LTD: WE FIND THAT ICRA MANAGEMENT CONSULTANCY LD. IS INTO ADVISORY AND MANAGEMENT CONSULTANCY, WHILE FOR THE ASSESSEE IS INTO PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES. IN OUR CONSIDERED VIEW AS THE FUNCTIONS PERFORMED IN INVES TMENT ADVISORY AS WELL AS IN MANAGEMENT CONSULTANCY REMAIN THE SAME, THUS A COMPANY PROVI DING MANAGEMENT CONSULTANCY CAN SAFELY BE TAKEN AS A COMPARABLE AS AGAINST THAT INVOLVED IN PROVIDING INVESTMENT ADVISORY. WE FIND THAT THE VARIOUS OBJECTIONS RAISED A ND THE BASIS ADOPTED BY THE LD. D.R TO JUSTIFY THE EX CLUSION OF THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. AS COMPARABLE IN THE CASE OF THE ASSESSEE, HAD BEEN REBUTTED AND DISLODGED BY THE LD. A.R IN HIS SUBMISSION S PLACED IN THE APPEAL OF THE ASSESSEE FOR A.Y 2012 - 13. WE ARE OF THE CONSIDERED VIEW THAT AS THE FACTS OF THE CASE BEFORE US, AS WELL AS THE FUNCTIONAL PROFILE OF THE ASSESSEE AND THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. HAD NOT WITNES SED ANY CHANGE DURING THE YEAR UNDER CONSIDERATION , THEREFORE, OUR OBSERVATIONS RECORDED FOR INCLUDING THE SAID COMPANY AS A COMPARABLE IN THE CASE OF THE ASSESSEE FOR A.Y 2012 - 13 SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT APPEAL OF THE ASSESSEE FOR A.Y 2 013 - 14. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAD RIGHTLY INCLUDED THE AFOREMENTIONED COMPANY VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD. AS A COMPARABLE IN THE CASE OF THE ASSESSEE AND THE SAME HAD W RONGLY BEEN EXCLUDED BY THE TPO/DRP. IN TERMS OF OUR OBSERVATIONS RECORDED WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE FOR A.Y 2012 - 13 I.E IN ITA NO. 2366/MUM/2017 , WE HEREIN DIRECT THE A.O/TPO TO INCLUDE ICRA MANAGEMENT CONSULTING SERVICES LTD. IN THE FINAL LIST OF COMPARABLES P A G E | 56 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y 2013 - 14. 42. WE SHALL NOW ADVERT TO THE CONTENTIONS ADVANCED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES IN CONTEXT OF THE COMPAN IES WHICH HA D BEEN SELECTED BY THE TPO/DRP AS A COMPARABLE S FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION VIZ. (I) E - C LERX SERVICES LTD.; AND (II) HARTRON COMMUNICATIONS LTD. WE SHALL DELIBERATE ON THE SUSTAINABILITY OF THE OBSERVATIONS OF THE LOWER AUTHORITIES IN CONTEXT OF THE SELECTION OF THE AFOREMENTIONED RESPECTIVE COMPAN IES AS COMPARABLE S , AS UNDER: ( A ) . E - CLERX SERVICES LTD: WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION IN RESPECT OF THE INCLUSION OF THE AFOREMENTIONED COMPANY VIZ. E - CLERX SERVICES LTD. AS A COMPARABLE BY THE TPO/DRP . ON A PERUSAL OF THE RECORDS IT STANDS REVEALED THAT THE DRP IN THE CASE OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2012 - 13 HAD HELD THE SAID COMPANY VIZ. E - CLERX SERVICES LTD. AS NOT FUNCTIONAL LY COMPARABLE TO THE ASSESSE E FOR THE REASON THAT IT WAS A KPO SERVICE PROVIDER , WHILE FOR THE ASSESSEE WAS INTO NON - BINDING INVESTMENT ADVISORY SERVICES. IN OUR CONSIDERED VIEW NOW WHEN THE FACTS FOR THE YEAR UNDER CONSIDERATION HAD NOT WITNESSED ANY CHANGE AS IN COMPARISON TO THE IMMEDIATELY PRECE DING YEAR VIZ. A.Y. 2012 - 13, HENCE THE DRP OUGHT TO HAVE FOLLOWED HIS EARLIER VIEW AND COULD NOT HAVE ADOPTED AN INCONSISTENT APPROACH AND INCLUDED THE SAID COMPANY AS A COMPARABLE IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ADMITTEDLY, A S THE ASSESSEE IS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES WHICH CANNOT BE COMPARED WITH THE KPO AND BPO ACTIVITIES PROVIDED BY THE AFOREMENTIONED COMPANY VIZ. E - P A G E | 57 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) CLERX S ERVICES LTD. , HENCE IN OUR CONSIDERED VIEW THE LAT T ER COULD NOT HAVE BEEN SEL ECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE. APART THEREFROM, WE ARE ALSO INCLINED TO ACCEPT THE CONTENTIONS ADVANCED BY THE LD. A.R THAT AS THE AFOREMENTIONED COMPANY W AS ALSO INVOLVED IN ONSHORE ACTIVITIES BY PROVIDING SERVICES AT CUSTOMERS LOCATIO NS, THEREFORE, IN THE ABSENCE OF SEGMENTAL MARGINS FOR EACH OF THE SEGMENTS IT COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE. OUR AFORESAID VIEW THAT THE ABOVEMENTIONED COMPANY VIZ. E - CLERX SERVICES LTD. CANNOT BE ADOPTED AS A C OMPARABLE IN THE CASE OF A COMPANY PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES STANDS FORTIFIED FROM THE ORDER OF THE TRIBUNAL IN THE CASE OF AP A X PARTNERS INDIA ADVISORS (P) LTD. VS. DCIT (2017) 86 TAXMAN.COM 169 (MUM) , WHEREIN IT WAS HELD THAT E - C LERX SERVICES L T D. COULD NOT BE TAKEN AS A COMPARABLE IN THE CASE OF A COMPANY PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES. ALSO, AS THE RPT PERCEN T AGE OF THE AFOREMENTIONED COMPANY WORKS OUT TO 25.55% I.E IN EXCESS OF THE RPT FILTER O F 25% APPLIED BY THE TPO , THUS ON THE SAID COUNT ALSO THE SAME COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP HAD WRONGLY INCLUDED THE AFOREMENTIONED E - C LERX SERVICES L T D. AS A COMPARABLE IN THE CASE OF THE ASSESS EE. IN TERMS OF OUR AFORESAID OBSERVATIONS WE DIRECT THE AO/TPO TO EXCLUDE E - CLERX SERVICES LTD. FROM THE FINAL LIST OF COMPARABLES FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF T HE ASSESSEE DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y 2013 - 14. ( B ). HARTRON COMMUNICATIONS LTD .: WE SHALL NOW ADVERT TO THE CONTENTIONS THAT WERE ADVANCED BY THE LD. A.R FOR EXCLUSION OF HARTRON COMMUNICATIONS LTD. THAT WAS SELECTED BY THE TPO/DRP AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL P A G E | 58 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FROM THE FINAL LIST OF COMPARABLES . ON A PERUSAL OF THE A NNUAL REPORT OF THE AFOREMENTIONED COMPANY IT HAD STANDS REVEALED THAT THE LATTER IS A LEADING OFFSHORE BUSINESS PROCESS SERVICE PROVIDER IN THE MEDICAL BILLING AND HEALTH CARE SECTOR. AS COMPARED TO THE SAID BPO SERVICES RENDERED BY THE AFORE SAID COMPANY THE ASSESSEE ON THE OTHER HAND IS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES. ADMITTEDLY , THE FACT THAT HARTRON COMMUNICATIONS LTD. WAS A BPO SERVICE PROVIDER HAD NOT BEEN REBUTTED BY THE LD. D.R. APART THEREFROM, WE ARE IN AGREEMENT WITH THE CONTENTION ADVANCED BY THE LD. A.R THAT THE SAID COMPANY HAD BEEN EARNING FLUCTUATING MARGINS DURING THE PERIOD FALLING BETWEEN A.Y. 2009 - 10 TO 2013 - 14. THE TRENDS OF THE MARGINS OF THE AFOREMENTIONED COMPANY CAN BE GATHERED FROM A PERUSAL OF ITS MARGINS WHICH WE FIND HAD SUBSTANTIALLY FLUCTUATED DURING THE AFOREMEN TIONED PERIOD , AS UNDER: AY. 2009 - 10 MARGIN OF - 27.00% AY. 2010 - 11 - MARGIN OF - 22.28% AY. 2011 - 12 - MARGIN OF - 50.89% AY. 2012 - 13 - MARGIN OF - 32.98% AY. 2013 - 14 - MARGIN OF - 19.41% WE ARE OF THE CONSIDERED VIEW THAT AS ABNORMAL FLUCTUATION IN THE MARGINS OF A COMPANY OVER THE YEARS RENDERS IT UNFIT FOR BEING SELECTED AS A COMPARABLE, THUS FOR THE SAID REASON ALSO THE AFOREMENTIONED COMPANY VIZ. HARTRON COMMUNICATIONS LTD. COULD NOT H AVE BEEN SAFELY ADOPTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE BEFORE US. WE FIND THAT OUR AFORESAID OBSERVATIONS THAT A COMPANY WITH FLUCTUATING MARGINS CANNOT BE SELECTED AS A COMPARABLE ARE FORTIFIED BY THE ORDER OF THE S PECIAL BENCH OF THE TRIB UNAL IN THE CASE OF M A ERSK GLOBAL C ENTR E S (I NDIA ) P. LTD. VS. ACIT (2014) 147 ITD 83 (MUM) (SB) . ALSO, A SIMILAR VIEW HAD BEEN TAKEN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CH R YSCAPITAL INVESTMENT ADVISORS P A G E | 59 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) (I NDIA ) P. LTD. (2015) 56 TAXMAN. CO M 417 (DEL) . WE ARE ALSO INCLINED TO ACCEPT THE CONTENTION OF THE LD. A.R THAT NOW WHEN THE DRP DURING THE YEAR UNDER CONSIDERATION HAD IN THE CASE OF THE ASSESSEE REJECTED AS A COMPARABLE A COMPANY VIZ. A CCENTIA TECHNOLOGIES LTD WHICH WAS ALSO PROVIDING SERVICES IN THE INDUSTRY OF IT E S/IT SERVICES IN HEALTH CARE SECTOR, THUS HE COULD NOT HAVE TAKEN A CONTRARY VIEW AND SELECTED THE AFOREMENTIONED COMPANY I.E HARTRON COMMUNICATIONS L T D. AS A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. WE ALSO FIND FORCE IN THE AVERMENTS OF THE LD. A.R THAT AS ONLY SEGMENTAL INFORMATION OF OFFICE BACK UP OPERATIONS OF THE AFOREMENTIONED COMPANY I.E. HARTRON COMMUNICATIONS LTD. WHICH IS ENGAGED IN W IDE RANG E OF BPO, LP O, IT OFFICE SERVICES IS AVAILABLE ON ITS WEBSITE, THUS IN THE BACKDROP OF THE SAID FACT TOO IT COULD NOT HAVE BEEN SELECTED AS A COMPARABLE IN THE CASE OF THE ASSESSEE . WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE TPO/DRP HAD WRONGLY INCLUDED THE AFOREMENTIONED HARTRON COMMUNICATIONS LTD. AS A COMPARABLE IN THE CASE OF THE ASSESSEE. IN TERMS OF OUR AFORESAID OBSERVATIONS WE DIRECT THE AO/TPO TO EXCLUDE HARTRON COMMUNICATIONS LTD. FROM THE FINAL LIST OF COMP ARABLES FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y 2013 - 14. 43 . INSOFAR, THE CONTENTION OF THE LD. A.R THAT RISK ADJUSTMENT IS REQUIRED TO BE DONE IN ORDER TO MAKE AN EQUITABLE C OMPARISON BETWEEN THE ASSESSEE AND THE COMPARABLE SELECTED BY THE TPO/DRP, THE SAME IN OUR CONSIDERED VIEW WOULD NOT SUBSIST ANYMORE AS THE COMPARABLES SELECTED BY THE TPO/DRP HAD BEEN DIRECTED BY US TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. WE TH US IN TERMS OF OUR OBSERVATIONS RECORDED IN CONTEXT OF THE SAID ISSUE WHILE DISPOSING OFF THE APPEAL OF P A G E | 60 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) THE ASSESSEE FOR THE A.Y 2012 - 13 REJECT THE AFORESAID CLAIM OF THE ASSESSEE. 44. I N TERMS OF OUR AFORESAID OBSERVATIONS WE DIRECT THE A.O/TPO TO RECO MPUTE THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AFTER INCLUDING/EXCLUDING THE AFOREMENTIONED COMPANIES FROM THE FINAL LIST OF THE COMPARABLES. IN CASE THE ALP OF THE ASSESSEE IS FOUND TO BE WITHIN THE SAFE HARBOUR MARGIN OF +/ - 5% OF THE ME AN MARGIN OF THE FINAL LIST OF COMPARABLES THEN NO TP ADJUSTMENT WOULD BE CALLED FOR IN HANDS OF THE ASSESSEE. 4 5 . THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 4 6 . THAT BOTH THE APPEALS OF THE ASSESSEE FOR A.Y 2012 - 13 I.E ITA NO. 2366/MUM/2017 AND FOR A.Y 2013 - 14 I.E ITA NO. 6321/MUM/2017 ARE PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOU NCED IN THE OPEN COURT ON 27 /02 /2019. SD/ - SD/ - (R.C. SHARMA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 27.02.2019 PS. ROHIT P A G E | 61 ITA NO.2366 & 6321/MUM/2017 A.YS. 2012 - 13 & 2013 - 14 CARLYLE INDIA ADVISORS PRIVATE LTD. VS. INCOME TAX OFFICER - 14(1)(2) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI