GUGGENHEIM CAPITAL MANAGEMENT (ASIA) P. LTD, MUMBAI V. ASST CIT CIR 3(1)(2), MUMBAI

ITA 423/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3626 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDHIR NAYAKMAULIK DOSHI; ANUJ KISNADVALA
• Keywords: Transfer pricing; International transaction; Tax effect
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, JM & SHRI M.BALAGANESH , AM ITA NO. 423 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) IT(TP)A NO. 1164/MUM/2017 (ASSESSMENT YEAR: 2012 - 13 M/S. GUGGENHEIM CAPITAL MANAGEMENT (A SIA) PRIVATE LIMITED C/O. QUEST OFFICES, 1 ST FLOOR PARINEE CRESCENZO BUILDING C 38 & 39, G BLOCK, BANDRA KURLA COMPLEX, MUMBAI 400 051 VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 PAN/GIR NO. AADCG2796G ( APPELLANT ) .. ( RESPONDENT ) ITA NO. 299 /MUM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 VS. M/S. GUGGENHEIM CAPITAL MANAGE MENT (ASIA) PRIVATE LIMITED C/O. QUEST OFFICES, 1 ST FLOOR PARINEE CRESCENZO BUILDING C 38 & 39, G BLOCK, BANDRA KURLA COMPLEX, MUMBAI 400 051 PAN/GIR NO. AADCG2796G ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI ANUJ KISNADVALA / SHRI RUSHABH VORA / SHRI MAULIK DOSHI REVENUE BY SHRI ANAND MOHAN DATE OF HEARING 18 / 02 /201 9 DATE OF PRONOUNCEMENT 20 / 02 /201 9 ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 2 / O R D E R PER M. BALAGANESH (A.M) : THESE CROSS APPEALS ARE FILED BY ASSESSEE AND R EVENUE DIRECTED AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS) - 1 , [HEREINAFTER REFERRED TO AS THE LD CITA] , MUMBAI DATED 23 RD SEPTEMBER 2015 FOR A.Y.201 1 - 12 AND 2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 144C OF THE INCOME - TAX ACT, 1961. SINCE IDENTICAL ISSUES ARE IN VOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATE ORDER, FOR THE SAKE OF CONVENIENCE. 2. LET US TAKE UP ASSESSEE APPEAL FOR A.Y.2011 - 12 IN ITA NO.423/MUM/2016. THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS B EFORE US, WE FIND THAT THE ONLY ISSUE TO BE DECIDED IS AS TO WHETHER THE LD. DRP WAS JUSTIFIED IN NOT INCLUDING IDC (INDIA) LTD., INFORMED TECHNOLOGIES INDIA LTD., PIPAL RESEARCH ANALYTICS & INFORMATION SERVICES INDIA PVT. LTD., AND ICRA MANAGEMENT CONSULT ING SERVICES LTD., AS COMPARABLE COMPANIES FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE. THE INTERCONNECTED ISSUE IS WHETHER THE LD. DRP WAS JUSTIFIED IN INCLUDING THE LADDERUP CORPORATE ADVISORY PVT. LTD. AS COMPARABLE FOR THE PURPOSE OF BENCHMARKING INTERNATIONAL TRANSACTIONS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PART OF GUGGANHEIM GROUP WHICH PROVIDES DIVERSIFIED FINANCIAL SERVICES. IT RENDERS ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 3 ASSET MANAGEMENT, INVESTMENT BANKING AND CAPITAL MARKET SERVICES, INSURANCE, INSTITUTIONAL FINANCE AND INVESTMENT ADVISORY SOLUTIONS. THE ASSESSEE IS ENGAGED IN PROVIDING NON - BINDING/RECOMMENDATORY INVESTMENT ADVISORY SERVICES TO GUGGANHEIM PARTNERS INDIA MANAGEMENT, LLC [HEREINAFTER REFERRED AS AE]. ASSESSEE COLLECTS INFORMATION FROM ABOVE COMPANIES, FUNDS OR PORTFOLIOS RECOMMENDED BY THE AE AND ANALYSE THE SAME TO GIVE ITS REPORTS TO ITS OVERSEAS AE. ASSESSEE IS ENGAGED IN BUSINESS OF PROVIDING INVESTME NT RESEARCH AND ADVISORY SERVICES TO ITS AES ON A NON - EXCLUSIVE AND NON - BINDING BASIS, IN CONNECTION WITH POTENTIAL INVESTMENT OPPORTUNITIES IN INDIA. THE DETAILS OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE DURING THE YEAR AS MENTIONED IN T HE ORDER OF THE LD. TPO DATED 13/01/2015 ARE AS UNDER: - SR. NO. NATURE OF INTERNATIONAL TRANSACTION FY 2010 - 11 METHOD USED 1 RENDERING NON - BINDING INVESTMENT ADVISORY SERVICES 6,63,82,418 TNMM 2 PAYMENT OF SUPPORT AND GLOBAL MANAGEMENT CHARGES 64,84,986 TNMM 3 REIMBURSEMENT OF EXPENSES 33,47,700 COST TO COST TOTAL 7,62,15,104 3.1. THE ASSESSEE BENCHMARKED ITS INTERNATIONAL TRANSACT IONS BY USING MULTIPLE YEAR DATA OF LAST THREE YEARS AVERAGE MARGIN AND BY IDENTIFYING FOLLOWING FIVE COMPARABLES AND ARRIVED AT WEIGHTED AVERAGE MARGIN OF 14.31% AS UNDER: - ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 4 SR. NO. NAME OF THE COMPANY THREE YEAR AVERAGE OPERATING PROFIT / OPERATING COST 1 ICRA MANAGEMENT CONSULTING SERVICES LTD., 5.03 2 ICRA ONLINE LTD., 34.87 3 IDC (INDIA) LTD., 12.30 4 INFORMED TE CHNOLOGIES INDIA LTD., 19.39 5 PIPAL RESEARCH ANALYTICS & INFORMATION SERVICES INDIA PVT LTD., - 0.03 AVERAGE 14.31 3.2. THE ASSESSEE ADOPTED T RANSACTIONAL N ET M ARGIN M ETHOD [TNMM] AS M OST A PPROPRIATE M ETHOD (MAM) BY ADOPTING P ROFIT L EVEL I NDICATOR [PL I] AS OPERATING PROFIT DIVIDED BY OPERATING COST (OP/OC) BY TAKING THE ASSESSEE COMPANY AS THE TESTED PARTY. THE PROFIT MARGIN OF THE ASSESSEE WAS 17.77% WHICH WAS HIGHER THAN THE COMPARABLES WEIGHTED AVERAGE MARGIN BASED ON THEIR THREE YEARS DATA OF 14.31 % AS ABOVE. ACCORDINGLY, THE ASSESSEE PLEADED THAT ITS MARGIN TO BE AT ARMS LENGTH PRICE. THE LD. TPO REJECTED FOUR OUT OF FIVE COMPARABLES IDENTIFIED BY THE ASSESSEE AND RETAINED ONLY ICRA ONLINE LTD., FROM THE COMPARABLES CHOSEN BY THE ASSESSEE. 3.3. DU RING THE COURSE OF PROCEEDINGS BEFORE THE TPO, ASSESSEE GAVE A SINGLE YEAR DATA I.E., CONTEMPORANEOUS DATA FOR ALL THE FIVE LIST OF COMPARABLES SELECTED BY THE LD. TPO WHICH ADMITTEDLY INCLUDED THE LIST OF FRESH COMPARABLES IDENTIFIED BY THE LD. TPO FOR TH E PURPOSE OF BENCHMARKING. ACCORDINGLY, THE FINAL LIST OF COMPARABLES AND ITS RESPECTIVE MARGINS BASED ON SINGLE YEAR DATA ARE AS UNDER: - ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 5 SR. NO. NAME OF THE COMPANY SINGLE YEAR OP/TC (%) COMPARABLE SELECTED BY 1 ICRA ONLINE LTD 21.63% ASSESSEE 2 MOTILAL OSWAL INVESTMENT ADVISORY PVT. LTD. 82.29% TPO 3 LADDERUP CORPORATE ADVISORY PVT LTD 52.43% TPO 4 NEW BERRY ADVISORS LTD., 35.62% TPO 5 ICRA TECHNOLOANALYST LTD., 24.29% TPO AVERAGE 43.26% 3.4. ACCORDINGLY, THE LD. T PO MADE AN ADJUSTMENT OF RS.1,3 9 ,97,428/ - AS UNDER: - PARTICULARS AMOUNT (RS.) OPERATING INCOME (A) 6,46,96,564 OPERATING COST (B) 5,49,34,724 OPERATING PROFIT (C) 97,61,840 OP/OC 17.77% ARM'S LENGTH OP/OC 43.25 % ARM'S LENGTH OPERATING INCOME (E) 7,86,93,992 ADJUSTM ENT - E - A 1,39,97,42 8/ - 105% OF INCOME (A) 6,79,31,392 95% OF INCOME (A) 6,14,61,736 3.5. THE ASSESSEE FILE D OBJECTIONS BEFORE THE HONBLE DISPUTE RESOLUTION PANEL (LD. DRP) AN D THE LD. DRP VIDE ITS DIRECTIONS U/S.144C(5) OF THE ACT DATED 23/09/2 015 DIRECTED THE TPO TO INCLUDE MOTILAL OSWAL INVESTMENT ADVISORY PVT. LTD., AND ICRA TECHNOANALYST LTD., IN THE LIST OF FINAL COMPARABLES CHOSEN BY THE LD. TPO AND DIRECTED THE LD. TPO TO ARRIVE AT THE REVISED BENCHMARKING AND MAKE SUITABLE ADJUSTMENTS TH EREON TO ALP. ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 6 4 . AGAINST THE SAID DIRECTIONS OF THE LD. DRP, BOTH ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. REVENUE IS IN APPEAL AGAINST THE DIRECTIONS OF THE LD. DRP TO INCLUDE MOTILAL OSWAL INVESTMENT ADVISORY PVT. LTD., AND ICRA TECHNOAN ALYST LTD. IN THE LIST OF COMPARABLES. THE ASSESSEE IS IN APPEAL BEFORE US FOR REJECTION OF COMPARABLES CHOSEN BY IT I.E IDC INDIA LTD., INFORMED TECHNOLOGIES INDIA LTD., PIPAL RESEARCH ANALYST & INFORMATION SERVICES INDIA PVT LTD., AND ICRA MANA GEMENT CON SULTING SERVICES LTD. ASSESSEE IS ALSO IN APPEAL BEFORE US AGAINST THE ORDER OF DRP IN UPHOLDING THE INCLUSION OF LADDERUP CORPORATE ADVISORY PVT. LTD., AND PRAYED FOR EXCLUSION OF THE SAME FROM THE LIST OF COMPARABLES. 5. T HE LD. AR PLACED ON RECORD THE COPIES OF CO - ORDINATE BENCH DECISIONS OF THIS TRIBUNAL IN ITA NOS.928 & 1370/MUM/2016 DATED 30/11/2018 FOR A.Y.2011 - 12 IN THE CASE OF BLACKSTONE ADVISORS INDIA PVT. LTD., ITA NOS. 1717 & 2207/MUM/2016 DATED 21/02/2018 FOR A.Y.2011 - 12 IN THE CASE OF GENER AL ATLANTIC PVT. LTD., AND IT(TP)A NOS. 1148& 2092/MUM/2016 DATED 30/11/2018 FOR A.Y.2011 - 12 IN THE CASE OF NEW SILK ROUTE ADVISORS PVT. LTD., WHEREIN IDC (INDIA) LTD., AND ICRA MANAGEMENT CONSULTIN G SERVICES LTD., WERE SOUGHT TO BE INCLUDED AS COMPARABLE COMPANY FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTIONS IN VIEW OF FUNCTIONAL SIMILARITIES. THE LD. AR ALSO PLACED RELIANCE ON THE AFORESAID ORDERS TO DRIVE HOME HIS POINT FOR EXCLUSION OF ONE OF THE COMPARABLES LADDERUP CORPORATE ADVISORY P VT. LTD. FROM THE ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 7 LIST OF COMPARABLES. IN RESPONSE THERETO, THE LD. DR DREW OUR ATTENTION TO THE FACT THAT LD. DRP IN PAGE 28 AT PARA 3.9.2. HAD CATEGORICALLY STATED THAT THE INCOME OF THE ASSESSEE DURING THE YEAR WAS RS.11.18 CRORES FROM FINANCIAL AND MAN AGEMENT CONSULTANCY FEES. COMPANY HAD ACQUIRED MERCHANT BANKING LICENSE ONLY IN JULY 2010. THERE IS NO EVIDENCE THAT DURING THE YEAR 2010 - 11 ANY INCOME HAS BEEN RECEIVED FROM MERCHANT BANKING. BASED ON THESE OBSERVATIONS, THE LD. DR H E LD THAT LADDERUP CORP ORATE ADVISORY PVT. LTD. TO BE A VALID COMPARABLE. 6. WE HAVE HEARD RIVAL SUBMISSIONS. LET US NOW EXAMINE EACH OF THE COMPARABLES UNDER DISPUTE BEFORE US. A. LADDERUP CORPORATE ADVISORY PVT. LTD : WE FIND THE ENTIRE ARGUMENT OF THE LD. DR HAVE ALREADY B EEN CONSIDERED BY THE CO - ORDINATE BENCH DECISION OF THIS TRIBUNAL IN IT(TP) A NO S . 1148 & 2092/MUM/2016 FOR A.Y.2011 - 12 IN THE CASE OF NEW SILK ROUTE ADVISORS PVT. LTD., WHEREIN IT WAS HELD AS UNDER: - 11. THIS COMPANY WAS SELECTED BY THE TRANSFER PRICING O FFICER AND WAS ALSO RETAINED BY THE DRP. 12. OBJECTING TO THE SELECTION OF THE AFORESAID COMPANY BY THE TRANSFER PRICING OFFICER AND THE DRP, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED, THE COMPANY BEING A MERCHANT / INVESTMENT BANKING COMPANY, IS FUNCT IONALLY DIFFERENT FROM THE ASSESSEE, HENCE, CANNOT BE TREATED AS COMPARABLE TO AN INVESTMENT ADVISORY SERVICE PROVIDER LIKE THE ASSESSEE. IN THIS CONTEXT, HE RELIED UPON THE FOLLOWING DECISIONS: I) DCIT V/S GENERAL ATLANTIC PVT. LTD., 91 TAXMANN.COM 406 ( MUM.); II) TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD. V/S DCIT, [2017] 87 TAXMANN.COM 168; III) WELL FARGO REAL ESTATE ADVISORS PVT. LTD. V/S DCIT, [2018] 90 ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 8 TAXMANN.COM 18 IV) AVENUE ASIA ADVISORS PVT. LTD. V/S DCIT, [2017] 85 TAXMANN.COM 311 (DEL.) 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE TRANSFER PRICING OFFICER AND THE DRP. 14. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. FROM THE FUNCTIONAL PROFILE OF THE AFORESAID COMPANY IT APPEARS THA T IT IS REGISTERED AS CATEGORY 1 MERCHANT BANKING COMPANY WITH SEBI AND IS ENGAGED IN MERCHANT BANKING SERVICES W.E.F. JULY 2010. CONSIDERING THE AFORESAID FACTUAL ASPECT, THE CO ORDINATE BENCH IN THE DECISIONS CITED BY THE LEARNED AUTHORISED REPRESENTATI VE FOR THE ASSESSEE HAS HELD THAT THIS COMPANY CANNOT BE A COMPARABLE TO A COMPANY ENGAGED IN THE ACTIVITY OF INVESTMENT ADVISORY SERVICES. SINCE, THE AFORESAID DECISIONS ARE FOR THE VERY SAME ASSESSMENT YEAR AND NO DISTINGUISHING FACT IN THE PRESENT APPEA L WAS BROUGHT TO OUR NOTICE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL, WE HOLD THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE HOLD THAT LADDERUP CORPORATE ADVISORY PVT. LTD., CANNOT BE TREATED AS A COMPARABLE TO THE ASSESSEE. B. INCLUSION OF IDC (INDIA) LTD.,: - WE FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO S .1717 & 2207/MUM/2016 DATED 21/02/2018 FOR A.Y.2011 - 12 IN THE CASE OF GENERAL ATLANTIC PVT. LTD., HAD OBSERVED AS UNDER: - 15. INSOFAR AS IDC (INDIA) LTD. IS CONCERNED, IT IS OBSERVED, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 07, THE TRIBUNAL ACCEPTED THIS COMPANY AS A COMPARABLE WHICH WAS UPHELD BY TH E HON'BLE JURISDICTIONAL HIGH COURT WHILE DISMISSING THE APPEAL FILED BY THE ASSESSEE. WHILE UPHOLDING THE DECISION OF THE TRIBUNAL, THE HON'BLE JURISDICTIONAL HIGH COURT OBSERVED THAT SINCE THE NON BINDING ADVISORY SERVICE PROVIDED BY THE ASSESSEE IS SIMI LAR TO THE SERVICE PROVIDED BY CARLYLE INDIA LTD., WHEREIN, IDC (INDIA) LTD. IS ACCEPTED AS A COMPARABLE THERE IS NO REASON TO DEFER WITH THE DECISION OF THE TRIBUNAL. IT IS NECESSARY TO OBSERVE, IN CASE OF OTHER ASSESSEES ENGAGED IN PROVIDING NON BINDING INVESTMENT ADVISORY SERVICES AKIN TO THE ASSESSEE FOR THE VERY SAME ASSESSMENT YEAR, ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 9 THE TRIBUNAL HAS HELD THAT IDC (INDIA) LTD. IS A GOOD COMPARABLE. IN THIS CONTEXT, WE REFER TO THE DECISIONS OF THE TRIBUNAL IN CASE OF AGM INDIA ADVISORY PVT. LTD. (SUPRA ) AND TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD. V/S DCIT, 87 TAXMANN.COM 168 (MUM.). MOREOVER, IN ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEARS, THIS COMPANY HAVING BEEN FOUND TO BE FUNCTIONALLY SIMILAR WAS ACCEPTED AS A COMPARABLE. IN VIEW OF THE AF ORESAID, WE DIRECT THE ASSESSING OFFICER TO INCLUDE THIS COMPANY AS A COMPARABLE. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE LD. AO TO INCLUDE THIS COMPANY TO BE A COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF THE ASSESSEE. C. ICRA M ANAGEMENT CONSULTING SERVICES LTD : WE FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO S . 928&1370/MUM/2018 DATED 30/11/2018 FOR A.Y.2011 - 12 IN THE CASE OF BLACKSTONE ADVISORS INDIA PVT. LTD., HAD OBSERVED AS UNDER: - 8. THIS IS ONE OF THE COMPANI ES SELECTED BY THE ASSESSEE. THE TRANSFER PRICING OFFICER REJECTED THIS COMPARABLE ON THE REASONING THAT THE COMPANY IS NOT FUNCTIONALLY SIMILAR TO THE ASSESSEE ON THE BASIS FUNCTIONS PROVIDED, ASSET EMPLOYED AND RISK UNDERTAKEN. THE TRANSFER PRICING OFFIC ER OBSERVED, WHILE THE ASSESSEE IS PROVIDING INVESTMENT ADVISORY SERVICES, AS PER THE INFORMATION OBTAINED UNDER SECTION 133(6) OF THE ACT, THIS COMPANY PROVIDES MANAGEMENT CONSULTANCY AND ADVISORY SERVICES TO CORPORATE BANKS, GOVERNMENT, MULTILATERAL AGEN CIES, INSTITUTIONAL AGENCIES, ETC. WHEREAS, THE ASSESSEE IS PROVIDING INVESTMENT ADVISORY SERVICES FOR PRIVATE EQUITY INVESTMENT AS WELL AS REAL ESTATE INVESTMENT TO THE A.ES. THUS, HE HELD THAT THE COMPANY IS NOT A COMPARABLE. THIS VIEW OF THE TRANSFER PR ICING OFFICER WAS ALSO ENDORSED BY THE DRP. 9. THE LEARNED SR. COUNSEL FOR THE ASSESSEE SUBMITTED, FUNCTIONS PERFORMED BY THIS COMPANY IS MORE OR LESS SIMILAR TO THE INVESTMENT ADVISORY SERVICES PROVIDED BY THE ASSESSEE TO THE A.ES. HE SUBMITTED, IN A NU MBER OF CASES RELATING TO THE VERY SAME ASSESSMENT YEAR THE TRIBUNAL HELD THIS COMPANY TO BE A COMPARABLE TO AN INVESTMENT ADVISORY SERVICE PROVIDER. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE FOLLOWING DECISIONS: I) DCIT V/S GENERAL ATLANTIC PVT. LTD. , ITA NO.1717/MUM./ 2016, DATED 21.02.2018; II) TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD. V/S DCIT, [2017] 87 ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 10 TAXMANN.COM 168; AND III) SUN ARES INDIA REAL ESTATE PVT. LTD. V/S DCIT, ITA NO.621/ MUM./2016, DATED 09.02.2018. 10. THE LEARNED SR. COUNSEL SU BMITTED, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 09, THE TRIBUNAL HAS ACCEPTED THIS COMPANY AS COMPARABLE TO THE ASSESSEE. THUS, HE SUBMITTED, THIS COMPANY HAS TO BE ACCEPTED AS A COMPARABLE. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE DRP AND THE TRANSFER PRICING OFFICER. 12. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD IN THE LIGHT OF DECISIONS RELIED UPON. AS COULD BE SEEN FROM THE FACTS ON RECORD, THIS COMPANY IS PROVIDING ADVIS ORY SERVICES, HENCE, IS FUNCTIONALLY SIMILAR TO THE ASSESSEE. THE ONLY REASON THE TRANSFER PRICING OFFICER HAS REJECTED THIS COMPANY AS COMPARABLE IS BECAUSE IT IS PROVIDING MANAGEMENT CONSULTANCY SERVICES TO BANKS, CORPORATES AND GOVERNMENT, ETC. HOWEVER, NO SUBSTANTIVE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT TO DEMONSTRATE THAT THE FUNCTIONS PERFORMED BY THIS COMPANY ARE DRASTICALLY DIFFERENT FROM THE ASSESSEE. IN FACT, IN A NUMBER OF DECISIONS, THE CO ORDINATE BENCH HAS HELD THIS COMPANY AS A COMPARABLE TO A INVESTMENT ADVISORY SERVICE PROVIDER. IN THIS CONTEXT, IT IS RELEVANT TO TAKE NOTE OF THE FOLLOWING OBSERVATIONS OF THE CO ORDINATE BENCH IN CASE OF GENERAL ATLANTIC PVT. LTD. (SUPRA) WHICH IS FOR THE VERY SAME ASSESSMENT YEAR. 14. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL AVAILABLE ON RECORD. INSOFAR AS ICRA MANAGEMENT CONSULTING SERVICES LTD. IS CONCERNED, THE TRANSFER PRICING OFFICER HAS REJECTED IT AS A COMPARABLE BASICALLY ON THE REASONING THAT UNLIKE THE ASSESSEE THIS C OMPANY IS PROVIDING MANAGEMENT CONSULTING SERVICE. ONE MORE REASON BY THE TRANSFER PRICING OFFICER TO EXCLUDE THIS COMPANY IS DIFFERENCE IN SKILL SET OF EMPLOYEES. HOWEVER, WE FIND NOTHING NEW IN THE ARGUMENT OF THE DEPARTMENT AS UPON CONSIDERATION OF THE VERY SAME ARGUMENT, THIS COMPANY HAS BEEN FOUND TO BE A COMPARABLE TO A NON BINDING INVESTMENT ADVISORY SERVICE PROVIDER. IT IS RELEVANT TO OBSERVE, IN CASE OF AGM INDIA ADVISORS PVT. LTD. V/S DCIT, [2017] 79 TAXMANN.COM 86 WHICH IS FOR THE VERY SAME ASSES SMENT YEAR, THE TRIBUNAL AFTER CONSIDERING ARGUMENT ADVANCED BY THE DEPARTMENT REGARDING DIFFERENCE IN SKILL SET HELD THAT ICRA MANAGEMENT CONSULTANCY SERVICES IS A VALID COMPARABLE TO A COMPANY PROVIDING NON BINDING INVESTMENT ADVISORY SERVICES. IT IS AL SO RELEVANT TO NOTE, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 10, THIS COMPANY HAS BEEN ACCEPTED AS A COMPARABLE BY THE DRP. EVEN OTHERWISE ALSO, THE OBSERVATIONS OF THE TRANSFER PRICING OFFICER ON DIFFERENCE IN SKILL SET BETWEEN THE ASSESSEE AND TH E COMPARABLE COMPANY APPEARS TO BE NOT ON THE BASIS OF PROPER ANALYSIS OF FACT AND MORE ON ASSUMPTION AND ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 11 PRESUMPTION. AS REGARDS OTHER FUNCTIONAL DIFFERENCES OF THIS COMPARABLE POINTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT NEEDS TO BE MENTIONED, NEITHER TRANSFER PRICING OFFICER NOR DRP HAVE DELIBERATED ON THOSE ASPECTS. SINCE THESE ISSUES RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ARE COMPLETELY NEW ISSUES AND NEVER RAISED AT ANY STAGE EARLIER, WE DO NOT CONSIDER IT APPROPRIATE TO DEAL WITH THEM AS IT REQUIRES VERIFICATION OF FRESH FACTS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRIBUNAL CITED BEFORE US BY THE LEARNED AUTHORISED REPRESENTATIVE, WE DIRECT THE ASSESSING OFFICER TO ACCEPT THIS COMPANY AS A COMPARABLE. 13. IT IS ALSO RELEVANT TO OBSERVE, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 09, THE TRIBUNAL HAVING FOUND THE COMPANY TO BE FUNCTIONALLY SIMILAR TO THE ASSESSEE HAS ACCEPTED IT AS COMPARABLE. IN VIEW OF THE AFORESAID, WE DIRECT THE ASSESSING OFFICER TO INCLU DE THIS COMPANY AS A COMPARABLE. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE LD. AO TO INCLUDE THIS COMPANY AS COMPARABLE FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF THE ASSESSEE. 6.1 . THE LD. AR STATED BEFORE US THAT IF ICRA MANAGEMENT CONSUL TING SERVICES AND IDC (INDIA) LTD., ARE INCLUDED IN THE LIST OF COMPARABLES AND LADDERUP CORPORATE ADVISORY PVT. LTD IS EXCLUDED FROM THE LIST OF COMPARABLES , A SSESSEE WOULD BE WELL WITHIN THE +/ - 5% RANGE AND HENCE, IT WOULD BE T HROUGH WITH REGARD TO ITS ALP. IN VIEW OF THE SAME, WE REFRAIN TO GIVE OUR OPINION ON THE OTHER COMPARABLES FOR WHICH GROUNDS HAVE BEEN RAISED BY THE ASSESSEE BEFORE US AND THOSE ISSUES ARE LEFT OPEN. THE LD. TPO IS DIRECTED TO RECOMPUTE THE MARGINS OF THE COMPARABLES SUBJECT TO TH E AFORESAID DIRECTIONS. ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 12 6.2. WITH REGARD TO THE REVENUE APPEAL, THE DISPUTED ISSUE BEFORE US AS STATED IN THE GROUNDS OF APPEAL BY THE REVENUE IS ONLY RS.36,75,133/ - . IT WOULD BE SQUARELY HIT BY THE RECENT CIRCULAR OF THE CBDT VIDE CIRCULAR NO. 3/2018 DATE D 11.07.2018 WHEREIN TAX EFFECT ON THE DISPUTED ISSUE WOULD BE LESS THAN RS.20,00,000/ - . HENCE, THE REVENUE APPEAL IS DISMISSED BY PLACING RELIANCE ON THE SAID CIRCULAR. 7 . ACCORDINGLY, THE APPEAL OF THE ASSESSEE FOR A.Y.2011 - 12 IS ALLOWED AND APPEAL OF THE REVENUE FOR A.Y.2011 - 12 IS DISMISSED. 8 . LET US COME TO APPEAL OF THE ASSESSEE FOR A.Y.2012 - 13 IN IT(TP)A NO.1146/MUM/2017. 9 . WE FIND THAT ASSESSEE SOUGHT FOR INCLUSION OF THE FOLLOWING COMPARABLES VIZ., 1. ICRA MANAGEMENT CONSULTING SERVICES LTD., 2. IDC (INDIA) LTD., AND 3. INFORMED TECHNOLOGIES INDIA LTD., AND SOUGHT FOR EXCLUSION OF LADDERUP CORPORATE ADVISORY PVT. LTD. FOR THE A.Y.2012 - 13 FOR THE PURPOSE OF BENCHMARKING INTERNATIONAL TRANSACTIONS CARRIED OUT BY HIM. 9.1 . THE BRIEF FACTS OF THIS IS SUE ARE THAT THE BUSINESS PROFILE OF ASSESSEE REMAIN THE SAME IN A.Y.2012 - 13 ALSO AND THE DETAILS OF VARIOUS INTERNATIONAL TRANSACTION S CARRIED OUT BY THE ASSESSEE DURING THE YEAR ARE AS UNDER: - SR. NO. NATURE OF INTERNATIONAL TRANSACTION FY 2011 - 12 METHOD USED 1 PROVISION OF NON - BINDING INVESTMENT ADVISORY SERVICES 59,546,585 TNMM 2 AVAILING OF SUPPORT AND GLOBAL 7,295,607 TNMM ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 13 MANAGEMENT CHARGES 3 REIMBURSEMENT OF EXPENSES 3,351,875 COST TO COST TOTAL 70,194,067 9.2. THE ASSESSEE CLAIMED ITS PROFIT MARGIN AT 15.07%. THE ASSESSEE BENCHMARKED ITS TRANSACTIONS BY USING BOTH MULTIPLE YEAR DATA AND SINGLE YEAR DATA OF THE FOLLOWING COMPARABLES AS UNDER: - SR. NO. NAME OF THE COMPANY THREE YEAR AVERAGE OPERATING PROFIT / OPERATING COST SINGLE YEAR UPDATED M ARGINS (FY 2011 - 12) 1 CYBER MEDIA RESEARCH LTD., 4.34 ( - 30.51) 2 ICRA MANAGEMENT CONSULTING SERVICES LTD., 7.73 6.95 3 ICRA ONLINE LTD., 30.61 14.93 4 INFORMED TECHNOLOGIES INDIA LTD., 14.35 8.26 AVERAGE 14.26 - 0.09 9.3. THE LD. TPO REJECTED THE CO MPARABLES CHOSEN BY THE ASSESSEE EXCEPT ICRA ONLINE LTD., AND INCLUDED LADDERUP CORPORATE ADVISORY PVT. LTD IN HIS LIST OF COMPARABLES AND ARRIVED AT THE AVERAGE COMPARABLES MARGINED AT 26.45% AS AGAINST THE ASSESSEES MARGIN AT 15.07%. THE LD. TPO ACCORDI NGLY MADE AN ADJUSTMENT OF RS.63,14,561/ - TO ALP AS UNDER: - PARTICULARS AMOUNT (RS.) OPERATING INCOME (A) 6,38,71, 566/ - OPERATING COST (B) 5,55,05,043 / - . OPERATING PROFIT (C) 83,66,523 / - OP/OC 15.07% ARM'S LENGTH OP/OC 26.45% ARM'S L ENGTH OPERATING INCOME (E) 7,01,86,127 / - ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 14 ADJUSTMENT - E - A 63,14,561 105% OF INCOME (A) 6,79,31,392/ - 95% OF INCOME (A) 6,14,61,736 / - 10. THE LD. DRP UPHELD THE ACTION OF TH E LD. TPO BY PLACING RELIANCE OF THEIR OWN ORDER FOR A.Y.2011 - 12 IN ASS ESSEES OWN CASE. 11. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAD FILED GROUNDS OF APPEAL FOR EXCLUSION OF LADDERUP CORPORATE ADVISORY PVT. LTD. AND INCLUSION OF ICRA MANAGEMENT CON SULTING SERVICES LTD., IDC (INDIA) LTD., AND INFORMED TECHNOLOGIES INDIA LTD. WE FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF GOLDMAN SACHS ASSET MANAGEMENT (INDIA) PVT. LTD., IN ITA NO.1427/MUM/2017 DATED 31/08/2018 FOR A.Y. 2012 - 13 WIT H REGARD TO THE AFORESAID COMPARABLES HAD OBSERVED AS UNDER: - T HE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS NO DISPUTE SO FAR AS THE NATURE OF SERVICES BEING RENDERED BY THE ASSESSEE IS CONCERNED, BEING NON - BINDING INVESTMENT ADVI SORY SERVICES. IT IS POINTED OUT THAT THE ACTION OF THE TPO IN CONSIDERING LADDERUP CORPORATE ADVISORY PVT. LTD. AS A COMPARABLE IS INCORRECT INASMUCH AS THE SAID CONCERN IS FUNCTIONALLY DISSIMILAR. IT HAS BEEN POINTED OUT THAT THE SAID CONCERN IS REGISTER ED WITH THE SEBI AS A CATEGORY - I MERCHANT BANKER AND IS, INTER - ALIA, ENGAGED IN RENDERING SERVICES IN INVESTMENT BANKING, CAPITAL MARKETS, WEALTH MANAGEMENT, PROJECT FINANCE AND GROWTH STAGE INVESTING, ETC. REFERENCE HAS ALSO BEEN MADE TO PARA 9.1 OF THE O RDER OF TPO TO POINT OUT THAT ASSESSEE HAD BROUGHT OUT, ON THE BASIS OF THE WEBSITE EXTRACT OF THE SAID CONCERN, THAT IT WAS ENGAGED IN RENDERING INVESTMENT BANKING AND DEBT CAPITAL SERVICES AND NOT INVESTMENT ADVISORY SERVICES. BEFORE THE TPO, ASSESSEE HA S ALSO POINTED OUT THAT EVEN IF THERE WAS ANY ELEMENT OF INVESTMENT ADVISORY SERVICES BEING RENDERED BY THE SAID CONCERN, THE ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 15 ANNUAL REPORT OF THE SAID CONCERN SHOWED THAT THERE WAS NO SEPARATE REPORTABLE SEGMENT AND, THEREFORE, THE SAID CONCERN COULD NOT BE COMPARED WITH THE TESTED TRANSACTIONS. AT THE TIME OF HEARING, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT FOR THE INSTANT ASSESSMENT YEAR, UNDER IDENTICAL CIRCUMSTANCES, IN THE CASE OF TEMASEK HOLDINGS ADVISORS (INDIA) PVT. LTD. (ITA N O. 1429/MUM/2017 DATED 03.01.2018), THE SAID CONCERN STOOD HELD TO BE FUNCTIONALLY DISSIMILAR TO THE ACTIVITIES SIMILAR TO THAT OF THE ASSESSEE. RELIANCE HAS ALSO BEEN PLACED ON THE CASE OF TEMASEK HOLDINGS ADVISORS (INDIA) PVT. LTD. (ITA NO. 477/MUM/2016 DATED 11.08.2017) AND WELLS FARGO REAL ESTATE ADVISORS PVT. LTD., (ITA NO.1520/MUM/2016 DATED 17.01.2018. 6. APART THEREFROM, IT IS POINTED OUT THAT IN THE FOLLOWING DECISIONS, IT HAS BEEN HELD THAT A CONCERN ENGAGED IN MERCHANT BANKING ACTIVITIES COULD N OT BE COMPARED WITH A CONCERN WHICH WAS RENDERING INVESTMENT ADVISORY SERVICES: - I) CIT VS TEMASEK HOLDINGS ADVISORS (INDIA) PVT. LTD., ITA NO. 1051 OF 2014 (BOMBAY HIGH COURT); II) GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD. VS DCIT, ITA NOS. 927/MUM/2016 AND 902/MUM/2016; III) GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD. VS ACIT, ITA NO. 7724/MUM/2011; AND, IV) GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD. VS DCIT, ITA NO. 222/MUM/2014 7. ON THE OTHER HAND, THE LD. CIT - DR APPEARING FOR THE REVENUE REFERRED TO THE DISCUSSION MADE BY THE TPO WHEREBY IT IS CANVASSED THAT THE SAID CONCERN OFFERS VARIOUS TYPES OF SERVICES INCLUDING FINANCIAL ADVISORY SERVICES. IT HAS ALSO BEEN POINTED OUT THAT THE TPO PERUSED THE RELEVANT NOTES TO THE ACCOUNTS ACCOMPANYING THE ANNU AL FINANCIAL STATEMENTS, WHICH SHOWED THAT THE SAID CONCERN WAS RECEIVING INCOME BY WAY OF CORPORATE ADVISORY SERVICES AND THAT THE SAID CONCERN IS TO BE UNDERSTOOD AS A FINANCE, CONSULTANCY AND ADVISORY SERVICE. IT WAS, THEREFORE, CONTENDED THAT THE INCOM E - TAX AUTHORITIES MADE NO MISTAKE IN TREATING THE SAID CONCERN AS A COMPARABLE IN ORDER TO BENCHMARK THE TESTED TRANSACTION. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. INSOFAR AS THE NATURE OF ACTIVITIES UNDERTAKEN BY THE ASSESSEE IS CONCERNE D, THERE IS NO DISPUTE INASMUCH AS THE ASSESSEE IS RENDERING INVESTMENT ADVISORY SERVICES TO ITS ASSOCIATED ENTERPRISE, WHICH IS SOUGHT TO BE BENCHMARKED. BY ITS VERY NATURE, PROVIDING OF INVESTMENT ADVISORY SERVICES STANDS ON AN ALTOGETHER DIFFERENT FOOTI NG THAN MERCHANT BANKING ACTIVITIES. THIS DISTINCTION HAS BEEN KEPT IN MIND BY OUR CO - ORDINATE BENCH IN THE CASE OF TEMASEK HOLDINGS ADVISORS (INDIA) PVT. LTD. (SUPRA) WHEREIN ALSO THE TESTED TRANSACTION WAS OF PROVIDING OF INVESTMENT ADVISORY SERVICES. IN THE SAID CASE TOO, THE TPO HAD CONSIDERED LADDERUP CORPORATE ADVISORY PVT. LTD. AS A GOOD COMPARABLE, WHICH WAS NOT FOUND ACCEPTABLE BY THE TRIBUNAL. A PERUSAL OF THE SAID DECISION DATED 03.01.2018 (SUPRA) SHOWS THAT FOR AN EARLIER ASSESSMENT YEAR OF 2011 - 12, THE SAID CONCERN WAS FOUND ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 16 INCOMPARABLE PRIMARILY ON THE GROUND THAT IT WAS ENGAGED IN MERCHANT BANKING ACTIVITIES, WHICH WAS QUITE DISTINCT FROM ITS ACTIVITY OF RENDERING INVESTMENT ADVISORY SERVICES . 9. IN VIEW OF THE SAID PRECEDENT, WHICH HAS BEE N RENDERED BASED ON THE FACT - SITUATION OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR BEFORE US, WE FIND NO JUSTIFICATION TO UPHOLD THE ACTION OF THE TPO IN CONSIDERING THAT LADDERUP CORPORATE ADVISORY PVT. LTD. IS A GOOD COMPARABLE. THUS, ON THIS A SPECT, THE PLEA OF THE ASSESSEE IS UPHELD AND LADDERUP CORPORATE ADVISORY PVT. LTD. IS DIRECTED TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 12.1. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE DIRECT THE LD. TPO TO EXCLUDE LADDERUP CORPORATE AD VISORY PVT. LTD. AND INCLUDE INFORMED TECHNOLOGIES INDIA LTD. IN THE LIST OF COMPARABLES FOR BENCHMARKING INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. SINCE, IT WAS STATE D BEFORE US BY THE LD. AR FOR THE ASSESSEE WOULD BE THROUGH BY TAKING THE BENEFIT OF + / - 5% RANGE IF THESE TWO COMPARABLES ARE ALONE ADJUDICATED, WE REFRAIN TO GIVE OUR OPINION ON THE INCLUSION / EXCLUSION OF ICRA MANAGEMENT CONSULTING SERVICES LTD., AND IDC (INDIA) LTD., FOR THE ASST Y EAR 2012 - 13. THE LD. TPO IS HEREBY DIRECTED TO RECOMPU TE THE MARGINS OF THE ASSESSEE IN ACCORDANCE WITH THE ABOVE MENTIONED DIRECTIONS. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED SUBJECT TO AFORESAID DIRECTIONS. ITA NO. 423/MUM/2016 AND OTHER APPEALS M/S. GUGGANHEIM CAPITAL MANAGEMENT (ASIA) PVT. LTD., 17 13 . IN THE RESULT, APPEAL S OF THE ASSESSEE FOR A.Y.2011 - 12 AND 2012 - 13 ARE ALLO WED AND APPEAL OF THE REVENUE FOR THE A.Y.2011 - 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 / 02 /201 9 SD/ - ( SAKTIJIT DEY ) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNT ANT MEMBER MUMBAI ; DATED 20 / 02 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//