3I INDIA P.LTD, MUMBAI V. DCIT CIR 8(3)(1), MUMBAI

ITA 581/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2992 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS RUPINDER BRAR
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Business income; Transfer pricing; International transaction; Rule of consistency; Wholly owned subsidiary
• Section: 143(3); 131

Judgement Text

1 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K , MUMBAI , , BEFORE SHRI R C SHARMA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDI CIAL MEMBER ITA NO. 581 /MUM/2015 (ASSESSMENT YEAR 2010 - 11) 3 I INDIA PRIVATE LIMITED , 3 RD FLOOR, NICHOLAS PIRAMAL TOWER, PENINSULA CORPORATE PARK, G K MARG, LOWER PAREL, MUMBAI - 400 013 .: PAN: AACCM 4000 H VS DEPUTY COMMISSIONER OF INCOME - TAX CIRCLE - 8 (3)(1), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P J PARDIWALLA RESPONDENT BY : MRS RUPINDER BRAR /DATE OF HEARING : 20 - 06 - 201 6 /DATE OF PRONOUNCEMENT : 16 - 0 9 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 29 TH DECEMBER, 2014, PASSED BY LD. DEPUTY COMMISSIONER OF INCOME - TAX - 2 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 8(3)(1)( ASSESSING OFFICER ) UNDER SECTION 143(3) R.W.S. 144C(13) IN PURSUANCE OF DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL (DRP) UNDER SECTION 144C(5), VIDE ORDER DATED 13 . 11 .2014 , FOR THE ASSESSMENT YEAR 2010 - 11. IN THE REVISED GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: - GROUND 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO BASED ON T HE DIRECTIONS OF THE HONBLE DRP, ERRED IN MAKING AN UPWARD ADJUSTMENT OF RS.19,55,13,737 IN DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION PERTAINING TO THE PROVISION OF INVESTMENT ADVISORY SERVICES TO ITS ASSOCIATED ENTERPRISES (AE) BY THE APPELLANT. GROUND 2 THE LEARNED AO, BASED ON THE DIRECTIONS OF THE HONBLE DRP, ERRED ON FACTS AND IN LAW, IN CONCLUDING THAT: ( A ) CERTAIN ACTIVITIES OF THE APPELLANT ARE ENGAGED IN PROVIDING PORTFOLIO MANAGEMENT SERVICES, OVER AND ABOVE THE INVESTMENT ADVISORY SERVICES PROVIDED TO 3I INVESTMENTS PLC (3I INVESTMENTS), PRIMARILY ON ACCOUNT OF THE PRESENCE OF THE APPELLANTS EMPLOYEES AS NOMINEE DIRECTORS ON THE BOARD OF THE INDIAN INVESTEE COMPANIES; ( B ) AN ADDITIONAL COMPENSATION SHOULD BE RECEIV ED BY THE APPELLANT IN RELATION TO THE ABOVE SERVICES BEING A PERFORMANCE FEE OF 0.25 PERCENT OF THE TOTAL INVESTMENTS AND DIVESTMENTS, OVER AND ABOVE THE COST PLUS MARK - UP ALREADY BEING FROM 3I INVESTMENTS, AS ARMS LENGTH CONSIDERATION FOR THE ABOVE SERV ICES; ( C ) THE APPELLANT RENDERS SERVICES NOT ONLY TO 3I INVESTMENTS, BUT ALSO TO VARIOUS 3I GROUP ENTITIES, WHO HAVE INVESTED IN THE INDIAN INVESTEE COMPANIES, FOR WHICH NO COMPENSATION HAS BEEN RECEIVED BY 3I INDIA FROM SUCH 3I GROUP ENTITIES; AND ( D ) WITHOUT P REJUDICE TO THE GROUNDS IN (A) TO (C) ABOVE, AN ADJUSTMENT ON ACCOUNT OF PERFORMANCE FEE SHOULD BE COMPUTED BY APPLYING 0.25 PERCENT ON RS.35,35,75,46,493, WHICH ERRONEOUSLY INCLUDES INTER ALIA AN ADDITIONAL INVESTMENT MADE IN UFO MOVIEZ INDIA LIMITED IN S EPTEMBER 2010 AMOUNTING TO RS.9,17,85,930, AND AN INVESTMENT MADE IN MUNDRA PORT AND SEZ LIMITED 3 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 WHICH WAS DIVESTED IN MARCH 2009, THAT OUGHT TO BE EXCLUDED GROUND 3 WI THOUT PREJUDICE TO THE GROUND 2 ABOVE, WHERE IT IS ASSUMED THAT THE APPELLANT IS PROVI DING PURPORTED PORTFOLIO MANAGEMENT SERVICES, THE LEARNED AO/THE HONBLE DRP, ERRED ON FACTS AND IN LAW, ON THE FOLLOWING GROUNDS: ( A ) NOT EXCLUDING THE DIVESTMENTS MADE DURING THE YEAR WHILE COMPUTING THE ADJUSTMENT ON ACCOUNT OF PERFORMANCE FEES AT THE RATE OF 0.25 PERCENT; ( B ) NOT EXCLUDING THE INDIAN INVESTEE COMPANIES, IN WHICH THE APPELLANTS EMPLOYEES WERE NOT ACTING AS NOMINEE DIRECTORS ON THE BOARD, WHILE COMPUTING THE ADJUSTMENT ON ACCOUNT OF PERFORMANCE FEES AT THE RATE OF 0.25 PERCENT OF THE TOTAL INV ESTMENTS AND DIVESTMENTS OF THE 3I GROUP ENTITIES IN INDIA; AND ( C ) NOT RECOGNIZING THAT AN INDEPENDENT PROVIDER OF PORTFOLIO MANAGEMENT SERVICES TO A THIRD PARTY WOULD NOT SEPARATELY CHARGE SUCH THIRD PARTY AN INVESTMENT ADVISORY FEE GIVEN THAT THE INVESTMEN T ADVISORY FUNCTION WOULD ORDINARILY BE A PART OF AND SUBSUMED WITHIN THE ACTIVITY OF PORTFOLIO MANAGEMENT SERVICES. GROUND 4 W ITHOUT PREJUDICE TO THE FACTS THAT THE PURPORTED PORTFOLIO MANAGEMENT FUNCTION IS NOT AN ADDITIONAL FUNCTION AND IS ALREADY CO VERED WITHIN THE SCOPE OF THE INVESTMENT ADVISORY SERVICES, WHERE NOMINEE DIRECTORSHIPS HELD BY THE APPELLANTS EMPLOYEES ON THE BOARD OF INDIAN INVESTEE COMPANIES IS CONSIDERED TO BE AN ADDITIONAL FUNCTION AND NOT COVERED UNDER THE INVESTMENT ADVISORY AGR EEMENT ENTERED BETWEEN THE APPELLANT AND 3I INVESTMENTS, THEN THE LEARNED AO/THE HONBLE DRP ERRED, ON FACTS AND IN LAW, ON THE FOLLOWING GROUNDS: ( A ) NOT SELECTING THE TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING SUCH ADDIT IONAL FUNCTION; AND ( B ) NOT EXCLUDING THE COSTS RELATING TO SUCH ADDITIONAL FUNCTION FROM THE COST BASE, WHILE RE - COMPUTING THE ALP OF THE INVESTMENT ADVISORY SERVICES BASED ON A MARK - UP ON OPERATING COSTS. 4 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 GROUND 5 THE LEARNED AO, BASED ON THE DIRECTIONS OF THE HONBLE DRP, ON THE FACT AND IN LAW, ERRED IN RE - COMPUTING THE ARMS LENGTH MARGIN OF THE INVESTMENT ADVISORY SERVICES PROVIDED BY THE APPELLANT AT 55.06 PERCENT BY REJECTING CERTAIN COMPARABLE COMPANIES SELECTED BY THE APPELL A NT IN THE TRANSFER DOC UMENTATION, AND BY SELECTING ADDITIONAL COMPARABLE COMPANIES WHICH ARE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT. GROUND 6 WITHOUT PREJUDICE TO THE GROUND 4 ABOVE, THE HONBLE DRP IN ITS DIRECTIONS, ON THE FACTS AND IN LAW, ERRED IN REJECTING TWO COMP ARABLE COMPANIES NAMELY FUTURE CAPITAL INVESTMENT ADVISORS LIMITED AND IDC (INDIA) LIMITED, WHICH WERE ACCEPTED BY BOTH THE LEARNED TRANSFER PRICING OFFICER IN ITS ORDER UNDER SECTION 92CA(3) OF THE ACT AND BY THE APPELLANT IN ITS TRANSFER PRICING STUDY RE PORT FOR FY 2009 - 10. GROUND 7 THE LEARNED AO, BASED ON THE DIRECTIONS OF THE HONBLE DRP ERRED, ON FACTS AND IN LAW, IN REJECTING THE USE OF CONTEMPORANEOUS AND MULTIPLE YEAR DATA AVAILABLE FOR COMPUTING THE ALP AS ON THE DATE OF FILING THE RETURN OF INC OME AND RELYING ONLY ON THE SINGLE YEAR D ATA (I.E. FOR THE YEAR ENDED 31 MARCH 2010) FOR THE PURPOSE OF DETERMINING THE ALP. EACH OF THE GROUNDS OF APPEAL REFERRED ABOVE IS SEPARATE, AND MAY KINDLY BE CONSIDERED INDEPENDENT OF EACH OTHER. THE APPELLANT C RAVES LEAVE TO ADD, VARY, OMIT, SUBSTITUTE OR AMEND ANY OR ALL OF THE GROUNDS OF APPEAL, OF ANY TIME BEFORE OR AT, THE TIME OF THE APPEAL, SO AS TO ENABLE THE HONBLE INCOME - TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 2. THE ENTIRE DISPUTE OF TRANSFER PRICING ADJUSTMENT OF RS.19,55,13,737/ - , REVOLVES AROUND FIRSTLY , ADJUSTMENT OF RS.8,83,93,866/ - BY COMPUTING ADDITIONAL COMPARABLE FEES AT 0.25% ON THE GROUND THAT, ASSESSEE IS ALSO PROVIDING PORTFOLIO MANAGEMENT SERVICES IN ADDITION TO THE NON - BINDING INVESTMENT ADVISORY SERVICES ; AND SECONDLY , REJECTION OF CERTAIN COMPARABLE COMPANIES SELECTED BY THE ASSESSEE AND 5 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 ALSO INCLUSION OF CERTAIN COMPARABLE COMPANIES FOR ENHANCING THE PROFIT MARGIN TO 37.51% AS COMPARED TO 20 % SHOWN BY THE ASSESSEE. 3. THE BRIEF F ACTS AND BACKGROUND OF THE CASE ARE THAT, ASSESSEE COMPANY, 3I INDIA PVT . LTD WAS INCORPORATED ON 25 TH JULY, 2005 IN INDIA AND IS A WHOLLY OWNED SUBSIDIARY OF UNITED KINGDOM BASED E NTITY , 3I INVESTMENTS PLC WHIC H IS A PART OF 3I GROUP PLC., UK. THE G ROUP PLC., UK IS ONE OF THE WORLDS LEADING PROFIT EQUITY AND 3I INVESTMENT PLC, UK ACTS AS A N INVESTMENT MANAGER TO 3I GROUP PLC AND OTHER THIRD PARTIES. THE ASSESSEE IN INDIA HAS BEEN APPOINTED AS AN INVESTMENT ADVI SOR BY 3I INVESTMENTS P LC TO PROVIDE INVESTMENT ADVISORY SERVICES IN RELATION TO THE POTENTIAL INVESTMENT OPPORTUNITIES IN INDIA. 3I INVESTMENTS P LC MAY UTILIZE SUCH SERVICES FOR THE BENEFIT OF ITSELF OR FOR ANY OTHER ENTITIES WITHIN THE 3I GROUP. THE IN VESTMENT ADVISORY SERVICES RENDERED BY 3I INDIA, INTER - ALIA , INCLUDE THE FOLLOWING: IDENTIFYING AND ANALYZING POTENTIAL INVESTMENT OPPORTUNITIES; EVALUATING AND MAKING RECOMMENDATIONS TO 3I INVESTMENTS PLC WITH RESPECT TO INVESTMENT OPPORTUNITIES; AND MONI TORING AND MAKING RECOMMENDATIONS TO 3I INVESTMENTS PLC WITH RESPECT TO SPECIFIED INVESTMENTS MADE INDIA. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ENTERED INTO THE FOLLOWING INTERNATIONAL TRANSACTIONS: - SR. N O. PARTICULAR OF TRANSACTIONS NAME OF AE AMOUNT(RS.) METHOD ADOPTED I) INVESTMENT MANA GE MENT SERVICES 3I INVESTMENT PLC, LONDON 73,41,16,766 TNMM 6 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 THE ASSESSEE FOR RENDERING OF NON - BINDING INVESTMENT ADVISORY SERVICES , HAS CHARGED C OST + 20% M ARK UP . TO BENCHMARK THE TRANSA CTION AND ALSO ITS PROFIT MARGIN, THE ASSESSEE HAD SELECTED TNMM AS THE MOST APPROPRIATE METHOD (MAM) AND COMPARABLE COMPANIES MAINLY IN THE FIELD OF ADVISORY SERVICES . THE PROFIT LEVEL INDICATOR (PLI) SELECTED FOR BENCHMARKING THE ARMS LENGTH PRICE (ALP) WAS ON THE BASE OF OPERATING PROFIT UPON OPERATING COST ( I.E. OP/OC). THE ASSESSEE HAD SHORTLISTED 8 COMPARABLE COMPANIES AFTER CARRYING OUT DETAIL SEARCH PROCESS BY APPLYING QUANTITATIVE FI LTERS AND QUALITATIVE ANALYSIS TO BENCHMARK THE ALP OF THE INTERN ATIONAL TRANSACTION RELATING TO ITS INTERNATIONAL ADVISORY SERVICES. SINCE THE ASSESSEE HAD TAKEN WEIGHTED AVERAGE YEARS MARGIN OF 8 COMPARABLES, THEREFORE, THE TPO ASKED THE ASSESSEE TO FURNISH MARGIN OF THE COMPARABLES USING SINGLE YEAR DATA FOR THE FIN ANCIAL YEAR 2009 - 10. ACCORDINGLY, THE ASSESSEE FURNISHED THE FOLLOWING DETAILS OF THE COMPARABLE COMPANIES ALONG WITH THE IR UPDATED MARGINS: - SR.NO. NAME OF THE COMPARABLE (OP/OC)(%) 1 ACCESS INDIA ADVISORS LTD. * 2 FUTURE CAPITAL INVES TMENT ADVISORS LTD. 15.71 3 ICRA ONLINE LTD. 41.77 4 ICRA MANAGEMENT CONSULTING SERVICES LTD. 0.41 5 IDC INDIA LTD. 13.00 6 INFORMED TECHNOLOGIES LTD. 25.52 7 INTEGRATED CAPITAL SERVICES LTD. - 2.92 8 KINETIC TRUST LTD. 10.39 AVERAGE MARGIN 14.84% ASSESSEES MARGIN 20.00% * IT WAS LATER SUBMITTED BY THE ASSESSEE THAT ACCESS INDIA ADVISORS LTD. IS NOT COMPARABLE. HENCE, IT WAS REPORTED THAT, ASSESSEES MARGIN OF 2 0 % MEETS THE ARMS LENGTH REQUIREMENT. 7 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 5. THE TPO FIRST OF AL L ANALYZED THE FUNCTIONS PERFORMED BY THE ASSESSEE AS PER THE INVESTMENT A DVISORY A GREEMENT BETWEEN THE ASSESSEE AND ITS AE, WHICH WERE AS UNDER: - 2.1 THE MANAGER APPOINTS THE INVESTMENT ADVISOR TO BE ITS INVESTMENT ADVISOR DURING THE TERM IN THE RELEVAN T COUNTRIES. 2.2 THE INVESTMENT ADVISER ACCEPTS THE APPOINTMENT AND, IN CONNECTION WITH THE APPOINTMENT, AGREES TO PROVIDE THE FOLLOWING SERVICES TO THE MANAGER: 2.2.1 TO IDENTIFY INVESTMENT OPPORTUNITIES AND TO RENDER ADVICE TO THE MANAGER ON SUITABLE IN VESTMENTS FOR EACH OF THE INVESTORS: 2.2.2 TO ADVICE THE MANAGER ON THE MERIT, TIMING, STRUCTURE, AND APPROPRIATE TERMS OF ANY ACQUISITION OR DISPOSAL OF INVESTMENTS IN PORTFOLIO COMPANIES OR PROSPECTIVE PORTFOLIO COMPANIES (AS RELEVANT) AND TO ADVICE T HE MANAGER ON THE ARRANGEMENTS FOR EACH SUCH ACQUISITION OR DISPOSAL, SUBJECT IN THE CASE OF ADVISED FUNDS TO THE APPROVAL OF THE BOARD OF DIRECTORS OR OTHER DULY CONSTITUTED BODY OF THAT ADVISED FUND; 2.2.3 TO ASSIST THE MANAGER IN MONITORING SUCH INVEST MENTS INCLUDING THE ANALYSIS OF THE PERFORMANCE OF PORTFOLIO COMPANIES AND TO ADVISE ON DIVESTMENTS BEING CONSIDERED BY THE MANAGER; 2.2.4 TO ADVISE ON INDIVIDUALS TO BE APPOINTED BY ANY INVESTOR AS A MEMBER OF THE BOARD (OR SIMILAR) OF PORTFOLIO COMPANY; 2.2.5 IF REQUIRED BY THE MANAGER, TO ADVISE THE MANAGER ON THE EXERCISE OF ANY SHAREHOLDER RIGHTS APPLICABLE TO ANY PORTFOLIO COMPANY; 2.2.6 IF REQUIRED BY THE MANAGER, TO PREPARE MATERIAL FOR INCLUSION IN ANNUAL OR OTHER REPORTS OF ANY INVESTOR (INCLUD ING __ATAICAS__) 2.2.7 TO PREPARE AND SUPPLY INFORMATION AND REPORTS TO THE MANAGER IN SUCH MEDIUM AS THE MANAGER MAY REASONABLY REQUEST; AND 2.2.8 TO ADVISE THE MANAGER IN RELATION TO ANY OTHER MATTER RELATING TO THE IMPLEMENTATION OF OR ARISING FROM TH E INVESTMENT POLICY OF ANY INVESTOR. 8 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 2.3 IN CARRYING OUT ITS DUTIES HEREUNDER THE INVESTMENT, ADVISER SHALL HAVE REGARD TO AND SHALL ENSURE THAT THE ADVICE AND ACTIVITIES COMPLY WITH: 2.3.1 THE INVESTMENT POLICY OF ANY INVESTOR, IF ANY; 2.3.2 ANY WRI TTEN NOTIFICATION FROM TIME TO TIME GIVEN TO THE INVESTMENT ADVISER BY THE MANAGER; 2.3.3 ANY RESTRICTIONS CONTAINED IN ANY APPLICABLE FUND DOCUMENT; AND 2.3.4 ALL 3I INTERNAL POLICIES, PRACTICES, PROCEDURES AND MANAGEMENT PLANS AS ARE FROM TIME TO TIME A PPLICABLE. 2.4 THE INVESTMENT ADVISER SHALL HAVE NO AUTHORITY, AND SHALL NOT BE OBLIGED, TO MAKE INVESTMENT DECISIONS ON BEHALF OF ANY INVESTOR. NOTHING IN THIS DEED SHALL CONSTITUTE THE INVESTMENT ADVISOR AGENT OF THE MANAGER OR ANY INVESTOR FOR ANY PU RPOSE AND, ACCORDINGLY, THE INVESTMENT ADVISER SHALL HAVE NO POWER OR AUTHORITY TO MAKE OR PURPORT TO MAKE INVESTMENT DECISIONS, OR TO AGREE THE TERMS OF ANY PROPOSED TRANSACTION OR TO ENTER INTO ANY TRANSACTION ON BEHALF OF OR IN ANY OTHER WAY TO BIND ANO THER MEMBER OF THE 3I GROUP, THE MANAGER OR THE INVESTORS. THE INVESTMENT ADVISER ACKNOWLEDGES THAT INVESTMENT DECISIONS OF AN ADVISED FUND ARE MADE BY THE BOARD OR OTHER DULY CONSTITUTED BODY OF THAT ADVISED FUND AND NOT BY THE MANAGER. 2.5 THE ADVISORY SERVICES TO BE PROVIDED BY THE INVESTMENT ADVISER UNDER THIS DEED ARE TO BE PROVIDED TO THE MANAGER FOR ITS OWN BENEFIT TO ENABLE IT PROPERLY TO ACT AS MANAGER OR ADVISER (AS THE CASE MAY BE) TO EACH INVESTOR AND ARE NOT TO BE PROVIDED FOR THE BENEFIT OF T HE INVESTORS. 2.6 NOTWITHSTANDING ANY OTHER PROVISION OF THIS DEED, THE INVESTMENT ADVISER SHALL NOT, AND SHALL NOT BE REQUIRED TO, PROVIDE ANY SERVICES UNDER THIS DEED WHICH REQUIRE IT TO BE AUTHORIZED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000 A NY EQUIVALENT LEGISLATION OF ANY OTHER JURISDICTION UNLESS IT IS SO AUTHORIZED. 2.7 ADVICE GIVEN BY THE INVESTMENT ADVISER HEREUNDER MAY BE REJECTED BY THE MANAGER IN ITS ABSOLUTE DISCRETION. 2.8 THE MANAGER SHALL PROVIDE ALL SUCH INFORMATION CONCERNING THE INVESTORS AND THE INVESTMENT POLICY OF EACH INVESTOR (INCLUDING COPIES OF RELEVANT FUND DOCUMENTS) AS THE 9 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 INVESTOR ADVISER SHALL REASONABLY REQUEST FROM TIME TO TIME TO ENABLE IT TO PROVIDE ITS SERVICES TO THE MANAGER PURSUANT TO THIS DEED. 2.9 THE I NVESTMENT ADVISER CONFIRMS IT HAS, AND WILL USE ITS REASONABLE ENDEAVOURS TO MAINTAIN, IN PLACE THE ABILITY, CAPACITY AND ANY AUTHORIZATIONS REGARDED BY THE LAW TO PERFORM THE SERVICES AND ACTIVITIES RELIABLY AND PROFESSIONALLY (SUBJECT TO CLAUSE 2.6 ABOVE ). 2.10 THE INVESTMENT ADVISER CONFIRMS IT WILL DISCLOSE TO THE MANAGER ANY DEVELOPMENTS THAT MAY HAVE A MATERIAL IMPACT ON ITS ABILITY TO CARRY OUT THE SERVICES IN COMPLIANCE WITH APPLICABLE LAWS AND REGULATORY REQUIREMENTS (SUBJECT ONLY TO CLAUSE 2.6). THE REAFTER, TPO SUMMONED THE EMPLOYEES OF THE ASSESSEE COMPANY AND RECORDED THEIR STATEMENT UNDER SECTION 131 WHICH HAS BEEN INCORPORATED BY THE TPO IN H IS ORDER FROM PAGES 4 TO 6. FROM THE STATEMENTS, HE INFERRED THAT THE ASSESSEE WAS NOT MER ELY PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES TO ITS AE BUT WAS ALSO DOING THE PORTFOLIO MANAGEMENT SERVICES FOR ITS AE. HE ALSO ANALYZED THE INVESTMENTS MADE BY VARIOUS AES DESPITE THE FACT THAT INVESTMENT ADVISORY AGREEMENT WAS BETWEEN ASS ESSEE AND 3I INVESTMENT PLC , LONDON. THUS, HE HELD THAT ASSESSEE HAS BEEN PERFORMING PORTFOLIO MANAGERS FUNCTIONS FOR OTHER AES ALSO . HE OBSERVES THAT, THIS IS CORROBORATED BY THE FACT THAT THE AES HAVE APPOINTED EMPLOYEE OF THE ASSESSEE AS NOMINATED DI RECTOR OF THE AE IN THE INVESTEE COMPANY IN WHICH THEY HAVE INVESTED , SO THAT INVESTOR (AE) HA S PROPER CONTROL IN WHICH THE INVESTMENT HAS BEEN MADE. THESE EMPLOYEES WHO WERE MADE THE NOMINEE DIRECTORS ARE CLOSELY MANAGING THE DAY - TO - DAY ACTIVITIES OF THE INVESTEE COMPAN IES. THEREAFTER, HE CALLED FOR THE VARIOUS DETAILS OF THE WORK DONE BY THESE NOMINEE DIRECTORS IN WHICH THEY WERE NOMINATED AND ALSO REQUIRED THE ASSESSEE TO FURNISH THE COPIES OF ANNUA L PERFORMANCE APPRAISAL OF THE 10 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 FORM SUBMITTED BY ITS EMP LOYEES , D ETAILS OF WHICH HA VE BEEN DEALT BY THE TPO FROM PAGES 10 TO 15 OF HIS ORDER. FROM THE DETAILS SUBMITTED AND THE DESCRIPTION OF THE FUNCTIONS PERFORMED BY T HE EMPLOYEES AS MENTIONED IN THEIR ANNUAL APPRAISAL REPORT, HE DEDUCED THAT, ASSESSEE HAS PE RFORMED MORE THAN PORTFOLIO MANAGEMENT SERVICES FOR THE VARIOUS AES AND ALSO C ARRIED OUT THE MANAGEMENT OF IPOS FOR THE AES. AFTER DETAILED DISCUSSION AND ANALYSIS, HE CAME TO THE FOLLOWING CONCLUSION: 11.9 FROM ALL THE ABOVE DISCUSSION IT CAN BE UNDERS TOOD THAT ASSESSEE IS DOING BUYOUTS, PORTFOLIO MANAGEMENT, RESTRUCTURING FOR ITS VARIOUS AES IN ADDITION TO THE FUNCTIONS OF INVESTMENT ADVISORY. THEREFORE THE ARMS LENGTH CONSIDERATION IS CALCULATED AS UNDER: 11.10 ANY INVESTMENT ADVISER HAS TWO COMPON ENTS TO THE FEES CHARGED. ONE IS A FIXED FEE AND ANOTHER IS IN ADDITION TO FIX FEE THERE IS A PERFORMANCE FEE. SINCE ASSESSEE HAS NOT CHARGED ANY FEES FROM THE ABOVE REFERRED AES, IN AN ARMS LENGTH SITUATION THIS CAN NEVER HAPPEN. HOWEVER, EVEN FOR ARGUME NT SAKE IT IS CONSIDERED THAT THESE SERVICES WERE PROVIDED TO 3I INDIA PLC ONLY, THEN ALSO ASSESSEE IN AN ARMS LENGTH SCENARIO WOULD GET PERFORMANCE FEE. THEREFORE ON A CONSERVATIVE BASIS PERFORMANCE FEE OF 0.25% OF THE TOTAL INVESTMENT AND DISINVESTMENT IS TAKEN AS ARMS LENGTH CONSIDERATION FOR THE SERVICES PROVIDED BY THE ASSESSEE IN ADDITION TO THE INVESTMENT ADVISORY FEES RECEIVED. 12. VALUE OF INVESTMENT RS. 3,095,22,78,193 + 905,26,8300 +350,00,00,000 = 3535,75,46,493 ARMS LENGTH CONSIDERATION = 0.25% OF RS. 3535,75,46,493 = RS. 8,83,93,866.23/ - AMOUNT CHARGED BY ASSESSEE TO AES = NIL 11 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 THEREFORE DIFFERENCE IN ARMS LENGTH CONSIDERATION AND ACTUAL CONSIDERATION = RS.8,83,93,866.23/ - ADJUSTMENT PROPOSED = RS.8,83,93,866.23/ - ON ACCOUNT OF PE RFORMANCE FEE FOR THE SERVICES RENDERED TO VARIOUS AES. IT WILL NOT BE OUT OF PLACE TO MENTION HERE THAT THE AES WHICH HAVE INVESTED IN INDIAN COMPANIES I.E. THE INVESTOR AES MOST OF THEM ARE LOCATED IN MAURITIUS. 6 . AFTER MAKING THE ADJUSTMENT OF RS. 8,83,93,866/ - IN THE AFORESAID MANNER, THE TPO PROCEEDED TO ANALYSE THE VARIOUS COMPARABLE COMPANIES INCLUDED BY THE ASSESSEE AND HE ALSO GAVE HIS OWN SET OF COMPARABLES . THE DISPUTED COMPARABLES ON WHICH HE ASKED FOR ASSESSEES OBJECTIONS WERE AS UNDER: - ( I) MOTILAL OSWAL INVESTMENT A DVISOR S P LTD .; (SOUGHT TO BE INCLUDED BY THE TPO ) ; (II) ICRA INVESTMENT MANAGEMENT CONSULTANCY SERVICES LTD .; (ASSESSEES COMPARABLE WHICH HAS BEEN SOUGHT TO BE EXCLUDED BY THE TPO); (III) KINETIC TRUST LTD .; (ASSESSEES COMPA RABLE WHICH HAS BEEN SOUGHT TO BE EXCLUDED BY THE TPO); AND (IV) INTEGRATED CAPITAL SERVICES LTD. ; (ASSESSEES COMPARABLE WHICH HAS BEEN SOUGHT TO BE EXCLUDED BY THE TPO); THEREAFTER, HE REJECTED THE ASSESSEES OBJECTION ON THE AFORESAID COMPARABLE S AND AF TER DETAILED DISCUSSION HE REJECTED THE INC L USION OF ICRA INVESTMENT MANAGEMENT CONSULTANCY SERVICES LTD ; KINETIC TRUST LTD ; INTEGRATED CAPITAL SERVICES LTD ; AND INCLUDED MOTILAL OSWAL INVESTMENT ADVISORS P VT. LTD . THUS, THE FINAL SET OF COMPARABLE S SELECTED BY THE TPO, WERE AS UNDER: - FUTURE CAPITAL HOLDINGS LIMITED 29.48% FUTURE CAPITAL INVESTMENT ADVISORS LTD 15.71% MOTILAL OSWAL INVESTMENT ADVISORS PVT LTD. 97.89% ICRA ONLINE LTD. 43.43% IDC (INDIA) LTD. 13% 12 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 INFORMED TECHNOLOGIES INDIA LTD . 25.52% TOTAL 225.03% AVERAGE 37.51% 7. A CCORDINGLY, HE MADE THE UPWARD ADJUSTMENT IN THE FOLLOWING MANNER: - OPERATING INCOME OF THE ASSESSEE 734116766 OPERATING COST OF THE ASSESSEE 611763971 OPERATING PROFIT OF THE ASSESSEE 122352795 OP/OC OF ASS ESSEE 20.00% OP/OC OF COMPARABLES 37.51% ARMS LENGTH PROFIT =37.51%*OC 229472665.5 ARMS LENGTH INCOME =ALP PROFIT + ALP COST 841236636.5 DIFFERENCE IN ACTUAL INCOME AND ALP INCOME 107119870.5 5% OF TRANSACTION VALUE 36705838.3 ADJUSTMENT PROPOSED 1 07119870.5 T HEREFORE, AN ADJUSTMENT PROPOSED TO THE TRANSACTION OF RECEIPT OF INVESTMENT ADVISORY FEE BY ASSESSEE FROM 3I INVESTMENT PLC IS RS.107119870.5. CONCLUSION: SR. NO. TRANSACTION ADJUSTMENT PROPOSED 1 ADJUSTMENT ON ACCOUNT OF PERFORMANCE FEE RS .8,83,93,866.23 2 TRANSACTION OF RECEIPT OF INVESTMENT ADVISORY FEE RS.10,71,19,870.5 TOTAL RS.19,55,13,736.73 8. FROM THE STAGE OF THE DRP, SO FAR AS THE UPWARD ADJUSTMENT OF RS.8,83,93,866/ - BY COMPUTING THE ADDITIONAL FE E @ 0. 2 5% OF THE TOTAL AVE RAGE INVESTMENT ON THE GROUND T HAT ASSESSEE IS PROVIDING ADDITIONAL PORTFOLIO MANAGEMENT SERVICE IN ADDITION TO NON - BINDING ADVISORY SERVICES, THE DRP HELD THAT: - ------ THE APPELLANT IS PROVIDING PORTFOLIO MANAGEMENT SERVICES TO ITS AE PRIMARILY ON ACC OUNT OF THE ASSESSEE EMPLOYEES ACTING AS NOMINEE DIRECTORS ON THE BOARD OF INVESTEE COMPANIES. THE DRP FURTHER CONCLUDED THAT THE ASSESSEE MAY NOT HAVE PERFORMED ALL THE FUNCTIONS PERFORMED BY A PORTFOLIO MANAGER. ACCORDINGLY, THE DRP UPHELD THE LEARNED TP OS CONCLUSION OF ARBITRARILY ADDING AN ADDITIONAL INCOME OF 0.25% OF THE VALUE OF INVESTMENT AND 13 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 DISINVESTMENT BY STATING THAT IT WAS REQUIRED TO BE ADDED SINCE THE ASSESSEE MONITORING FUNCTIONS IS WIDER THAN ITS INVESTMENT ADVISORY FUNCTIONS, AND THUS, ADDED IT TO THE TOTAL TAXABLE INCOME. 9 . SO FAR AS ADJUSTMENT MADE ON ACCOUNT OF AV ERAGE MARGIN OF THE COMPARABLES SELECTED BY THE TPO, THE DR P WENT STEP FURTHER AND ENHANCED THE MARGIN OF 37.51% TO 55.06% BY REJECTING TWO MORE COMPARABLES SELECTED BY T HE ASSESSEE IN ITS TP STUDY REPORT WHICH WAS ACCEPTED BY THE TPO. THE SUMMARY OF THE COMPARABLE COMPANIES CONSIDERED BY THE ASSESSEE, TPO AND THE DRP ARE AS UNDER: - S NO. PARTICULARS ASSESSEES S ET B ASED ON S INGLE YEAR DATA TPOS SET DRP S SET 1 FUTURE CAPITAL INVESTMENT ADVISORS LTD . 15.71% 15.71% X 2 ICRA ONLINE LTD. 41.77% 43.43% 41.77% 3 ICRA MANAGEMENT CONSULTING SERVICES LTD. 0.41% X X 4 IDC(INDIA) LTD. 13.00% 13.00% X 5 INFORMED TECHNOLOGIES LTD. 25.52% 25.52% 25.52% 6 INTEGRATED CAPITAL SE RVICES LTD. - 2.92% X X 7 KINETIC TRUST LIMITED 10.39% X X 8 FUTURE CAPITAL HOLDINGS LIMITED - 29.48% X 9 MOTILAL OSWA L INVESTMENT ADVISORS PVT . LTD - 97.89% 97.89% ARITHMETIC MEAN 14.84% 37.51% 55.06% A SSESSEE S OPERATING MARGIN 20% THUS, AFTER THE DIRECTION OF THE DRP , ONLY THREE COMPARABLE SETS REMAINED. 10 . BEFORE U S, THE LD SENIOR COUNSEL MR. P ERCY PAR DIWALA AFTER EXPLAINING THE ENTIRE FACTS AND BACKGROUND OF THE CASE AS DISCUSSED ABOVE, SUBMITTED THAT, THIS IS NOT THE FIRST YEAR OF TP , AS IN THE ASSESSMENT YEAR 2008 - 09 NO TP ADJUSTMENT WAS MADE BY THE DEPARTMENT AND IN THE AY 2009 - 10, THE ISSUE 14 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 INVOLVED WAS MAINLY REJECTION OF CERTAIN COMPARABLE COMPANIES AND SO FAR AS FUNCTIONS WERE CONCERNED, IT WAS ACCEPTED THAT ASSESSEE WAS REN DERING PURELY NON - BINDING ADVISORY SERVIC E AND NO SUCH FINDING WAS GIVEN THAT ASSESSEE OVER AND ABOVE ITS REGULAR INVESTMENT ADVISORY SERVICES IS ALSO PERFORMING PMS SERVICES FOR WHICH ANY ADDITIONAL FEES IS REQUIRED TO BE BENCHMARKED OR ADJUSTED AND NO SU CH ADJUSTMENT WAS MADE . IN THE SUBSEQUENT YEAR ALSO, I.E. IN THE AY 2011 - 12, THE ISSUE REVOLVED ONLY ON ACCOUNT OF COMPARABLES AND THERE WAS ABSOLUTELY NO DISPUTE REGARDING COMPUTING OF ADDITIONAL FEES ON ACCOUNT OF PMS AS DONE BY THE DEPARTMENT IN THIS YE AR. THUS, ON SAME FUNCTION AND FACTS NO NEW SUCH ADJUSTMENT IS CALLED FOR. HE ALSO BROUGHT ON RECORD THAT, IN THE CASE OF ASSESSEE, THERE WAS A DVANCE PRICING A GREEMENT (APA) WITH CBDT U/S 92CC ON 24 TH NOVEMBER, 2015 , WHEREBY RIGHT FROM THE ASSESSMENT YEA R 2015 - 16 TO AY 2019 - 20 IT HAS BEEN CONCLUDED THAT, ARMS LENGTH PRICE OF THE TRANSACTION OF PROVISION OF N ON - B INDING A DVISORY S ERVICES AND RELATED SUPPORT SERVICES, THE OPERATING MARGIN WOULD BE COSTS PLUS 21% MARKUP. THUS, HE SUBMITTED THAT, IF UNDER T HE APA ITSELF IT HAS BEEN AGREED THAT, THE PROFIT MARGIN OF THE ASSESSEE SHOULD BE A T @ 21% , THEN IN THE PRESENT ASSESSMENT YEAR, THE PROFIT MARGIN OF 20% IS NOT ONLY REASONABLE BUT ALSO MEETS THE ARMS LENGTH PRICE. HE SUBMITTED THAT, THE FUNCTIONS PERFOR MED BY THE ASSESSEE IN THE PRESENT ASSESSMENT YEAR AS WELL AS THE ASSESSMENT YEARS WHICH ARE COVERED UNDER THE APA AFTER DETAIL ANALYSIS AND EXAMINATION ARE EXACTLY THE SAME AND THERE ARE NO ADDITIONAL FUNCTIONS OR SERVICES IN THIS YEAR WHICH ARE DIFFERENT . HE FURTHER SUBMITTED THAT, THERE ARE VARIOUS COURT DECISIONS WHEREIN, IT HAS BEEN HELD THAT, IF IN THE SUBSEQUENT YEARS THE MATTER HAS BEEN ACCEPTED BY THE APA DESPITE SUCH 15 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 AN ORDER OF THE TPO AND DRP ON RECORD, THEN SAME PRINCIPLE OR ALP HAS TO BE APPLI ED AND ACCEPTED IN THIS Y EAR ALSO. IN SUPPORT, HE RELIED UPON FEW SUCH DECISIONS: - SR. NO . NAME OF THE CASE LAW & ITA NO. ASSESSMENT YEAR I) AMERIPRISE INDIA PVT LTD. ITA 2067/2016 DELHI HIGH COURT 2009 - 10 II) RANBAXY LABORATORIES LTD ITA 196/DEL/20 13 2009 - 10 III) JP MORGAN SERVICES PVT . LTD. - ITA NO. 8987/ M UM /210 & ITA NO. 7822/MUM/2011 2006 - 07 & 2007 - 08 HE ALSO DREW OUR ATTENTION TO RELEVANT FINDING GIVEN IN THESE JUDGMENTS. 1 1 . ON MERITS , A S REGARDS THE ADJUSTMENT MADE BY COMPUTING THE ADDITIO NAL FEE ON ACCOUNT OF PMS, HE SUBMITTED THAT, THE ASSESSEE HAD UNDERTAKEN FAR ANALYSIS OF NON - BINDING ADVISORY SERVICES WHICH COVERS VARIOUS ASPECTS NOT ONLY ENSHRINED IN THE INVESTMENT ADVISORY A GREEMENT BUT ALSO IN THE TP STUDY REPORT. ONE OF THE MAI N FUNCTIONS IN THE COURSE OF RENDERING OF ADVISORY SERVICES IS MONITORING OF INVESTMENTS, WHICH AT TIME LEADS TO MONITORING OF ONGOING PERFORMANCE OF THE INVESTEE COMPANIES TO KEEP THE OF LATEST DEVELOPMENT AND TRENDS IN INDUSTRY AND ALSO PROFITS NECESSARY INFORMATION ON THE PERFORMANCE OF INVESTEE COMPANIES. THE EMPLOYEES OF THE ASSESSEE COMPANY PERFORM THESE FUNCTIONS THROUGH REGULAR ON - GOING DISCUSSIONS WITH THE MANAGEMENT OF THE INVESTEE COMPANIES. THE EMPLOYEES OF THE ASSESSEE COMPANY MAY, IN CERTAIN I NSTANCES, BE NOMINATED TO TAKE A BOARD OF DIRECTORS SEAT IN SUCH COMPANY, EITHER AS A DIRECTOR OR AN OBSERVER, WHICH FACILITATES THE PORTFOLIO MONITORING PROCESS. THESE DISCUSSIONS OR INFORMATION OBTAINED FROM THE INVESTEE COMPANIES ARE SHARED WITH THE AE S. THE ASSESSEES INTERACTION WITH THE MANAGEMENT OF PORTFOLIO COMPANIES MAY 16 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 ALSO ASSIST THE AE IN ENSURING THAT THE TERMS AS PER INVESTMENT AGREEMENT WITH THE INVESTEE COMPANIES ARE COMPILED WITH THE INVESTEE COMPANIES AND IN PROTECTING THE RIGHTS OF THE AES AS INVESTORS. ACCORDINGLY, THE AFORESAID MONITORING FUNCTION PERFORMED BY THE ASSESSEE IS PART AND PARCEL OF THE INVESTMENT ADVISORY SERVICES RENDERED BY IT. IN SUPPORT OF THE AFORESAID CONTENTION, HE STRONGLY RELIED UPON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF T E MASEK HOLDINGS ADVISORS INDIA PVT . L TD IN ITA NO.776/MUM/2 015 , WHEREIN ON THE SIMILAR ISSUE THE TRIBUNAL HELD THAT MONITORING FUNCTION ARE PART AND PARCEL OF THE INVESTMENT ADVISORY AND COST + MARK UP COMPENSATION RECEIVED GETS COV ERED UNDER ALL THE INVESTMENT ADVISORY SERVICES. HE FURTHER RELIED UPON THE FOLLOWING DECISIONS ALSO: - CARLYLE INDIA ADVISORS PRIVATE LIMITED V ADDITIONAL COMMISSIONER OF INCOME - TAX [24 TAXMAN . COM 176 (MUMBAI)]; TPG CAPITAL INDIA PVT . LTD V ACIT (ITA NO. 880/MUM/2013); AND NVP VENTURE CAPITAL INDIA PVT . LTD V DCIT (ITA NO.1564/MUM/2015). REGARDING OBJECTIVE OF APPOINTING NOMINEE DIRECTORS, HE SUBMITTED THAT IT WAS AIMED AT MONITORING OF THE INVESTEE COMPANIES AND THESE EMPLOYEES ACT IN FIDUCIARY CAPACITY IN THOSE COMPANIES. THE NOMINATED DIRECTORS WERE REMUNERATED BY THE INVESTEE CO MPANIES IN THE SIMILAR MANNER A S THEY WOULD REMUNERATE TO ANY OTHER DIRECTOR. NOT ONLY TH AT , THE SAID REMUNERATION PAID TO THESE EMPLOYEES WERE RETURNED BY THEM TO THE ASSESSEE COMPANY AND SUCH AN AMOUNT HAS BEEN OFFERED TO TAX BY THE ASSESSEE. THUS THERE WAS NO NEED FOR MAKING ANY SEPARATE COMPUTATION ON ACCOUNT OF ADDITIONAL SERVICES. HE 17 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 FURTHER SUBMITTED THAT, A PORTFOLIO MANAGER IS A HIGHLY REGULATED ENTITY GOVERNED BY THE SEBI (PORTFOLIO MANAGER S ) REGULATIONS . BASED ON THESE REGULATIONS, IT CAN BE SEEN THAT THE TYPICAL FUNCTIONS AND REGULATORY REQUIREMENTS OF A PORTFOLIO MANAGER INCLUDE MANDATORY REGISTRATION REQUIREMENTS, ACCEPTANCE OF FUNDS, INVESTMENT ADVISORY FUNCTION AND MANAGEMENT AND ADMINISTRATION OF PORTFOLIO. IT IS EVIDENT THAT THE FUNCTIONS PERFORMED BY THE ASSESSEE AS AN INVESTMENT ADVISORY SERVICE PROVIDER FORMS ONLY ONE PART OF THE WIDE RANGE OF FUNCTIONS PERFORMED BY A PORTFOLIO MANAGER. AMONGST OTHERS, ONE O F THE KEY DIFFERENCES BETWEEN THE PORTFOLIO MANAGER AND AN INVESTMENT ADVISOR IS THE DECISION MAKING AUTHORITY AVAILABLE WITH THE PORTFOLIO MANAGER IN RELATION TO THE INVESTMENTS/DIVESTMENT TO BE MADE BY THE CLIENTS. IN THE CASE OF THE ASSESSEE, THE DECISI ON MAKING AUTHORITY ENTIRELY RESTS WITH THE AE. ACCORDINGLY, THE RISK ASSUMED BY THE PORTFOLIO MANAGER IS ALSO HIGHER THAN THE RISK ASSUMED BY THE INVESTMENT ADVISOR SIMPLICITOR . ACCORDINGLY, THE ASSESSEE CANNOT BE CLASSIFIED AS A PORTFOLIO MANAGER. WITHOU T PREJUDICE, HE SUBMITTED THAT, AN INDEPENDENT PERSON RENDERING PORTFOLIO MANAGEMENT SERVICES TO A THIRD PARTY WOULD NOT SE PARATELY CHARGED THIRD PARTY FOR INVESTMENT ADVISORY SERVICES , BECAUSE INVESTMENT ADVISORY FUNCTION WOULD ORDINARILY BE PART OF THE P ORTFOLIO MANAGEMENT SERVICES AND IT WILL BE SUBSUMED IN THE ACTIVITY OF PMS. ACCORDINGLY, THE FUNCTIONS OF PORTFOLIO MANAGEMENT SERVICES WOULD BE PART OF INVESTMENT ADVISORY SERVICES AND HENCE , NO SEPARATE BENCHMARKING CAN BE DONE. TO BUTTRESS HIS POINT, MR. PARDIWALA REFERRED TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ MFG. CO. LTD. VS . DCIT , REPORTED IN 328 ITR 81 AND DREW OUR ATTENTION TO PAGE 132 OF THE SAID REPORT AND POINTED OUT THAT, THERE THE 18 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 HONBLE CO URT HAS OBSERVED THAT PORTFOLIO /INVESTMENT MANAGER EARNS AROUND 2 % TO 2.5% OF THE AVERAGE VALUE OF INVESTMENT . IF SAME YARDSTICK IS APPLIED IN THE CASE OF THE ASSESSEE ON THE AVERAGE VALUE OF INVESTMENT THEN THE INVESTMENT MADE BY THE AE IS APPROXIMATELY RS. 2,860 CRORES AND 2. 5% MARGIN OR FEES WILL WORKED OUT TO RS.71.51 C RORES. HOWEVER, THE ASSESSEE ITSELF HAS EARNED MORE THAN RS.73 CRORES FROM ITS AE DURING THE AY 2010 - 11. THUS, THERE IS NO QUESTION OF CHARGING SEPARATE FEES. 12. LASTLY HE SUBMITTED THAT, TRANSFER PRICIN G ADJUSTMENT IN SUCH CASES CANNOT BE MADE WITHOUT BENCHMARKING THE SAME WITH COMPARABLE UNCONTROLLED TRANSACTIONS. NEITHER THE TPO NOR THE DRP HAS PROVIDED THE MANNER IN WHICH 0. 2 5% OF THE FEES ON INVESTMENT AND DIVESTMENT HAVE BEEN DETERMINED BY THEM. THE RE IS NO BENCHMARKING DONE VIS - - VIS THE COMPARABLE UNCONTROLLED TRANSACTION WITH THE INDEPENDENT ENTITIES AND NO COMPARABILITY ANALYSIS HAS BEEN UNDERTAKEN, THEREFORE, SUCH A ARBITRARILY AND AD - HOC ADDITION IS OUTSIDE THE SCOPE OF TP PROVISIONS. 1 3 . ON THE OTHER HAND, LD. DR REFERRED TO THE DESCRIPTION OF 3I GROUP AS PROVIDED IN THE IR WEBSITE , WHEREIN, IT HAS BEEN MENTIONED THAT 3I GROUP IS MAINLY ENGAGED IN IDENTIFYING AND ANALYZING POTENTIAL INVESTMENT OPPORTUNITIES IN PROFIT MAKING ENTERPRISES AND THA T 3I GROUP IS MAINLY ENGAGED IN EVALUATING AND MAKING RECOMMENDATIONS TO 3I I NVESTMENTS PLC WITH RESPECT TO INVESTMENT OPPORTUNITIES AND PROBABLE GROWTH ORIENTED COMPANIES WHEREBY CAPITAL INVESTMENT WOULD GROW RAPIDLY. IT IS NOT ONLY RENDERING ADVISORY SER VICES BUT ALSO FUNCTIONING AS FULL - FLEDGED PORTFOLIO MONITORING. IN SUPPORT, S HE 19 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 READ OUT THE VARIOUS OBSERVATION MADE BY THE TPO IN HIS IMPUGNED ORDER. REGARDING A PA, IT WAS SUBMITTED THAT, WHAT WERE THE FACTS ON WHICH THE AUTHORITIES TO THE APA TOOK THE DECISION ARE NOT CLEAR AND WHETHER PMS HAS BEEN EXAMINED AND FACTORED INTO THE PRICING OR NOT IS NOT BORNE OUT. IF ASSESSEE IS ACTING AS AN INVESTMENT ADVISORY THEN IT S ROLE AND FUNCTION ARE CONFINED PURELY AS AN ADVISOR AND DOES NOT PARTICIPATE IN THE MAN NER IN WHICH THE ASSESSEE COMPANY HAS DONE. THIS IS A BORNE OUT FR OM THE FACT THAT THE EMPLOYEE OF THE ASSESSEE ACTS AS A DIRECTOR IN THE INVESTEE COMPANIES AND THUS, ASSESSEE CAN NOT BE RECKONED AS SOLE CONSULTANT OR INVESTMENT ADVISOR SIMPLICITOR . THUS, S HE SUBMITTED THAT, FACTS IN THIS YEAR SHOULD BE KEPT IN PERSPECTIVE AND CANNOT BE GUIDE D SOLELY BY APA, WHICH IS RELEVANT FOR THE SUBSEQUENT YEARS. SO FAR AS THE BASIS OF 0.25% AND WHETHER IT SHOULD BE SUBSUMED IN THE MARGIN OF 20% OR NOT , S HE SUBMITTED TH AT, ONCE IT IS PRINCIPALLY HELD THAT, THE ASSESSEE IS CARRYING OUT TWO DIFFERENT FUNCTIONS, THEN THIS MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE TPO TO PROPERLY EXAMINE AND BENCHMARK THE SAME BY CARRYING OUT FRESH ANALYSIS. 1 4 . REGARDING THE INCLUSION AND EXCLUSION OF VARIOUS COMPARABLES WHICH ARE IN DISPUTE , MR. PARDIWALA SUBMITTED THAT THESE COMPARABLES CAME UP FOR DETAIL SCRUTINY AND ANALYSIS VIS - - VIS THE INVESTMENT ADVISORY SERVICES ON IDENTICAL SET OF FACTS FOR THE SAME ASSESSMENT YEAR I N THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF T E MASEK HOLDINGS ADVISORS INDIA P LTD. ( SUPRA ) . HE DREW OUR ATTENTION TO THE VARIOUS FINDING GIVEN IN THE TRIBUNAL ORDER QUA THESE COMPARABLES. HE POINTED OUT THAT, THIS DECISION HAS TAKEN INTO ACCOUNT AL L THE RELEVANT FACTS, FINANCIAL REPORTS FOR THE RELEVANT 20 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 ASSESSMENT YEAR 2010 - 11 AND ALSO THE VARIOUS DECISIONS OF THE TRIBUNAL, WHEREIN THESE VERY COMPARABLES HAVE BEEN CONSIDERED AND ANALYZED VIS - - VIS THE ENTITIES RENDERING INVESTMENT ADVISORY SERVICES AND HAVE GIVEN DETAIL REASONING AS TO WHY THEY ARE TO BE INCLUDED OR EXCLUDED WHILE ANALYZING THE COMPANIES RENDERING NON - BINDING INVESTMENT ADVISORY SERVICES. 1 5 . ON THE OTHER HAND, ON THE ISSUE OF COMPARABLES THE LD. CIT DR STRONGLY RELIED UPON THE ORD ER OF THE DRP AND SUBMITTED THAT, INDEPENDENT FACTS NEEDS TO BE EXAMINED FOR EVERY CASE AND THE MATERIAL AND FACTS ON RECORD WHICH HA VE BEEN DISCUSSED IN THE IMPUGNED ORDERS ARE THE RELEVANT CONSIDERATION RATHER THAN FOLLOWING THE TRIBUNAL ORDER RENDERED I N THE CASE OF A DIFFERENT ASSESSEE. THUS , STRONG RELIANCE WAS PLACED ON THE ORDERS OF THE AUTHORITIES BELOW: 1 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WELL AS THE ENTIRE GAMUT OF FACTS A ND MATERIALS AS REFERRED TO BEFORE US . THE ASSESSEE IS PROVIDING NON - B INDING I NVESTMENT A DVISORY S ERVICES TO ITS AE , 3I INVESTMENT P LC , UK. THE ASSESSEE MAKES INVESTMENT RECOMMENDATION TO ITS AE AND THE AE IN TURN RETAINS THE ABSOLUTE RIGHTS WHETHER TO USE THE INVESTMENT ADVICE/ INFORMATION PROVIDED BY THE ASSESSEE OR NOT . THE SERVICES RENDER E D BY THE ASSESSEE ARE LARGELY ON ACCOUNT OF FOLLOWING: - IDENTIFYING AND ADVISING ON POTENTIAL INVESTMENT OPPORTUNITIES; 21 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 EVALUATING AND MAKING RECOMMENDATIONS TO 3I INVESTMENTS PLC WITH RESPECT TO INVESTMENT OPPORTUNITIES; AND MONITORING AND ADVISING ON DIVESTMENT AND INVESTMENTS. THE FUNCTIONS PERFORMED AS PER THE INVESTMENT A DVISORY S ERVICES A GREEMENT HA VE BEEN ELABORATED BY US IN THE EARLIER PART OF OUR ORDER. F OR RENDERING O F SUCH SERVICES, THE ASSESSEE HAS BEEN REMUNERATED WITH C OST + 20% MARK - UP . THIS PROFIT MARGIN HAS BEEN DISTURBED BY MAKING UPWARD ADJUSTMENT OF RS.19,55,13,737/ - , FIRSTLY , BY WAY OF ADJUSTMENT OF RS.8,83,93,866/ - WHICH HAS BEEN MADE BY COMPU TING THE ADDITIONAL PERFORMANCE FEES AT 0.25% OF THE TOTAL INVESTMENT AND DIVESTMENT ON THE GROUND THAT ASSESSEE IS ALSO ENGAGED IN THE PROVIDING PMS , THAT IS, P ORTFOLIO M ANAGEMENT S ERVICES IN ADDITION TO NON - BINDING ADVISORY SERVICES; AND SECONDLY , BY INC LUSION AND EXCLUSION OF CERTAIN COMPARABLES AND THEREBY ENHANCING THE PROFIT MARGIN TO ALMOST 55.06%. FIRST OF ALL, WE WILL DEAL WITH THE FIRST ISSUE . A S DISCUSSED ABOVE, ONE OF THE MAIN FUNCTION OF THE ASSESSEE FOR RENDERING OF THE INVESTMENT ADVISORY SE RVICES IS , MON ITORING AND ADVISING ON INVESTMENT / DIVESTMENTS WHICH HAS BEEN TREATED TO BE THE PART OF THE NON - BINDING INVESTMENT ADVISORY AGREEMENT . ONCE THE AE ACTS UPON THE ADVICE GIVEN BY THE ASSESSEE FOR MAKING THE INVESTMENT, THEN ASSESSEE IS ASKE D TO MONITOR THE ONGOING PERFORMANCE OF THE I NVESTEE C OMPANIES AND FOR THIS PURPOSE, EMPLOYEE / S OF THE ASSESSEE COMPANY ARE NOMINATED AS A DIRECTOR OR OBSERVER IN THE I NVESTEE COMPANY TO PARTICIPATE AND SIT IN THE BOARD OF DIRECTORS. THIS IS DONE TO ENSUR E AND PROTECT THE RIGHTS OF THE AE AS AN INVESTOR. IT HAS BEEN BROUGHT ON 22 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 RECORD THAT, THE SALARY PAID TO THESE DIRECTORS / EMPLOYEES OF THE ASSESSEE BY THE INVESTEE COMPANIES HAVE BEEN RETURNED BACK TO THE ASSESSEE WHICH HAVE BEEN OFFERED FOR TAX. THIS CO NTENTION OF THE ASSESSEE HAS NOT BEEN REBUTTED OR REJECTED BY THE DEPARTMENT. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS PERFORMED ITS FUNCTION BEYOND THE TERMS AGREED UPON IN THE INVESTMENT ADVISORY AGREEMENT AND RENDERED ANY ADDITION SERVICES OUTSIDE THE AGREEMENT. ON THE FACTS OF THE PRESENT CASE , IT CANNOT BE HELD THAT THE ASSESSEE IS PERFORMING A SEPARATE FUNCTION AND CARRYING OUT TRANSACTION OF PORTFOLIO MANAGEMENT SERVICES AS A N INDEPENDENT AND SEPARATE FUNCTION BESIDES RENDERING INVESTMENT ADVISORY, BECAUSE MONITORING OF INVESTMENT IS EMBEDDED IN THE PROFILE AND FUNCTION OF THE ASSESSEE IN TERMS OF THE AGREEMENT ITSELF . AN INDEPENDENT P ORTFOLIO M ANAGEMENT S ERVICE PROVIDER TO A THIRD PARTY WOULD NOT SEPARATELY CHARGED AS INVESTME NT ADVISORY FEE GIVEN THE FACT THAT THE INVESTMENT ADVISORY FUNCTION WILL ORDINARILY BE PART OF THE PMS SERVICES AND WILL BE SUBSUMED WITHIN THE ACTIVITY OF PORTFOLIO MANAGEMENT SERVICES ONLY . IF THE ASSESSEE IS CHARACTERIZED AS P ORTFOLIO M ANAGER, THEN AS POINTED OUT BY THE LD. COUNSEL ON THE STRENGTH OF THE OBSERVATION MADE IN THE BOMBAY HIGH COURT DECISION , IN SUCH CASE S , THE PMS FEES IS AROUND 2 % TO 2.5% OF THE AVERAGE VALUE OF INVESTMENTS AND IF SUCH A FEE IS TAKEN INTO CONSIDERATION THEN WHAT ASSESSEE HAS RECEIVED IS FAR MORE THAN THE PMS WOULD GENERALLY CHARGE. IN ANY CASE, IF THE REVENUE IS OF THE VIEW THAT, IT IS A SEPARATE TRANSACTION AND IS NOT PART OF THE INVESTMENT ADVISORY FUNCTIONS, THEN IT NEEDS TO BE SEPARATELY BENCHMARKED AND SUCH BENCHMARKI NG CAN ONLY BE DONE BY CARRYING OUT COMPARABILITY ANALYSIS WITH UNCONTROLLED COMPARABLE TRANSACTIONS UNDER THE TRANSFER PRICING PROVISIONS 23 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 AS PRESCRIBED UNDER THE ACT, R EAD W ITH THE RULES. BENCHMARKING THE PRICE ON A DHOC MANNER AND BY RESORTING TO ESTIMATE WITHOUT ANY BASIS AND ANALYSIS CANNOT BE RESORTED FOR DETERMINING THE ARMS LENGTH PRICE OF ANY TRANSACTION , AT LEAST UNDER PRESENT TRANSFER PRICING MECHANISM . THIS PRECISE ISSUE HAS BEEN DEALT IN DETAIL BY THE TRIBUNAL IN THE CASE OF T E MASEK HOLDING ADVI SORS INDIA P VT. LTD. (SUPRA) IN THE FOLLOWING MANNER: - 26 . LASTLY , COMING TO THE ADDITION OF 3% MARKUP ADDITIONALLY MADE OVER AND ABOVE THE COMPARATIVE MARGIN ARRIVED AT BY THE TPO, WE FIND THAT SAME IS NOT TENABLE FROM ANY QUARTERS. THE TPO HAS ADDED THI S MARKUP ON THE GROUND THAT ASSESSEE IN ADDITION TO INVESTMENT ADVISORY SERVICES HAS RENDERED PORTFOLIO MANAGEMENT SERVICES, THAT IS, IT IS MONITORING THE FUNDS FOR ITS AE, HENCE FOR SUCH A DISTINCT FUNCTION FURTHER UPWARD ADJUSTMENT SHOULD BE MADE. FIRST OF ALL FOR MAKING SUCH TRANSFER PRICING ADJUSTMENT A COMPARABILITY ANALYSIS HAS TO BE DONE AND THEN ONLY MARGINS CAN BE BENCHMARKED. HE HAS NOT BROUGHT ON RECORD THAT , ASSESSEE IS RENDERING ANY ADDITIONAL FUNCTION WHICH IS NOT INCLUDED IN THE INVESTMENT AD VISORY FUNCTION. THE TPO HAS TO SHOW THAT THERE ARE ADDITIONAL FUNCTIONS OR SERVICES RENDERED BY THE ASSESSEE IN THIS YEAR QUA THE ASSETS EMPLOYED, FUNCTIONS PERFORMED AND RISKS ASSUMED. AS SUBMITTED BY LD. COUNSEL, COST PLUS MARK - UP COMPENSATION IS RECEIV ED FOR ALL THE INVESTMENT ADVISORY SERVICES AND THE MONITORING ACTIVITY IS PART AND PARCEL OF THE SAME ADVISORY SERVICES. MOREOVER IF THE ACTIVITIES OF THE ASSESSEE HAVE REMAINED THE SAME AND FAR ANALYSIS HAS BEEN DONE ON INVESTMENT ADVISORY SERVICES AS IN THE EARLIER YEARS, THEN HOW SUCH SERVICES HAVE BECOME DIFFERENT IN THIS YEAR WITHOUT ANY NEW MATERIAL FACT HAS NOT BEEN ELABORATED BY THE TPO. WE AGREE THAT SUCH AN ADDITIONAL MARK - UP APPLIED BY THE TPO IS WITHOUT ANY FAR ANALYSIS OR WITHOUT ANY 24 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 BENCHMARK ING EXERCISE WITH ANY COMPARABLES AND MORE IMPORTANTLY WITHOUT ANY ANALYSIS OF ASSESSEES OWN FACTS. THE ASSESSEE IS PROVIDING NON - BINDING INVESTMENT ADVISORY SERVICES TO ITS AE AND SUCH SERVICES AS HIGHLIGHTED BY LD. COUNSEL INCLUDE; IDENTIFYING AND ANALY ZING POTENTIAL INVESTMENT OPPORTUNITIES, EVALUATING AND MAKING RECOMMENDATIONS TO THPL WITH RESPECT TO SPECIFIED INVESTMENTS. THE MONITORING FUNCTIONS PERFORMED BY THE ASSESSEE ARE PART AND PARCEL OF THE PORTFOLIO ADVISORY SERVICES RENDERED BY IT BECAUSE, THE ACTIVITIES CARRIED OUT BY THE ASSESSEE WHILE UNDERTAKING PORTFOLIO MONITORING ACTIVITIES INCLUDE ANALYSIS OF THE LATEST DEVELOPMENT IN THE INDUSTRY, ONGOING PERFORMANCE OF THE INDUSTRIES AND PROVIDING NECESSARY INFORMATION TO ITS AE FROM TIME TO TIME. THIS ASPECT HAS BEEN NOTED BY THE ITAT, MUMBAI BENCH IN THE CASE OF CARLYLE INDIA ADVISORS PRIVATE LIMITED ( SUPRA ) AND IN OTHER DECISIONS CITED ABOVE BY THE LD. COUNSEL. THUS, WE HOLD THAT NO SUCH ADDITION OR ADJUSTMENT ON ACCOUNT OF EXTRA MARKUP CAN BE MA DE. ACCORDINGLY, WE DIRECT TO DELETE THE ADDITION . 1 7 . THUS, IN VIEW OF THE AFORESAID DECISION, WE HOLD THAT NO SEPARATE PMS SERVICES NEEDS TO BE BENCHMARKED AS THE SAME IS PART AND PARCEL OF RENDERING OF INVESTMENT ADVISORY SERVICES WHICH IS EVIDENT F ROM THE FUNCTIONS PERFORMED IN TERMS OF THE I NVESTMENT A DVISORY A GREEMENT ENTERED BETWEEN THE ASSESSEE AND ITS AE. WE FURTHER AGREE WITH THE CONTENTION OF THE LD. SENIOR COUNSEL THAT, IF THE SIMILAR FUNCTION WAS CARRIED OUT BY THE ASSESSEE IN THE EARLIE R YEARS AND ALSO IN THE SUBSEQUENT YEAR S WITH SAME FAR ANALYSIS, THEN PARTICULAR LY FOR THIS YEAR, IT CANNOT BE HELD THAT, ASSESSEE WAS PERFORMING PMS SERVICES SEPARATELY WHICH WAS NOT THERE EARLIER AND IN SUBSEQUENT YEARS. IT HAS NOT BEEN DISPUTED THAT SO FAR AS FAR 25 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 AND OVERALL FUNCTIONS ARE CONCERNED , IT REMAINS THE SAME NOT ONLY IN THE EARLIER YEARS BUT ALSO IN SUBSEQUENT YEARS. THUS, THIS YEAR NO EXCEPTION CAN BE CARVED OUT TO DEVIATE FROM THE PRINCIPLE OF CONSISTENCY ; AND ACCORDINGLY , WE HOLD THAT NO SE PARATE ADJUSTMENT ON ACCOUNT OF PMS CAN BE MADE THAT TOO ON AD - HOC BASIS WITHOUT ADHERING TO TRANSFER PRICING PROVISIONS UNDER THE INCOME - TAX ACT AS WELL AS IT RULES. THOUGH THE APA IN THE CASE OF ASSESSEE HAS BEEN ENTERED FROM AY 2005 - 16 ONWARDS BU T IT DO ES GI VE AN INDICATION THAT THE C OST + M ARK UP CHARGED BY THE ASSESSEE IN THIS YEAR (20%) IS IN AND AROUND THE SAME RANGE WHICH HAS BEEN AGREED IN THE APA (21%) . THE RELEVANT PORTION OF THE APA FOR THE SAKE OF READY REFERENCE IS REPRODUCED BELOW: 3. COVE RED TRANSACTIONS : THE INTERNATIONAL TRANSACTIONS OF PROVISION OF NON - BINDING INVESTMENT ADVISORY SERVICES & RELATED SUPPORT SERVICES; AND RECOVERY OF SERVICE PAY BETWEEN THE APPLICANT AND ITS ASSOCIATED ENTERPRISES 3I INVESTMENT PLC (HEREINAFTER REFERRE D TO AS (AES)), SHALL BE THE COVERED TRANSACTIONS FOR THE AGREEMENT AND THE AGREEMENT SHALL APPLY TO THESE INTERNATIONAL TRANSACTIONS. 4. FUNCTIONS, ASSETS AND RISKS : THE FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISK UNDERTAKEN (HEREINAFTER REFERRED TO A S FAR) BY THE APPLICANT, AND BY ITS AE(S), FOR THE COVERED TRANSACTIONS SHALL BE AS GIVEN IN APPENDIX I. 5. MOST APPROPRIATE TRANSFER PRICING METHOD(S) : THE MOST APPROPRIATE TRANSFER PRICING METHOD FOR THE COVERED TRANSACTIONS SHALL BE THE TRANSACTION AL NET MARGIN METHOD (HEREINAFTER REFERRED TO AS TNMM) WITHIN THE APPLICANT AS THE TESTED PARTY AND OPERATING PROFIT MARGIN AS PROFIT LEVEL INDICATOR (PLI). RECOVERY OF SERVICE PAY IS INCLUDED IN OPERATING EXPENSE; AND HENCE IT WILL GET BENCH MARKED WITH THE TRANSACTION OF PROVISION OF NON - BINDING INVESTMENT ADVISORY SERVICES AND RELATED SUPPORT SERVICES. 6. ARMS LENGTH PRICE : 26 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 THE ARMS LENGTH PRICE (HEREINAFTER REFERRED TO AS ALP) OF THE COVERED TRANSACTIONS SHALL BE THE OPERATING PROFIT MARGIN OF N OT LESS THAN 21% FOR EACH PREVIOUS YEAR OF APA YEARS AND ROLLBACK YEARS. THE DETERMINATION OF ALP FOR ROLLBACK YEARS IS SUBJECT TO THE CONDITION THAT THE ALP WOULD GET MODIFIED TO THE EXTENT THAT IT DOES NOT RESULT IN REDUCING THE TOTAL INCOME OR INCREASI NG THE TOTAL LOSS, AS THE CASE MAY BE, OF THE APPLICANT AS ALREADY DECLARED IN THE RETURN OF INCOME OF THE SAID YEARS. 1 8 . WHENCE , ON SIMILAR FUNCTIONS AND THE TRANSACTIONS THE ARMS LENGTH PRICE HAS BEEN AGREED AT 21% WHICH IF COMPARED WITH THE MARGIN O F 20% IN THIS YEAR, THE N SAME IS NOT AT VARIANCE, THEREFORE, IT CAN BE HELD THAT THE ASSESSEES MARGIN OF 20% FOR THE FUNCTIONS PERFORMED ARE AT ARMS LENGTH PRICE. ACCORDINGLY, WE HOLD THAT, UPWARD ADJUSTMENT OF RS.8,83,93,866/ - IS WITHOUT ANY BASIS AND I S DIRECTED TO BE DELETED. 1 9 . NOW, WE COME TO VARIOUS COMPARABLE COMPANIES, WHICH ARE BEING DISPUTED BEFORE US BY THE ASSESSEE. FROM THE CHART INCORPORATED ABOVE, IT CAN BE SEEN THAT, ASSESSEE HAD CHOSEN 8 COMPARABLE COMPANIES, OUT OF WHICH, 3 COMPARABL ES WERE REJECTED BY THE TPO AND 2 ADDITIONAL COMPARABLES WERE ADDED FROM THE DRP STAGE AND 3 COMPARABLE COMPANIES WHICH WERE CHOSEN BY THE ASSESSEE AND ACCEPTED BY THE TPO , SAME HAS BEEN FURTHER REJECTED BY DRP, LEADING TO SET OF ONLY 3 COMPARABLE COMPANIE S , THE ARITHMETIC MEAN OF WHICH WAS ARRIVED AT 55.06 % AS AGAINST THE ASSESSEES OPERATING MARGIN OF 20%. THE COMPARABLES SELECTED BY THE ASSESSEE, TPO AND DRP ARE ILLUSTRATED IN THE FOLLOWING MANNER : - S NO. PARTICULARS A SSESSEE S SET TPOS SET DRP SET 1 ACCESS INDIA ADVISORS LTD NC NC NC 2 FUTURE CAPITAL INVESTMENT ADVISORY LTD. 15.71% 15.71% X 27 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 3 ICRA ONLINE LTD. 41.77% 43.43% 41.77% 4 ICRA MANAGEMENT CONSULTING SERVICES LTD 0.41% X X 5 IDC (INDIA) LTD. 13.00% 13.00% REJECTED 6 INFORMED TECHNOLOGI ES LIMITED 25.52% 25.52% 25.52% 7 INTEGRATED CAPITAL SERVICES LTD. - 2.52% X X 8 KINETIC TRUST LIMITED 10.39% X X 9 FUTURE CAPITAL HOLDINGS LIMITED 29 .48% REJECTED 10 MOTILAL OSWAL INVESTMENT ADVISORS PVT . LTD. 97.89% 97.89% ARITHMETIC MEAN 14.84 % 37.51% 55.06% APPLICANTS OPERATING MARGIN 20.00% 20.00% 20.00% BEFORE US, THE ASSESSEE HAS FINALLY CONTESTED THE FOLLOWING COMPARABLES FOR INCLUSION AND EXCLUSION : - 20. IN SUPPORT OF THE EXCL USION AND INCLUSION OF THESE COMPARABLES LD. COUNSEL HAS HEAVILY RELIED UPON THE DECISION IN THE CASE OF T E MASEK HOLDINGS ADVISORS INDIA P LTD. (SUPRA) RENDERED ON EXACTLY SIMILAR SET OF FACTS AND HOST OF O THER DECISIONS. WE FIND THAT, IN THE SAID CASE THE TRIBUNAL IN ITS DECISION WHILE CONSIDERING SIMILAR FUNCTIONS OF AN ENTITY RENDERING NON - BINDING INVESTMENT ADVISORY SERVICES HAS DEALT WITH SIMILAR SET OF COMPARABLES IN DETAIL AFTER CONSIDERING THE VARIOU S GAMUTS OF ARGUMENTS AND ALSO THE ANNUAL REPORT OF THE COMPARABLE COMPANIES RELEVANT FOR THE AY 2010 - 11. THE RELEVANT OBSERVATION AND FINDING OF THE TRIBUNAL ON THESE COMPARABLES ARE REPRODUCED HEREUNDER : - I. ICRA MANAGEMENT CONSULTING SERVICES LTD - FOR INCLUSION II. IDC (INDIA) LTD. - FOR INCLUSION III. KINETIC TRUST LIMITED - FOR INCLUSION IV. INTEGRATED CAPITAL SERVICES LTD . - FOR INCLUSION V. MOTILAL OSWAL INVESTMENT ADVISORS PVT . LTD. - FOR EXCLUSION VI. FUTURE CAPITAL HOLDINGS LTD. FOR INCLUSION 28 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 ICRA MANAGEMENT CONSULTING SERVICES LIMIT ED : 20. AT THE OUTSET, THIS COMPARABLE WAS SUBJECT MATTER OF CONSIDERATION BEFORE THE TRIBUNAL IN AY 2008 - 09 & 2009 - 10 , WHEREIN THIS COMPANY WAS HELD TO BE GOOD COMPARABLE BOTH ON THE GROUND OF FUNCTIONAL SIMILARITY AND IN VIEW OF PRINCIPLES OF CONSIS TENCY AS IT WAS HELD TO BE A GOOD COMPARABLE BY THE TPO IN THE EARLIER YEARS. FROM THE PERUSAL OF THE ANNUAL REPORT, WHICH IS APPEARING FROM PAGES 156 TO 187 OF THE PAPER BOOK, WE FIND THAT IT IS ESSENTIALLY PROVIDING CONSULTANCY SERVICES IN DIVERSIFIED AR EAS, LIKE IN GOVERNMENT SECTORS, INFRASTRUCTURE, ENERGY, CORPORATE ADVISORY, BANKING AND FINANCIAL SERVICES, ETC. IT FOCUSES ON CONSULTANCY AND ADVISORY WHICH IS ITS CORE AREA AND COMPETENCY. THE REVENUE GENERATION IS PURELY FROM CONSULTANCY FEES WHICH IS EVIDENT FROM PROFIT AND LOSS ACCOUNT AS ON 31 ST MARCH 2010 (APPEARING AT PAGE 176 OF THE PAPER BOOK). THE TPO IN HIS ORDER HAS NOTED THAT ITS CONSULTATION OR ADVISORY OPERATIONS RANGES IN VARIOUS FIELDS WHICH HAVE BEEN TABULATED BY HIM AT PAGES 9 TO 11 OF THE ORDER, WHICH ACCORDING TO HIM ASSESSEE IS NOT PERFORMING. ON THE PERUSAL OF THE DIRECTORS REPORT AND ALSO THE REMARKS OF THE TPO, WE FIND THAT THE ICRA MANAGEMENT IS PROVIDING CONSULTANCY SERVICES IN A MYRIAD AREAS RANGING FROM DEVELOPMENT, TRANSPORTA TION, URBAN INFRASTRUCTURE, ENERGY SECTOR, BANKING AND FINANCIAL SERVICES AND ADVISING CROSS BORDER M&A TRANSACTION ETC. SOME OTHER OBSERVATION MADE BY THE TPO IS THAT ICRA HAS PARTICIPATED IN VARIOUS INTERNATIONAL FORUMS, PARTNERED WITH FOREIGN COMPANY IN MULTIPLE PROJECTS AND HAS A VERY BIG CLIENT BASE UNLIKE ASSESSEE. HOWEVER ALL THESE FACTS DO NOT AFFECT THE CORE COMPETENCY AND FUNCTIONS OF THE SAID COMPANY, WHICH IS ADVISORY, BECAUSE IN ALL THE FIELDS IT IS RENDERING ONLY ADVISORY AND CONSULTANCY SERVI CES. THE WHOLE REVENUE IS AGAIN FROM CONSULTANCY/ADVISORY FEES. IN THE INSTANT CASE ALSO, THE ASSESSEE IS PROVIDING INVESTMENT ADVISORY SERVICES TO ITS AE IN DIVERSE INDUSTRIES LIKE, INFRASTRUCTURE, TELECOM, MEDIA, BANKING ETC. TO ENABLE THE AE TO TAKE DEC ISION FOR MAKING INVESTMENTS. THE FUNCTIONS OF CONSULTANCY/ADVISORY HAVE TO BE SEEN AS ITS CORE COMPETENCE AREA AND NOT IN THE FIELD IN WHICH SUCH CONSULTANCY IS GIVEN. UNDER THE TNMM, ONE HAS TO SEE THE TRANSACTION UNDERTAKEN ARE COMPARABLE OR NOT AND WHE THER ANY ADJUSTMENT IS REQUIRED TO OBTAIN A RELIABLE RESULT, BECAUSE UNDER TNMM THE NET MARGIN ARE LESS AFFECTED BY TRANSACTIONAL DIFFERENCES AND IS MORE TOLERANT TO SOME MINOR FUNCTIONAL DIFFERENCES BETWEEN CONTROLLED AND UNCONTROLLED TRANSACTIONS. HOWEVE R, IF ANY UNIQUE FUNCTION OR PROPERTY SIGNIFICANTLY AFFECTS THE OPERATING COSTS OR NET MARGIN OR HAS A BEARING IN THE GENERATION OF REVENUE ITSELF, THEN IT CANNOT BE CONSIDERED TO BE A FIT COMPARABLE FOR BENCHMARKING THE NET MARGINS. HERE IT IS NOT THE CAS E WHERE THERE IS ANY UNIQUE FUNCTIONS MATERIALLY 29 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 AFFECTING THE REVENUE OR NET MARGINS VIS - A - VIS THE FUNCTIONS PERFORMED BY ICRA. HENCE ON FUNCTIONAL LEVEL IT IS A GOOD COMPARABLE. AS STATED EARLIER, IN THE EARLIER YEARS, THE TPO HAS ACCEPTED ICRA TO BE A C OMPARABLE AND IN LATER YEARS THE TRIBUNAL IN AY 2008 - 09 & 2009 - 10 HAS HELD ICRA MANAGEMENT TO BE GOOD COMPARABLE QUA THE FUNCTIONS OF THE ASSESSEE AND THERE BEING NO MATERIAL CHANGE ON FACTS, FUNCTIONAL PROFILE OR ANY OTHER FACTOR IN THIS YEAR, THEN AS MAT TER OF CONSISTENCY, WE DO NOT WANT DO DEVIATE FROM OUR FINDINGS GIVEN IN THE EARLIER YEARS. THERE CANNOT BE A PICK AND CHOOSE OF COMPARABLES EVERY YEAR UNLESS THERE ARE SOME MATERIAL DIFFERENCE IN FACTS AND CIRCUMSTANCES COMPELLING TO TAKE A DIFFERENT CONC LUSION. THUS, WE HOLD THAT ICRA MANAGEMENT IS A GOOD COMPARABLE AND SHOULD BE INCLUDED IN THE LIST OF FINAL COMPARABLES. KINETIC TRUST LTD. : - 21. THIS COMPANY HAS BEEN REJECTED BY THE TPO ON THE GROUND THAT ITS TURNOVER IS ONLY 24 LAKHS AND IT IS REG ISTERED WITH THE RBI AS NBFC. ON A LOWER TURNOVER, THE TPO HAS MAINLY RELIED UPON THE DECISION OF ITAT IN THE CASE OF TRIOLOGY E BUSINESS. AT THE OUTSET, IT IS NOTICED THAT IN THE EARLIER TWO YEARS, THE KINETIC TRUST LTD HAS BEEN HELD TO BE GOOD COMPARABLE BASED ON ITS FUNCTIONAL PROFILE. SO FAR AS FUNCTIONS ARE CONCERNED, IT IS EVIDENT FROM THE DIRECTORS REPORTS, WHICH ARE PLACED IN THE PAPER BOOK FROM PAGES 187 TO 230. IT IS SEEN THAT, THE COMPANY IS CONCENTRATING ON ITS MAIN ACTIVITY OF CORPORATE CONSUL TANCY SERVICES AND FINANCIAL SERVICES. BEING A NBFC HAS NOT CHANGED THE NATURE OF ACTIVITY UNDERTAKEN BY THE COMPANY AND ITS CORE BUSINESS COMPETENCY AND ITS REVENUE IS FROM CONSULTANCY SERVICES. SO FAR AS THE TURNOVER FILTER APPLIED BY THE TPO, WE FIND TH AT, FIRST OF ALL AT THE TIME OF SELECTION PROCESS, THE ASSESSEE HAS NOT CONSIDERED THE TURNOVER FILTER FOR ACCEPTING OR REJECTING THE COMPARABLES. THE TURNOVER FILTER CANNOT BE ONE OF THE TOOL FOR CHERRY PICKING BY EITHER OF THE PARTIES AT A LATER STAGE, AS IT HAS TO BE DONE AT THE THRESHOLD LEVEL ONLY, I.E. AT THE TIME OF SEARCH PROCESS AND BY APPLYING QUANTITATIVE FILTER. HOWEVER, ONCE TURNOVER FILTER HAS NOT BEEN APPLIED THEN COMPARABILITY HAS TO BE DONE AT QUALITATIVE LEVEL BASED ON FAR ANALYSIS. IF ON FAR ANALYSIS THERE ARE DIFFERENCES ON ACCOUNT OF EITHER ASSETS DEPLOYED AND RISK ASSUMED MATERIALLY AFFECTING COSTS OR MARGINS THEN PROBABLY SUCH COMPARABILITY CAN BE REJECTED. BUT HERE IN THIS CASE, MERELY ON THE GROUND THAT IT HAS A LOW TURNOVER CANNOT BE THE REASON OR CRITERIA FOR REJECTION. MOREOVER, FROM THE PERUSAL OF THE DECISION OF TRIOLGY E. BUSINESS INDIA PVT LTD.(SUPRA), IT IS SEEN THAT THE TRIBUNAL ON THE FACTS OF THE CASE HIGHLIGHTED THE IMPORTANCE OF APPLYING TURNOVER FILTER BETWEEN THE RANGE OF RS. 1 CRORE TO 200 CRORES. THIS DOES NOT LEAD TO 30 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 ANY INFERENCE THAT IN ALL THE MATTERS THE SAME CRITERIA FOR APPLYING THE TURNOVER FILTER SHOULD BE TAKEN BETWEEN 1 CRORE TO 200 CRORES. THUS, THE RATIO OF THE TRIBUNAL DECISION CANNOT BE APPLIED UNIVERS ALLY IN ALL THE CASES. RATHER IN THE CASE OF NORTEL INDIA PVT . LTD VS . ADDL. CIT ( SUPRA ), THE TRIBUNAL HELD THAT A COMPANY CANNOT BE EXCLUDED FROM THE COMPARABLE LIST MERELY FOR THE REASON OF LOW TURNOVER ESPECIALLY, WHEN NO TURNOVER FILTER WAS APPLIED BY EITHER PARTY . THE ANALYSIS IN SUCH CASES HAS TO BE CARRIED OUT ON FUNCTIONAL BASIS. BEFORE US, IT HAS ALSO BEEN BROUGHT ON RECORD THAT THE SAID DECISION OF THE TRIBUNAL IN THE APPEAL FILED BY THE REVENUE BEFORE THE HIGH COURT HAS BEEN UPHELD THAT IS, REVEN UES APPEAL HAS BEEN DISMISSED. FURTHER AS STATED ABOVE, IN THE EARLIER YEARS, THIS COMPARABLE HAS BEEN HELD TO BE A GOOD COMPARABLE BY THE TPO HIMSELF AND TRIBUNAL IN TWO YEARS HAVE ACCEPTED TO BE A GOOD COMPARABLE. THUS AS A MATTER OF CONSISTENCY, WE HOL D THAT KINETIC TRUST LTD. SHOULD BE INCLUDED IN THE COMPARABILITY LIST. IDC INDIA LTD : - 22. THIS COMPARABLE THOUGH ACCEPTED BY THE TPO AS A GOOD COMPARABLE, HOWEVER, THE DRP HAS ADDITIONALLY REJECTED THIS COMPARABLE. IN ASSESSMENT YEAR 2008 - 09, THE TRIBUNAL HAS HELD TO BE A GOOD COMPARABLE, FIRSTLY , ON THE GROUND THAT THIS COMPANY IS ALSO ENGAGED IN THE ADVISORY AND CONSULTANCY SERVICES FOR THE PURPOSE OF INVESTMENT MADE IN VARIOUS SECTORS AND SECONDLY , IT HAS BEEN FOUND TO BE GOOD COMPARABLE BY THE TPO IN THE ASSESSMENT YEAR 2007 - 08 AND 2009 - 10. ONCE COMPANY HAS BEEN HELD TO BE GOOD COMPARABLE CONSISTENTLY FOR THREE YEARS THEN WITHOUT ANY CHANGE IN THE MATERIAL FACTS, IT CANNOT BE HELD THAT THIS COMPARABLE COULD BE REJECTED IN THIS YEAR. MOREOVER, I N THE CASE OF CARLYLE ADVISORY INDIA LTD., ITAT MUMBAI BENCH, REPORTED IN 43 TAXMAN.COM 184, THE TRIBUNAL HELD THAT THIS COMPANY IS A GOOD COMPARABLE WITH THE COMPANIES RENDERING INVESTMENT ADVISORY SERVICES. THIS DECISION OF THE CARLYLE ADVISORS HAVE ALSO UPHELD BY THE HONBLE BOMBAY HIGH COURT. MOREOVER, WE HAVE ALREADY DISCUSSED THE FUNCTIONS PERFORMED BY THE IDC INDIA LTD WHILE DEALING WITH LD. COUNSELS ARGUMENT THAT FUNCTIONS OF ADVISORY SERVICES ARE QUITE SIMILAR TO THE FUNCTIONS OF THE ASSESSEE AND, THEREFORE, WE ACCEPT THE ASSESSEES CONTENTION THAT THIS COMPARABLE CANNOT BE REJECTED. ACCORDINGLY, SAME IS DIRECTED TO BE INCLUDED IN THE COMPARABILITY LIST. MOTILAL OSWAL INVESTMENT AND ADVISOR LTD : - 25. THIS COMPARABLE HAS BEEN INCLUDED BY THE T PO AND WHILE INCLUDING THE SAID COMPARABLE HE HAS OBSERVED THAT ITS INCOME 31 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 IS ONLY FROM ADVISORY FEES DURING THE YEAR AND IT IS PERFORMING ADVISORY SERVICES IN THAT FIELD OF INVESTMENT LIKE ASSESSEE. BEFORE US, LD. CIT DR ARGUING FOR ITS INCLUSION SUBMITTE D THAT, IF THE ICRA MANAGEMENT SERVICES CAN BE INCLUDED FOR HAVING REVENUE FROM ADVISORY SERVICES THEN ON SAME ANALOGY THIS COMPANY SHOULD ALSO BE GIVEN THE SAME TREATMENT. FROM THE PERUSAL OF THE DIRECTORS REPORT, IT IS SEEN THAT THIS COMPANY DERIVES ITS BUSINESS INCOME FROM FOUR DIFFERENT BUSINESS VERTICALS, I.E. EQUITY CAPITAL MARKETS, MERGER AND ACQUISITIONS, PROFIT EQUITY SYNDICATIONS AND STRUCTURED DEBT. IT ALSO GIVE ADVISES ON CROSS BORDER ACQUISITION. ITS CORE COMPETENCE IS IN THE FIELD OF MERCHANT BANKING. IT ALSO PROVIDES COMPREHENSIVE INVESTMENT BANKING SOLUTIONS AND TRANSACTION EXPERTISE COVERING PRIVATE PLACEMENT OF EQUITY, DEBT AND CONVERTIBLE INSTRUMENTS IN INTERNATIONAL AND DOMESTIC CAPITAL MARKETS, MONITORING MERGERS AND ACQUISITIONS AND AD VISING M&A AS PROFESSIONAL AND RESTRUCTURING ADVISORY AND IMPLEMENTATIONS. IT IS ALSO INVOLVED IN VARIOUS PROFESSIONAL ACTIVITIES OF THE MERCHANT BANKING. A MERCHANT BANKER PROVIDES CAPITAL TO COMPANIES IN THE FORM OF SHARE OWNERSHIP INSTEAD OF LOANS. IT A LSO PROVIDES ADVISORY ON CORPORATE MATTERS TO THE COMPANIES IN WHICH THEY INVEST. THE FOCUS IS ON NEGOTIATED PRIVATE EQUITY INVESTMENT. THE WIDE RANGE OF ACTIVITIES INCLUDE PORTFOLIO MANAGEMENT, CREDIT SYNDICATION, COUNSELING ON M&A, ETC. THIS WHOLE RANGE OF FUNCTIONS AND ACTIVITIES CARRIED OUT BY MOTILAL OSWAL IS DEFINITELY ARE FAR WIDER AND MUCH DIFFERENT FROM INVESTMENT ADVISORY SERVICES WHERE CORE FUNCTIONS IS TO GIVE ADVICES FOR MAKING THE INVESTMENTS IN DIVERSIFIED FIELDS. A COMPANY WHICH IS ENGAGED IN MERGER AND ACQUISITIONS, PRIVATE EQUITY SYNDICATION, LOAN/CREDIT SYNDICATION AND PERFORMING MOST OF THE FUNCTION OF A MERCHANT BANKER, THEN THE ENTIRE FUNCTIONS AND TRANSACTIONS AFFECTS THE GENERATION OF REVENUE AND MARGINS. SUCH FUNCTIONS ARE ENTIRELY DIFFERENT FROM INVESTMENT ADVISORY SERVICES. MERE CLASSIFICATION OF THE REVENUE AS ADVISORY FEES WILL NOT PUT THE COMPANY IN A COMPARABLE BASKET SANS FUNCTIONAL SIMILARITY AND TRANSACTIONAL ANALYSIS. IN CASE OF CARLYLE INDIA ADVISORS PVT. LTD (SUPRA), IT HAS BEEN HELD THAT, THE MERCHANT BANKING FUNCTIONS ARE ENTIRELY DIFFERENT FROM INVESTMENT ADVISORY SERVICES AND THIS DECISION OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT. THUS, IN VIEW OF PLETHORA OF JUDICIAL DECISIONS AS REFERRED TO BY LD. COUNSEL AND IN VIEW OF FUNCTIONAL DIFFERENCES AS DISCUSSED AS ABOVE, WE HOLD THAT MOTILAL OSWAL CANNOT BE PUT INTO THE COMPARABILITY LIST AND IS DIRECTED TO BE EXCLUDED. FUTURE CAPITAL INVESTMENT ADVISORY LTD : - 23. THIS COMPANY IS ALSO ACCEPTE D BY THE TPO AS GOOD COMPARABLE, HOWEVER, THE DRP HAS REJECTED THE SAME. SUCH A 32 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 REJECTION BY THE DRP IS WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE. FROM THE PERUSAL OF THE ANNUAL REPORT, WHICH HAS PLACED IN THE PAPER BOOK FROM PAGES 263 TO 272, IT IS S EEN THAT IT IS PRIMARILY ENGAGED IN RENDERING INVESTMENT ADVISORY SERVICES ONLY AND ITS OPERATING IN A SINGLE SEGMENT. THUS, THERE CANNOT BE ANY GENUINE REASON FOR REJECTING THE SAID COMPARABLE. THE DRP HAS REJECTED THIS COMPARABLE ON THE GROUND THAT IT IS IN THE PROCESS OF SHUTTING DOWN ITS BUSINESS. HOWEVER, DURING THE YEAR, IT HAS CONTINUED TO RENDER THE INVESTMENT ADVISORY SERVICES AND THE REALIGNMENT AGREEMENT WAS EFFECTIVE FROM 1 ST JANUARY, 2010, THE REALIGNMENT IS ALSO FOR INVESTMENT ADVISORY ACTIVIT IES. THUS, THERE IS NOT MUCH IMPACT ON THE NET MARGINS ESPECIALLY IN THE ASSESSMENT YEAR 2010 - 11, THEREFORE, THIS COMPANY CANNOT BE REJECTED AND TPO IS DIRECTED TO INCLUDE THE SAME IN THE FINAL COMPARABILITY LIST . THE AFORESAID DECISION QUA THE COMPARABL ES IN DISPUTE WILL APPLY HERE IN THIS CASE ALSO , BECAUSE THERE IS NOT MUCH DIFFERENCE IN THE FUNCTION PERFORMED. I T HAS ALSO BEEN POINTED OUT THAT, THESE COMPARABLE COMPANIES HAVE ALSO BEEN DEALT IN SEVERAL OTHER DECISIONS WHILE ANALYZING THE FUNCTIONS OF THE COMPANIES RENDERING INVESTMENT ADVISORY SERVICE S, THE COPY OF WHICH WAS FILED SEPARATELY BY THE LD. COUNSEL. SINCE WE HAVE ALREADY TAKEN NOTE OF THE AFORESAID DECISION, THEREFORE, WE ARE NOT ANALYZING THE OTHER DECISIONS. 21. IN VIEW OF THE AFORESAID FINDING AND F OLLOWING THE AFORESAID DECISION , WE HOLD AS UNDER: ( I ) ICRA MANAGEMENT CONSULTANCY SERVICES LTD IS DIRECTED TO BE INCLUDED IN THE COMPARABILITY LIST; ( II ) KINETIC TRUST LTD . SHOULD BE INCLUDED AS COMPARABLE ; ( III ) IDC INDIA LTD. SHOULD BE INCLUDED AS COMPA RABLE; ( IV ) FUTURE CAPITAL INVESTMENT ADVISORS SHOULD BE INCLUDED; AND LASTLY; ( V ) MOTILAL OSWAL INVESTMENT ADVISORS LTD. IS DIRECTED TO BE EXCLUDED. 33 3I INDIA PRIVATE LIMITED ITA NO. 581/MUM/2015 ACCORDINGLY, THE TPO IS DIRECTED TO BENCHMARK THE ASSESSEES MARGIN WITH FINAL LIST OF COMPARABLE COMPANIES AND IF THEY ARE WITHIN THE RANGE OF 5%, THEN THE ENTIRE ADJUSTMENT SHOULD BE DELETED. IN VIEW OF OUR FINDING, WE ARE NOT SEPARATELY ADJUDICATING THE VARIOUS GROUNDS OF APPEAL. 2 2 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPE N COURT ON 16 TH SEPTEMBER , 2016. SD/ - SD/ - ( ) ( ) ( R C SHARMA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 16 TH SEPTEMBER, 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE DIT/ ADDL. CIT( TP ) CONCERNED /II(5) ___ , MUMBAI. 4 ) THE COMMISSIONER OF INCOME TAX /DIT - TP - II ____ MUMBAI. 5 ) K , , / THE D.R. K BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS