DCIT, New Delhi V. M/s. Chrys Capital Investment Advisors Pvt. Ltd., New Delhi

ITA 6510/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4612 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I2
• Next Hearing Date: 21-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIKASH SRIVASTAVA
• Keywords: Transfer pricing; International transaction; Retrospective amendment; Additional evidence; Scheme of amalgamation; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6504/DEL./2013 (ASSESSMENT YEAR : 2007-08) M/S. CHRYSCAPITAL INVESTMENT ADVISORS VS. ADDL. CIT , (INDIA) PRIVATE LIMITED, RANGE 3, SUITE 101, THE OBEROI, NEW DELHI. DR. ZAKIR HUSSAIN MARG, NEW DELHI 110 003. (PAN : AABCC4609H) ITA NO.6510/DEL./2013 (ASSESSMENT YEAR : 2007-08) ADDL. CIT, VS. M/S. CHRYSCAPITAL INVESTMENT ADVISO RS RANGE 3, (INDIA) PRIVATE LIMITED, NEW DELHI. SUITE 101, THE OBEROI, DR. ZAKIR HUSSAIN MARG, NEW DELHI 110 003. (PAN : AABCC4609H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIKASH SRIVASTAVA, ADVOCATE REVENUE BY : SHRI H.K. CHOUDHARY, CIT DR DATE OF HEARING : 06.09.2017 DATE OF ORDER : 19.09.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 2 SINCE BOTH THE AFORESAID APPEALS HAVE BEEN ARISEN O UT OF THE SAME ORDER IMPUGNED BY THE ASSESSEE AS WELL AS THE REVENUE, BOTH THE APPEALS ARE BEING DISPOSED OFF BY WAY OF CONSOL IDATED ORDER TO AVOID REPETITION OF DISCUSSION. 2. APPELLANT, M/S. CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE AS SESSEE COMPANY), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE TH E IMPUGNED ORDER DATED 17.09.2013 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-XX, NEW DELHI, FOR THE ASSESSMENT YEARS 2 007-08 ON THE GROUNDS INTER ALIA THAT :- 10. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXVIII, NEW DELHI ('LD. CIT(A)') UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 ('THE ACT') IS BAD IN LAW AND AN FACTS AND CIRCUMSTANCES OF THE CASE. 11. THE LD. CIT(A) AS WELL AS LEARNED ASSESSING OFFICER (LD. AO') AND THE LEARNED TRANSFER PRICING OFFICER ('LD. TPO') HAVE ERRED IN LAW AS WELL AS FA CTS OF THE CASE IN NOT ACCEPTING THE ARM'S LENGTH PRICE (' ALP') AS DETERMINED BY THE APPELLANT. 12. THE LD. CIT(A) / LD. AO / LD. TPO HAS ERRED IN DETERMINING THE ALP ON THE BASIS OF DATA FAR FINANC IAL YEAR 2006-07 ONLY AND IGNORING THE DATA FOR TWO PRI OR FINANCIAL YEARS I.E. FY 2004-05 AND FY 2005-06. 13. THE LD. CIT(A) / LD. AO / LD. TPO HAS ERRED IN INTRODUCING BRESCON CORPORATE ADVISORS LIMITED AS A COMPARABLE, IGNORING THE EXCEPTIONALLY HIGH MARGINS EARNED BY IT, WHILE DETERMINING THE ALP. ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 3 14. THE LD. CIT(A) / LD. AO / LEI TPO HAS ERRED IN NOT ACCEPTING A COMPANY I.E. IDFC INVESTMENT ADVISORS LIMITED AS A COMPARABLE OF THE APPELLANT A ND REJECTING THE SAME ON THE CONTENTION THAT IT IS THE FIRST YEAR OF OPERATION OF THIS COMPANY AND IT HAS A NEGATIVE NET WORTH. 15. LD. CIT(A) HAS ERRED IN NOT ACCEPTING INTEGRATED ENTERPRISES INDIA LIMITED AS A COMPARABL E OF THE APPELLANT IGNORING THE FACT THAT ITS FINANCI ALS ARE NOW AVAILABLE IN PUBLIC DOMAIN. 16. THE LD. CIT(A) / LD. AO / LD. TPO HAS ERRED IN CONSIDERING THE AMOUNTS REIMBURSED BY ITS ASSOCIATE D ENTERPRISES (PAYMENTS MADE BY THE ASSESSEE AN BEHAL F OF ITS ASSOCIATED ENTERPRISES WHICH WERE SUBSEQUENT LY REIMBURSED TO THE APPELLANT BY THE ASSOCIATED ENTERPRISES) AS PART OF OPERATING EXPENSES AND THE CORRESPONDING REIMBURSEMENT AS PART OF OPERATING REVENUE OF THE APPELLANT WHILE DETERMINING ALP. 17. LD. CIT(A) / LD. AO HAS ERRED IN DISALLOWING THE BONUS AMOUNTING TO RS.23,340,000 PAID BY THE APPELLANT TO ITS EMPLOYEES (WHO ARE ALSO SHAREHOLDE RS OF THE APPELLANT) U/S 36(1)(II) OF THE ACT BY HOLDI NG THAT THE SAME WOULD HAVE BEEN PAYABLE BY WAY OF DIVIDEND. THE LD. CIT(A) / LD. AO HAS IGNORED THE FACT THAT THE RATIO OF BONUS PAID BY THE APPELLANT IS DIFFERENT FROM THE RATIO OF THE SHAREHOLDING OF THE SHAREHOLDERS EMPLOYEE AND THUS, BONUS PAID CANNOT BE DISALLOWED U/S 36(1)(II) OF THE ACT. 18. THE LD. CIT(A) / LD. AO HAS ERRED IN NOT REDUCING THE OPERATING COSTS INCURRED BY THE APPELL ANT BY THE AMOUNT OF BONUS DISALLOWED U/S 36(1)(II) OF THE ACT WHILE COMPUTING THE ALP FOR THE INTERNATIONAL TRANSACTION. 19. THE LD. CIT(A) / LD. AO / LD. TPO HAS ERRED IN LAW BY IGNORING SEVERAL JUDICIAL PRECEDENTS RELIED UPON BY THE APPELLANT INCLUDING FEW DECISIONS BY TH E ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 4 JURISDICTIONAL BENCH OF INCOME TAX APPELLATE TRIBUNAL AND HIGH COURT. 20. THE ABOVE GROUNDS OF APPEALS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 21. THE APPELLANT CRAVES LEAVE TO ADD I WITHDRAW OR AMEND ANY GROUND OF APPEAL AT THE TIME OF HEARING. ASSESSEE STATED TO HAVE ASSIGNED WRONG NUMBERS TO T HE GROUNDS RAISED IN THIS APPEAL AS SL.NOS.10 TO 21 INSTEAD OF SL.NOS.1 TO 11, SO THE GROUNDS RAISED BY THE ASSESSEE ARE BEING DISPOS ED OFF ACCORDINGLY. 3. THE ASSESSEE HAS ALSO TAKEN THE FOLLOWING ADDITI ONAL GROUND IN THE AFORESAID APPEAL BY MOVING APPLICATION DATED 22.09.2015 :- THE LD. CIT (A) HAS ERRED IN ACCEPTING BRESCON CORPORATE ADVISORS LTD. (BRESCON) AS A COMPARABLE TO THE APPELLANT BY HOLDING THAT THE ACTIVITIES PERFORMED BY BRESCON ARE SIMILAR TO THE ACTIVITIES PERFORMED BY THE APPELLANT. KEEPING IN VIEW THE FACT THAT THE ADDITIONAL GROUND SOUGHT TO BE RAISED BY THE ASSESSEE COMPANY, THOUGH NOT RAISED B EFORE THE LD. CIT (A), IS NECESSARY FOR COMPLETE ADJUDICATION OF THE CONTROVERSY AT HAND, THE APPLICATION FOR ADDITIONAL GROUND IS H EREBY ALLOWED. 4. APPELLANT, ADDL. COMMISSIONER OF INCOME TAX, RA NGE 3, NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE ), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORD ER DATED ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 5 17.09.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XX, NEW DELHI, FOR THE ASSESSMENT YEARS 2007-08 ON THE GROUNDS INTER ALIA THAT :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN EXCLUDING M/S KEYNOTE CORPORATE SERVICES LTD., AS A COMPARABLE BY IGNORING THAT: I. AN ENTITY CAN BE EXCLUDED FROM LIST OF COM PARABLES ONLY ON THE GROUND OF INCOMPARABILITY TAKI NG INTO ACCOUNT COMPARABILITY FACTORS AS STIPULATED U/ S 92C(1) OF THE ACT AND RULE 10B(2) & (3) OF THE RULE AND NOT ONLY ON THE BASIS OF HIGHER OR LOWER PROFIT RATE. II. THE DECISIVE FACTORS FOR DETERMINING EXCLUSION OR INCLUSION OF ANY CASE FROM THE LIST OF COMPARABLES ARE THE SPECIFIC CHARACTERISTICS OF SERVICES PROVIDED, ASSETS EMPLOYED, RISKS ASSUMED, CONTRACTUAL TERMS AND CONDITIONS INCLUDING GEOPRAPHICAL LOCATION AND SIZE OF MARKETS, COSTS OF LABOUR AND CAPITAL IN MARKET ETC. III. THE ABOVE PRINCIPLE IS IN ACCORDANCE WITH THE TRANSFER PRICING LAW IN INDIA AS WELL AS FOLLOWED I N UN AND OECD TP GUIDELINES. 5. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY STATED T O BE INTO THE BUSINESS OF PROVIDING ADVICE TO CHRYSALIS MANAGEMEN T COMPANIES IN ORDER TO ASSESS THE INVESTMENT DECISION. ASSESS EE COMPANY REPORTEDLY CARRIES OUT RESEARCH WORK AND SCOUTING A CTIVITIES FOR CHRYSALIS MANAGEMENT COMPANIES IN ORDER TO IDENTIFY ENTREPRENEURS AND PORTFOLIO COMPANIES REQUIRING ASS ISTANCES FOR ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 6 CAPITAL INFUSION, STRATEGIC INVESTMENT AND FINANCIA L ADVICE. AS PER FORM NO.3CB, THE ASSESSEE COMPANY ENTERED INTO INTE RNATIONAL TRANSACTIONS DURING THE YEAR UNDER ASSESSMENT AS UN DER :- S.NO. DESCRIPTION OF TRANSACTION METHOD VALUE 1 ADVISORY SERVICES TO CMC - III TNMM 111,160,500 2 ADVISORY SERVICES TO CMC - IV TNMM 229,143,997 3 REIMBURSEMENT OF EXPENSES BY CMC-II - 1,567,690 4 REIMBURSEMENT OF EXPENSES BY CMC-III - 10,308,214 5 REIMBURSEMENT OF EXPENSES BY CMC-IV - 32,262,336 6. ASSESSEE COMPANY, AFTER ADOPTING TRANSACTIONAL N ET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM) WITH OPERATING PROFIT / OPERATING COST (OP/OC) AS THE PR OFIT LEVEL INDICATOR (PLI), BENCHMARKED ITS INTERNATIONAL TRAN SACTIONS RELATING TO ADVISORY SERVICES. 7. ASSESSEE COMPANY IN ORDER TO BENCHMARK ITS INTER NATIONAL TRANSACTION CHOSEN 4 COMPARABLES BY USING WEIGHTED AVERAGE ON THE BASIS OF DATA FOR AYS 2004-05, 2005-06 & 2006-0 7 AND FOUND ITS INTERNATIONAL TRANSACTIONS PERTAINING TO ADVISO RY SERVICES AT ARMS LENGTH. 8. HOWEVER, LD. TPO INTRODUCED 2 NEW COMPARABLES AN D SELECTED TOTAL 5 COMPARABLES FOR THE PURPOSE OF BEN CHMARKING THE ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 7 INTERNATIONAL TRANSACTIONS AND WORKED OUT OP/OC OF THE COMPARABLE AT 61.51% AND THEREBY MADE AN ADJUSTMENT AT ALP OF RS.14,38,63,970/- TO THE TOTAL INCOME OF THE ASSESS EE. 9. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, BOTH THE ASSESSEE COMPANY AS WELL AS REV ENUE HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING T HE IMPUGNED ORDER PASSED BY LD. CIT (A) BY FILING AFORESAID CRO SS APPEALS. 10. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ASSESSEES APPEAL (ITA NO.6504/DEL/2013) GROUNDS NO.10, 11, 12, 14 & 16 11. AT THE VERY OUTSET, LD. AR FOR THE ASSESSEE FAI RLY CONCEDED THAT HE HAS NO MATERIAL TO SUPPORT GROUNDS NO.10, 1 1, 12, 14 & 16 AND AS SUCH, SAME MAY BE TAKEN AS NOT PRESSED, SO G ROUNDS NO.10, 11, 12, 14 & 16 ARE DECIDED AGAINST THE ASSESSEE. ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 8 GROUNDS NO.13 & 15 AND ADDITIONAL GROUND 12. ASSESSEE BY FILING THE PRESENT APPEAL HAS CHALL ENGED THE INCLUSION OF 2 COMPARABLES, NAMELY, BRESCON CORPORATE ADVISORS LIMITED AND INTEGRATED ENTERPRISES INDIA LIMITED BY THE TRANSFER PRICING OFFICER (TPO) FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS. 13. UNDISPUTEDLY, THE LD. TPO HAS ACCEPTED TNMM AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE INTERNATION AL TRANSACTIONS; THAT THERE IS NO CHANGE OF BUSINESS A CTIVITIES OF THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT; THAT SEA RCH FOR COMPARABLES ALREADY CONDUCTED IN THE IMMEDIATELY PR ECEDING YEARS HAVE BEEN CONSIDERED BY TPO FOR THE YEAR UNDER ASSE SSMENT AND NO FRESH SEARCH FOR COMPARABLES HAS BEEN DONE. 14. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FAC TS, THE LD. TPO HAS WORKED OUT THE CAPITAL ADJUSTED MARGIN OF T HE COMPARABLES AS UNDER :- S.NO. COMPANY NAME MARGINS WC ADJUSTED MARGINS 1. KHANDWALA SECURITIES LTD. 38.14 81.37 2. KEYNOTE CORPORATE SERVICES LTD. 145.8 3 158.30 3. SUMEDHA FISCAL SERVICES LTD. 36.67 53.77 4. KJMC GLOBAL MARKET (INDIA) LTD. 13.89 -56.62 5. BRESCON CORPORATE ADVISORS LTD. 75.32 70.73 ARITHMETIC MEAN 61.97% 61.51% ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 9 15. ON THE BASIS OF AFORESAID COMPUTATION AFTER WOR KING CAPITAL ADJUSTMENT MARGIN, TPO WORKED OUT THE ARMS LENGTH P RICE OF INTERNATIONAL TRANSACTIONS IN QUESTION AS UNDER :- TOTAL COST OF PROVISION OF SERVICES BY THE ASSESSEE : (AS CALCULATED IN PARA 6 ABOVE) 329,581,269 MARGIN (OP/OC) @ 61.51% OF THE ABOVE 202,725,438 ARMS LENGTH PRICE 532,306,707 PRICE CHARGED BY THE ASSESSEE (RS.340,340,497 + RS.48,138,240) 388,442,737 DIFFERENCE 143,863,970 16. FIRSTLY, ASSESSEE HAS CHALLENGED THE INCLUSION OF BRESCON CORPORATE ADVISORS LIMITED AS COMPARABLE BY THE LD. TPO ON THE GROUNDS INTER ALIA THAT THIS COMPARABLE COMPANY IS A MERCHANT BANKING COMPANY HAVING MAIN SOURCE OF INCOME FROM RECAPITALIZATION ADVISORY AND DEBT SYNDICATION; THA T THE COMPARABLE COMPANY IS NOT A SIMPLE ADVISORY SERVICES AS IN THE CASE OF ASSESSEE COMPANY AND RELIED UPON THE DECISION RENDE RED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.3288/DEL/2012 FOR AY 2006-07 DATED09.02.2017 . 17. HOWEVER, ON THE OTHER HAND, THE LD. DR TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR FOR THE ASSESSEE CONTENDED THAT SUITABILITY OF THE COMPARABLE FOR THE PURPOSE OF BE NCHMARKING THE INTERNATIONAL TRANSACTION IS TO BE SEEN ON THE BASI S OF FUNCTIONALITY OF THE COMPARABLE COMPANY AND REFERRED TO PAGE 129 OF THE PAPER ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 10 BOOK WHEREIN PROFILE OF THE ASSESSEE COMPANY IS GIV EN. THE LD. DR FURTHER CONTENDED THAT WHEN WE SEE THE INTERNATIONA L TRANSACTIONS ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND CMC-I I, IT IS NOT CLEAR AS TO WHAT SERVICES ARE BEING RENDERED BY THE ASSESSEE COMPANY TO ITS ASSOCIATED ENTERPRISES (AE). 18. SO FAR AS, THIS CONTENTION BY THE LD. DR IS CON CERNED, IT IS APPARENTLY NOT TENABLE BECAUSE FUNCTIONALITY OF THE COMPARABLE COMPANY VIS--VIS ASSESSEE COMPANY HAS BEEN EXAMINE D AT LENGTH BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2006-07 (SUPRA) AND THE SAID DECISION HAS ALREAD Y BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT. 19. SECONDLY, THE TPO HAS UNEQUIVOCALLY ADMITTED TH AT THERE IS NO CHANGE IN THE BUSINESS ACTIVITIES OF THE ASSESSE E COMPANY DURING THE YEAR UNDER ASSESSMENT WHEN COMPARED TO THE EARL IER YEARS. EVEN OTHERWISE, NEGLIGIBLE AMOUNT OF RS.15,67,690/- HAS BEEN DETERMINED AS ALP IN CASE OF SERVICES RENDERED BY T HE ASSESSEE COMPANY TO CMC-II AND THIS FACT HAS BEEN FAIRLY CON CEDED BY LD. DR. 20. LD. DR FOR THE REVENUE FURTHER CONTENDED THAT F OR PROVIDING SERVICES BY THE ASSESSEE COMPANY TO CMC-III AND CMC -IV, THERE IS AN AGREEMENT ENTERED INTO BETWEEN THE PARTIES, A VAILABLE AT PAGE ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 11 104 OF THE AGREEMENT THEN MODIFIED AGREEMENT AT PAG E 109 AND AGAIN MODIFIED AGREEMENT AT PAGE 107, AND WHEN WE P ERUSE THE AGREEMENT, THE ASSESSEE COMPANY IS NOT PROVIDING SI MPLE ADVISORY SERVICES RATHER PERFORMING COMPLICATED FUNCTIONS LI KE MANAGING THE COMPANY AND MAINTAINING BOOKS OF ACCOUNT. THE LD. DR FOR THE REVENUE FURTHER CONTENDED THAT THERE IS A VARIATION OF COST OF SERVICES TO BE PAID BY THE AE TO THE ASSESSEE COMPA NY IN ALL THE AGREEMENTS ENTERED INTO BETWEEN THEM WITHOUT HIGHLI GHTING WHAT ADDITIONAL FUNCTION IS BEING PERFORMED BY THE ASSES SEE AND FURTHER CONTENDED THAT THE ASSESSEE COMPANY IS A FINANCIAL COMPANY. 21. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT AGA IN THE CONTENTIONS RAISED BY THE LD. DR ARE NOT SUSTAINAB LE FOR 3 REASONS:- (I) THAT THE LD. DR IS NOT EMPOWERED TO IMPROVE UPO N THE CASE MADE OUT BY THE LD. TPO; (II) THAT ALL THESE ARGUMENTS HAVE ALREADY BEEN ENT ERTAINED AND DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND THEN FINDINGS OF THE TRIBUNAL HAS BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT; AND (III) THAT THE QUANTUM OF THE SERVICES IS TO BE DE TERMINED ON THE BASIS OF FUNCTION RENDERED BY THE ASSESSEE ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 12 COMPANY. IN CASE MORE SERVICES ARE RENDERED BY THE ASSESSEE COMPANY, CERTAINLY IT WILL CHARGE MORE IN ACCORDANCE WITH AGREEMENT AND IN CASE SOME LIMITED SERVICES HAVE BEEN RENDERED THEN CERTAINLY THE COST OF SERVICES WILL COME DOWN. ALL THESE FACTS WILL NOT CHANGE THE PROFILE OF A CO MPANY WHICH IS OTHERWISE NOT DISPUTED. A PROFESSIONAL IS EMPOWERE D TO CHARGE HIS FEE AS PER THE NATURE AND QUANTUM OF SERVICES TO BE RENDERED BY HIM AND NO UNIFORM POLICY CAN BE ADOPTED. EVEN OTHERWI SE, ISSUE OF COMMERCIAL EXPEDIENCY CANNOT BE INTERFERED WITH BY THE REVENUE AS THIS IS THE PREROGATIVE OF THE BUSINESSMAN AS TO HOW AND WHAT SERVICES ARE REQUIRED TO RUN THE BUSINESS. 22. NOW WE SHALL EXAMINE THE SUITABILITY OF COMPARA BLE, NAMELY, BRESCON CORPORATE ADVISORS LIMITED WHICH TH E ASSESSEE HAS SOUGHT TO EXCLUDED AND INTEGRATED ENTERPRISES I NDIA LIMITED WHICH THE ASSESSEE HAS SOUGHT TO BE INCLUDED AS A C OMPARABLE IN THE FINAL LIST OF COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS ONE BY ONE. BRESCON CORPORATE ADVISORS LIMITED : 23. WHEN IT IS NOT IN DISPUTE THAT THERE IS NO CHAN GE IN THE BUSINESS ACTIVITY OF THE ASSESSEE AND THE SEARCH FO R COMPARABLE ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 13 ALREADY DONE BY THE ASSESSEE DURING THE IMMEDIATELY PRECEDING YEAR HAS BEEN ACCEPTED, THE SUITABILITY OF BRESCON CORPORATE ADVISORS LTD. IS REQUIRED TO BE ACCEPTED BY THIS BE NCH AS THIS ISSUE HAS ALREADY BEEN EXAMINED BY THE COORDINATE BENCH O F THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) BY RETURNING THE FOL LOWING FINDINGS:- 34. NOW, IN THE PRESENT APPEAL, THE ASSESSEES MAI N GRIEVANCE VIDE GROUND NO. 5 IS AS REGARDS INCLUSION OF BRESCON CORPORATE ADVISORS LIMITED MAINLY RELYING O N THE DECISION IN THE CASE OF TEMASEK HOLDINGS ADVISORS I NDIA (P.) LTD VS. DEPUTY COMMISSIONER OF INCOME TAX, CIR CLE 3(3) AND THE DECISION OF ITAT DELHI BENCH IN THE CA SE OF XANDER ADVISORS INDIA (P.) LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-18(1), NEW DELHI . LEARNED COUNSEL POINTED OUT THAT IN BOTH THESE DECI SIONS THIS COMPANY HAD BEEN CONSIDERED AND IT WAS HELD TH AT THIS WAS A MERCHANT BANKING COMPANY WITH ITS MAIN SOURCE OF INCOME FROM RECAPITALIZATION ADVISORY AND DEBT SYNDICATIONS AND, THUS, IT WAS NOT A SIMPLE INVESTM ENT ADVISORY SERVICES AS THE ASSESSEE IS. LEARNED CIT (DR) SUBMITTED THAT THE DECISION IN THE CASE OF XANDER A DVISORS INDIA (P.) LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-18(1), NEW DELHI PERTAINS TO ASSESSMENT YEAR 2008- 09 AND NOT TO ASSESSMENT YEAR 2006-07 WHICH IS BEFO RE US. IN THIS REGARD, HE RELIED ON RULE ON 10B(4), WHEREI N, IT HAS BEEN MANDATED THAT THE DATA TO BE USED IN ANALYZING THE COMPARABILITY WITH AN INTERNATIONAL TRANSACTION SH ALL BE THE DATA OF THE FINANCIAL YEAR IN WHICH THE INTERNA TIONAL TRANSACTION HAS BEEN ENTERED INTO. AS REGARDS, THE TEMASEK HOLDINGS ADVISORS INDIA (P.) LTD., ALSO LEA RNED CIT(DR) POINTED OUT THAT THE SAME DEALT WITH ASSESS MENT YEAR 2005-06 AND NOT FOR ASSESSMENT YEAR 2006-07. H E, THEREFORE, SUBMITTED THAT BOTH THESE CASE RELIED BY LEARNED COUNSEL ARE NOT RELEVANT AND SINCE IN EARLIER YEAR THIS COMPARABLE WAS USED FOR DETERMINING ARMS PRICE LENG TH PRICE OF INTERNATIONAL TRANSACTION THEREFORE IT WAS RIGHTLY INCLUDED BY LEARNED TPO. 35. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD OF THE CASE. WE ARE NOT ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 14 INCLINED ACCEPT THE SUBMISSION OF LEARNED CIT (DR) THAT A DECISION CAN BE APPLIED IN TRANSFER PRICING CASES O NLY IF IT PERTAINS TO THE SAME ASSESSMENT YEAR BECAUSE ULTIMA TELY IT IS THE FAR ANALYSIS WHICH IS RELEVANT OF THE TESTED PARTY AS WELL AS OF COMPARABLE FOR SELECTING/REJECTING A COMPARABLE. IF THE FUNCTIONAL PROFIT OF A COMPARABL E VIS-- VIS THE TESTED PARTY REMAINS THE SAME OVER THE YEAR S THEN THERE IS NO REASON AS TO WHY THE DECISION RENDERED IN REGARD TO ONE ASSESSMENT YEAR MAY NOT BE APPLIED FO R ANY OTHER YEAR UNLESS IT IS DEMONSTRATED WITH FACTS AND FIGURES THAT THE SAID DECISION WAS RENDERED IN ENTIRELY DIF FERENT SET OF FACTS. IN THE PRESENT CASE, THE ASSESSEE HAS REF ERRED TO PARA 10 OF XANDER ADVISORS INDIA (P.) LTD VS. ASSI STANT COMMISSIONER OF INCOME TAX, CIRCLE-18(1), NEW DELHI , WHICH IS AS FOLLOWS: WE HAVE PERUSED THE ANNUAL ACCOUNTS OF THIS COMPAN Y, A COPY OF WHICH HAS BEEN PLACED ON /RECORD. THIS COMP ANY IS ENGAGED IN CARRYING ON MERCHANT BANKING AND INVESTMENT ACTIVITIES ALONG WITH PROVIDING PROJECT ADVISORY SERVICES. A LOOK AT THE ANNUAL ACCOUNTS OF BRESCON CORPORATE ADVISORS LTD. INDICATES THAT IT HAS TWO S TREAMS OF INCOME, NAMELY, TEE BASED FINANCIAL SERVICES' AN D 'OTHER INCOME 1 . DETAILS OF THE REVENUE UNDER 'FEE BASED FINANCIAL SERVICES' IS GIVEN AT PAGE 324 OF THE PAP ER BOOK, WHICH IS AS UNDER: FINANCIAL RESTRUCTURING & RECAPITALISATIONRS.10,00 CRORE SYNDICATION OF DEBT RS. 2.18 CRORE EQUITY RELATED ADVISORY/M&A ADVISORY RS. 2.03 CRORE DUE DILIGENCE ADVISORY TO ARCIL NIL TOTAL RS. 14.23 CRORE THE SECOND STREAM OF ITS INCOME TOTALING RS.6.04 CR ORE INCLUDES DIVIDEND, INTEREST RECEIVED, PROFIT/LOSS O N SALE OF INVESTMENTS AND PROFIT/LOSS ARISING OUT OF DEALING IN SHARES AND SECURITIES. A CLOSE LOOK AT THE COMPOSITION OF THE GROSS REVENUE FROM TEE BASED FINANCIAL SERVICES' TRANSPIR ES THAT SOME COMPONENT OF 'EQUITY RELATED ADVISORY/M&A ADVISORY' PRIMA FACIE PARTLY RESEMBLES WITH THE SER VICES RENDERED BY THE ASSESSEE. THE ID. DR HIMSELF CANDID LY ACCEPTED, AND RIGHTLY SO, THAT THE OTHER COMPONENTS OF THIS STREAM OF THE REVENUE ARE OF NO MATCH WITH THAT OF THE ASSESSEE. NOW, THE QUESTION ARISES AS TO WHETHER BR ESCON CORPORATE ADVISORS LTD., UNDER THESE CIRCUMSTANCES CAN ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 15 BE CONSIDERED AS COMPARABLE? AT THIS STAGE, IT IS P ERTINENT TO MENTION THAT THE GROSS REVENUE OF THIS COMPANY AMOUNTS TO RS.20.27 CRORE AND THERE IS NO SEGMENTAL DATA AVAILABLE EITHER IN RESPECT OF NET PROFIT FROM 'FEE BASED FINANCIAL SERVICES' OR 'OTHER INCOME'. AS 'OTHER IN COME' ALSO INCLUDES INCOME FROM INVESTMENT ACTIVITY, BEIN G PROFIT/LOSS ON SALE OF INVESTMENT AND DEALING IN SH ARES AND SECURITIES, THE IMPACT OF SUCH PROFIT/LOSS ON THE O VERALL NET PROFIT OF THE COMPANY ON ENTITY LEVEL, CANNOT BE DETERMINED. EVEN THOUGH SOME COMPONENT OF 'EQUITY RELATED ADVISORY/M&A ADVISORY', WITH THE GROSS REVE NUE OF RS.2.03 CRORE, PARTLY RESEMBLES WITH THE ASSESSEE, STILL IN THE ABSENCE OF ANY SEGMENTAL DATA OF SUCH COMPOSITI ON, THERE CAN BE NO VALID COMPARISON. REVENUE FROM THIS COMPONENT ACCOUNTS FOR AROUND 10% OF THE TOTAL GROS S REVENUE OF THIS COMPANY AND IF WE FURTHER EXAMINE T HIS 10% COMPONENT IN ITSELF, IT TURNS OUT THAT THE SAME ALSO INCLUDES M&A ADVISORY, WHICH IS OBVIOUSLY NOT AKIN TO THE SERVICES RENDERED BY THE ASSESSEE. THE ASSESSEE'S A CTIVITY, IN A NUTSHELL, IS TO TENDER ADVICE TO THE MANAGER A BOUT THE AVENUES FOR MAKING INVESTMENT IN REAL ESTATE, AND, IF THE MANGER AGREES TO GO AHEAD WITH SUCH INVESTMENT OPPORTUNITY, THEN, TO GET INVOLVED IN THE PROCESS O F FINALIZATION OF THE DEAL AND THEN PROVIDE SUPPORT S ERVICES, INCLUDING MAINTENANCE OF BOOKS OF ACCOUNT ETC., ON THE CLICKING OF THE DEAL. TAKING A HOLISTIC VIEW OF THE FACTUAL MATRIX, WE DO NOT FIND ANY RATIONALITY IN INCLUDING THIS COMPANY IN THE LIST OF COMPARABLES SINCE NO SEGMENT AL DATA OF THE ADVISORY SERVICES BY THIS COMPANY IS AV AILABLE, WHICH COMPONENT IS VERY SMALL VIS-A-VIS THE ENTITY LEVEL OPERATIONS. AVAILABILITY OF SEPARATE DATA OF THIS S EGMENT COULD HAVE POSSIBLY MADE IT COMPARABLE WITH THE ASS ESSEE. THIS COMPANY IS, THEREFORE, DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. XXXXX 37. FROM THE ABOVE IT IS EVIDENT THAT THERE IS NO CHANGE IN FUNCTIONAL PROFILE OF BRESCON IN ASSESSME NT YEAR 2006-07 AS COMPUTED TO ASSESSMENT YEAR 2005-06 EXCEPT THAT IN THE ASSESSMENT YEAR 2006-07 DUE DILIGENCE ADVISORY TO ADVISORY TO ARCIL/M&A ADVISOR Y FEES WAS ALSO THERE. THEREFORE, THERE IS NO CHANGE IN FUNCTIONAL PROFILE AS REGARDS THE ADVISORY SERVICES GIVEN BY ASSESSEE AS COMPARED TO BRESCON, THEREFORE , ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 16 THE DECISION RELIED UPON BY LEARNED COUNSEL IS APPLICABLE TO THE PRESENT SET OF FACTS. 38. AS FAR AS LD. CIT(DR)S CONTENTION REGARDING INCLUSION OF THIS COMPARABLE BY ASSESSEE IN EARLIER YEAR IS CONCERNED, IT WOULD SUFFICE TO OBSERVE THAT THERE IS NO ESTOPPEL AGAINST THE ASSESSEE FROM DEMONSTRATING THAT A PARTICULAR COMPARABLE WAS WRONGLY INCLUDED IN EARLIER YEAR AND, THEREFORE, IT SHOULD BE EXCLUDED IN THIS YEAR. WE FIND THAT BOTH THE DECISIONS REFERRED BEFORE US CLEARLY SUPPORTS THE ASSESSEES CONTENTION AND, THEREFORE, WE DIRECT FOR EXCLUDING BRESCON CORPORATE ADVISORS LIMITED FROM THE LIST OF COMPARABLES. AS FAR AS THE INCLUSION O F ICDS SECURITIES IS CONCERNED, THE SAME WAS NOT PRESSED AT THE ITEM OF HEARING AND, THEREFORE, THE SAME WILL REMAIN IN THE LIST OF COMPARABLES. IN THE RESU LT, GROUND NO. 5 IS PARTLY ALLOWED. 24. SO, FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2006- 07 (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT BRESCON CORPORATE A DVISORS LTD. INTRODUCED BY THE TPO AND RETAINED BY LD. CIT (A) I N THE FINAL LIST OF COMPARABLES IS NOT A SUITABLE COMPARABLE, HENCE ORDERED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. INTEGRATED ENTERPRISES INDIA LIMITED : 25. ASSESSEE BY MOVING AN APPLICATION DATED 15.06.2 012 BEFORE LD. CIT (A) UNDER RULE 46A OF THE INCOME-TAX RULES 1962 SOUGHT TO BRING ON RECORD THE FINANCIAL DATA OF INTEGRATED ENTERPRISES INDIA LIMITED TO BE SELECTED AS A SUITABLE COMPARABLE ON THE GROUND THAT DURING TRANSFER PRICING PROCEEDINGS BEFORE LD. TPO, THE FINANCIAL ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 17 DATA WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AND AS SUCH COULD NOT BE FURNISHED. 26. UNDISPUTEDLY, TPO HAS REJECTED THIS COMPARABLE FOR WANT OF FINANCIAL DATA AVAILABLE IN THE PUBLIC DOMAIN. HOW EVER, PERUSAL OF THE IMPUGNED ORDER PASSED BY LD. CIT (A) GOES TO PR OVE THAT THIS COMPARABLE COMPANY, INTEGRATED ENTERPRISES INDIA LI MITED, HAS NOT FOUND ANY PLACE FOR DISCUSSION AND MIGHT BE OVERLOO KED BY THE LD. CIT (A) DUE TO MISTAKE. 27. WE ARE OF THE CONSIDERED VIEW THAT WHEN A SPECI FIC PRAYER HAS BEEN MADE BY THE ASSESSEE TO ADMIT ADDITIONAL E VIDENCES IN THE FORM OF FINANCIAL DATA WHICH WAS NOT AVAILABLE IN T HE PUBLIC DOMAIN DURING THE TP PROCEEDINGS BEFORE TPO, IT WAS IMPERA TIVE ON THE PART OF LD. CIT (A) TO PASS AN ORDER ON THE APPLICA TION FOR ADDITIONAL EVIDENCE AND TO EXAMINE THE SUITABILITY OF COMPARAB LE SOUGHT TO BE INCLUDED BY THE ASSESSEE FOR BENCHMARKING ITS INTER NATIONAL TRANSACTION. IN VIEW OF THE MATTER, WE SET ASIDE T HIS ISSUE TO THE LD. CIT (A) TO DECIDE AFRESH THE SUITABILITY OF THE COM PARABILITY OF THE INTEGRATED ENTERPRISES INDIA LIMITED AFTER ALLOWING THE APPLICATION FOR ADDITIONAL EVIDENCE. SO, GROUNDS NO.13 & 15 AN D ALSO THE ADDITIONAL GROUND IS DETERMINED IN FAVOUR OF THE AS SESSEE. ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 18 GROUNDS NO.17 & 18 28. AO DISALLOWED AN AMOUNT OF RS.2,33,40,000/- ON ACCOUNT OF BONUS PAID TO THE EMPLOYEES BY INVOKING PROVISIONS CONTAINED U/S 36(1)(II) OF THE INCOME-TAX ACT, 1961 (FOR SHORT T HE ACT). THE LD. CIT (A) BY RELYING UPON THE DECISION RENDERED BY IT AT IN ASSESSEES OWN CASE FOR AY 2006-07 (SUPRA) CONFIRME D THE DISALLOWANCE OF RS.2,33,40,000/- ON ACCOUNT OF BONU S PAID TO SHRI ASHISH DHAWAN, MANAGING DIRECTOR AND SHRI KUNAL SHR OFF, DIRECTOR. 29. HOWEVER, THE COORDINATE BENCH OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR AY 2006-07 (SUPRA) DECIDED THE IDENTIC AL ISSUE AS TO MAKING PAYMENT OF BONUS TO SHRI ASHISH DHAWAN AND S HRI KUNAL SHROFF AFORESAID IN FAVOUR OF THE ASSESSEE BY FOLLO WING DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) PVT. LTD. VS. DCIT IN ITA 417/200 4 DATED 27.04.2015 . 30. FOR READY PERUSAL, FINDINGS RETURNED BY THE COO RDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2006- 07 (SUPRA) ARE REPRODUCED AS UNDER :- 41. NOW, WE COME TO THE GROUNDS RELATING TO CORPOR ATE ISSUES. THE ASSESSEE HAS PRIMARILY PRESSED GROUND N OS. 10 AND 11 IN THIS REGARD. BRIEF FACTS OF THE CASE QUA GROUND NO.10 ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 19 ASSESSEE COMPANY HAD PAID SALARY AND OTHER ALLOWANC ES TO ITS DIRECTORS. THE PAYMENT ALSO INCLUDED BONUS TO I TS MANAGING DIRECTOR AND DIRECTORS NAMELY SRI. ASHISH DHAWAN AND SRI. KUNAL SHROFF AT RS.1,89,75,000/- AN D 1,06,18,000/- WHO ARE ALSO MAJOR SHAREHOLDERS IN TH E COMPANY WITH 50% SHAREHOLDING OF EACH. ASSESSING OFFICER OBSERVED THAT AS PER THE PROVISION OF SECTI ON 36(I)(II) BONUS AND/OR COMMISSION PAID TO AN EMPLOY EE IS ALLOWABLE AS DEDUCTION, IF AND ONLY IF, IT IS NOT P AYABLE AS PROFIT OR DIVIDEND. ASSESSING OFFICER POINTED OUT THAT IN THE CASE OF ASSESSEE COMPANY, PROFIT OF RS.5,06,14, 970/- HAD BEEN DECLARED, HOWEVER, NO DIVIDEND HAD BEEN PROPOSED OR DISTRIBUTED AMONG THE SHAREHOLDERS WHIC H ALSO INCLUDED THE DIRECTORS OF THE COMPANY. THUS, H E CONCLUDED THAT IN CASE OF DIRECTORS OF THE COMPANY, THE SUM PAID AS COMMISSION AND BONUS COULD HAVE BEEN PA ID AS PROFIT OR DIVIDEND WHICH IS NOT THE CASE HERE. A FTER CONSIDERING THE ASSESSEES DETAILED REPLY HE MADE A N ADDITION OF RS. 2,95,93,000/-. AT THE TIME OF HEARI NG, LD. COUNSEL POINTED OUT THAT THIS ISSUE IS COVERED IN F AVOUR OF ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COUR T IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 . HAVING HEARD BOTH THE PARTIES, WE FIND THAT HONBLE DELHI HIGH COURT VIDE ITA NO.417/2014 DATED 27 TH APRIL, 2015, HAS OBSERVED AS UNDER: THE FINAL QUESTION THAT ARISES FOR THIS COURTS DETERMINATION IN THE PRESENT APPEAL IS THE ASSESSEE S CLAIM FOR DEDUCTION UNDER SECTION 36(1)(II) OF THE ACT IN RESPECT OF THE BONUS PAID BY IT TO ITS TWO SHAREHOLDERS - A SHISH DHAWAN AND KUNAL SHROFF. THE LOWER AUTHORITIES DENI ED SUCH CLAIM, HOLDING THAT THE BONUS WAS PAID TO THE SHAREHOLDERS IN LIEU OF DIVIDEND WITH THE OBJECTIVE OF AVOIDING TAX. SUCH INFERENCE WAS DRAWN FROM TWO FAC TS: A) THE BONUS PAID WAS IN PROPORTION OF THEIR SHAREHOLD ING IN THE ASSESSEE COMPANY, I.E. 2:1; AND B) NO DIVIDEND HAD BEEN DECLARED BY THE ASSESSEE. HOWEVER, A PERUSAL O F AN EXCERPT FROM THE DRP S ORDER DATED 21.09.2012 QUOTED BY THE AO IN HIS ORDER DATED 19.10.2012 CONTRADICTS BO TH THESE FACTS: A) BONUS WAS NOT PAID IN THE RATIO OF 2:1 AND B) THE ASSESSEE HAD DECLARED INTERIM DIVIDEND ITA 417/2014 PAGE 52 OF ` 5,47,47,000/-. FURTHER, THE B ONUSES PAID TO THE TWO SHAREHOLDER-DIRECTORS IN THE PRECED ING TWO FINANCIAL YEARS WERE IN THE RATIO OF 60-65%:40-35%, EVEN THOUGH THEIR SHAREHOLDING WAS 1:1. THE BALANCE SHEE T OF ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 20 THE ASSESSEE PLACED ON RECORD ALSO INDICATES THAT T HE TWO SHAREHOLDERS ALSO HOLD DIRECTORIAL POSITIONS IN THE ASSESSEE. THEREFORE, THE ASSESSEES CONTENTION THAT THE BONUS WAS PAID TO THE SHAREHOLDERS IN THEIR MANAGER IAL CAPACITY, LIKE IN THE CASE OF OTHER MANAGERS, CANNO T BE QUESTIONED MERELY ON THE BASIS OF A SPECULATION BY THE REVENUE THAT SUCH PAYMENT WAS TO AVOID TAX. IN SUCH CIRCUMSTANCES, THE DEDUCTION UNDER SECTION 36(1)(II ) IN RESPECT OF PAYMENT OF BONUS TO THE TWO SHAREHOLDER- DIRECTORS IS ALLOWED. THE ASSESSEE HAS RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS TO SUPPORT ITS CONTENTION. HOWEVER, WE DO NOT CONSIDER IT NECESSAR Y TO DISCUSS THOSE DECISIONS FOR RULING IN ITS FAVOUR. T HEREFORE, THIS QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE . 42. RESPECTFULLY FOLLOWING AFOREMENTIONED DECISION, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 31. FOLLOWING THE AFORESAID DECISION RENDERED BY CO ORDINATE BENCH OF THE TRIBUNAL WHICH IS BASED ON THE HONBL E HIGH COURT JUDGMENT IN CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) PVT. LTD. VS. DCIT (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE DEDUCTION U/S 36(1)(II) IN RESPECT OF PAYMENT OF BO NUS TO THE AFORESAID SHAREHOLDER/DIRECTOR WHO ARE ALSO MAJOR S HAREHOLDER IN THE COMPANY WITH 50% SHAREHOLDING OF EACH IS ALLOWA BLE DEDUCTION AS THERE IS NO CHANGE IN THE SHAREHOLDING PATTERN D URING THE YEAR UNDER ASSESSMENT, HENCE GROUNDS NO.17 & 18 ARE DETE RMINED IN FAVOUR OF THE ASSESSEE. 32. GROUNDS NO.19, 20 & 21 ARE GENERAL IN NATURE AN D DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 21 REVENUES APPEAL (ITA NO.6510/DEL/2013 : M/S. KEYNOTE CORPORATE SERVICES LTD. 33. THE REVENUE BY FILING THE PRESENT APPEAL HAS SO UGHT INCLUSION OF M/S. KEYNOTE CORPORATE SERVICES LTD. A S A SUITABLE COMPARABLE BY CHALLENGING THE FINDINGS OF LD. CIT ( A) WHO HAS EXCLUDED THIS COMPANY AS COMPARABLE FOR BENCHMARKIN G THE INTERNATIONAL TRANSACTION. 34. M/S. KEYNOTE CORPORATE SERVICES LTD. IS SELECTE D BY LD. TPO AS A SUITABLE COMPARABLE HAVING MARGIN OF 139.00%. THE LD. CIT (A) BY TAKING INTO ACCOUNT VOLATILE PROFIT OF THE C OMPANY TO THE TUNE OF 145% DUE TO THE ALLIANCES FORMED WITH A MID DLE EAST BASED CONSULTING COMPANIES AND SWISS BASED CONSULTING COM PANIES AND HAS ALSO LAUNCHED ESOP DIVISION WHICH FOCUSED ON DE SIGNING AND IMPLEMENTING STOCK OPTION SCHEMES FOR CORPORATE. L D. CIT (A) ALSO RELIED UPON THE DECISION RENDERED BY DRP IN AS SESSEES OWN CASE FOR AY 2006-07 WHEREIN M/S. KEYNOTE CORPORATE SERVICES LTD. IS HELD TO BE NOT A ROBUST COMPARABLE. 35. UNDISPUTEDLY, BUSINESS MODEL OF M/S. KEYNOTE CO RPORATE SERVICES LTD. WAS RESTRUCTURED DURING THE YEAR ENDI NG 31.03.2007 WHICH IS REPRODUCED FROM PAGE 8 OF THE ANNUAL REPOR T OF 2006-07 FOR READY REFERENCE AS UNDER :- ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 22 BUSINESS RESTRUCTURING DURING THE YEAR ENDED 31 ST MARCH, 2007, THE SCHEME OF AMALGAMATION OF GROUP COMPANIES VIZ COBAL INVESTMENT COMPANY LIMITED, WEST COAST LIGHTERAGE COMPANY PRIVATE LIMITED, STARLINE ISPAT AND ALLOYS LIMITED, GALAXY LEASING LIMITED, KEYNOTE FINSTOCK LIMITED, PLETHORA INVESTMENTS COMPANY LIMITED (THE TRANSFEROR COMPANIES') WITH KEYNOTE CORPORATE SERVICES LIMITED (''THE TRANSFEREE COMPANY') HAVE BEEN APPROVED BY HON'BLE HIGH COURTS, AT ALLAHABAD, BOMBAY AND GUWAHATI VIDE THEIR ORDERS DATED 21 ST DECEMBER, 2006, 9 TH MARCH 2007 AND 19 TH MARCH, 2007 RESPECTIVELY AND EFFECTED. DURING THIS FINANCI AL YEAR, IN TERMS OF THE SCHEME OF AMALGAMATION 77,170 NEW EQUITY SHARES WERE ISSUED TO THE SHAREHOLDERS O F TRANSFEROR COMPANIES AND 14,51,702 EQUITY SHARES HAVE BEEN TRANSFERRED TO 'KEYNOTE TRUST.' ALL THE RELEVANT FORMALITIES/PROCEDURES RELATING TO THE SAI D ORDERS HAVE BEEN COMPLETED. 16. PURSUANT TO THE SCHEME OF AMALGAMATION BETWEEN COBAL INVESTMENT COMPANY LIMITED, WEST COAST LIGHTERAGE COMPANY PRIVATE LIMITED, STARLINE ISPAT AND ALLOYS LIMITED. GALAXY LEASING LIMITED, KEYNOTE FINSTOCK LIMITED AND PLETHORA INVESTMENTS COMPANY LIMITED (HEREINAFTER KNOWN AS TRANSFEROR COMPANIES) AND KEYNOTE CORPORATE SERVICES LIMITED (HEREINAFTER KNOWN AS TRANSFEREE COMPANY) APPROVED BY SHAREHOLDERS AND THEN APPROVED BY THE HONORABLE HIGH COURT OF ALLAHABAD, BOMBAY, GUWAHALI VIDE THEIR ORDERS DATED 21 ST DECEMBER, 2006, 9 TH MARCH, 2007 & 19 TH MARCH, 2007 RESPECTIVELY. THE ASSETS AND LIABILITIES OF THE TRANSFEROR COMPANIES ARE VESTED IN THE TRANSFEREE COMPANY WITH RETROSPECTIVE EFFECT FR OM 1 ST APRIL, 2005, THE APPOINTED DATE UNDER THE SCHEME. THE ACCOUNTS OF THE TRANSFEREE COMPANY FOR THE PERIOD ENDED 31 ST MARCH, 2007 ARE DRAWN UP TO GIVE EFFECT TO THE SCHEME. ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 23 36. LD. DR FOR THE REVENUE CONTENDED THAT ISSUE OF AMALGAMATION HAS NOT BEEN CONSIDERED BY THE LD. CIT (A). ONLY THE SHAREHOLDING PATTERN OF M/S. KEYNOTE CORPORATE SERVICES LTD. IS CHANGED WITH AMALGAMATION WHICH HAS NOT AFFECTED THE PROFIT. HOWEVER, THIS CONTENTION IS NOT TENABLE IN THE FACE OF UNCONTROVERTED FACT THAT THE PROFIT MARGIN OF ASSES SEE COMPANY HAS RAISED UP TO 145% DURING THE YEAR UNDER ASSESSMENT WHICH IS EXTREMELY VOLATILE AND ABNORMAL AND IS DUE TO THE A MALGAMATION AND MERGER. MOREOVER, LAUNCH OF ESOP DIVISION WHIC H FOCUSED ON DESIGNING AND IMPLEMENTING STOCK OPTION SCHEME F OR CORPORATE, THE BUSINESS MODEL OF COMPARABLE COMPANY HAS UNDERG ONE A CHANGE. SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS RIGHTLY EXCLUDED M/S. KEYNOTE CORPORATE SERVICES LT D. AS UNSUITABLE COMPARABLE. 37. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 19 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 19 TH DAY OF SEPTEMBER, 2017 TS ITA NO.6504/DEL./2013 ITA NO.6510/DEL./2013 24 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.