ARISAIG PARTNERS (INDIA) P.LTD, MUMBAI V. ASST CIT 2(1)(1), MUMBAI

ITA 840/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2100 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 06-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI N K CHAND
• Assessee Lawyers: ARVIND SONDE
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary

Judgement Text

1 , , , , INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , ,, , , , , , , ,, , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND SAKTIJIT DEY,JUDICIAL MEMBER / ITA NO.840/MUM/2015 : /ASSESSMENT YEAR-2010-11 ARISAIG PARTNERS (INDIA) PRIVATE LIMITED VILLAR VILE, FIRST FLOOR 16, P.J.,RANCHANDAN I MARG, COLABA MUMBAI-400 039. PAN:ASSESSEEFCA 2559 L VS. ACIT-2(1)(1) ASSESSEEYAKAR BHAVAN MUMBAI. (APPELLANT) (RESPON DENT) REV ENUE BY: SHRIN.K. CHAND -CIT ASS ESSEE BY: SHRI ARVIND SONDE / DATE OF HEARING: 04.10.2016 / DATE OF PRONOUNCEMENT: 11.11.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDERS DATED 11/12/2014 OF THE AO P ASSED IN PERSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PENAL(DRP)DTD.28.10. 2014,TH E ASSESSEE HAS FILED PRESENT APPEAL.IT IS WHOLLY OWNED SUBSIDIARY OF ARISAIG PARTNERS (ASIA) PTE LTD.,HEADQUARTERED IN SINGAPORE.IT FILED ITS RETURN OF INCOME ON 05.10.2010,DECLARING TOTAL INCOME OF RS.2.63 CRORES.DURING THE ASSESSMENT PROCEEDINGS,THE ASSESSING OFFICER(AO)MAD E A REFERENCE TO THE TRANSFER PRICING OFFICER(TPO)TO DETERMINE THE ARMS LENGTH PRICE(ALP )OF THE IT.S.,WHO MADE AN ADJUSTMENT OF RS.1,83,86,942/-.AFTER RECEIVING THE ORDER OF TH E TPO,THE AO ISSUED A DRAFT ASSESSMENT ORDER TO THE ASSESSEE AND SAME WAS CHALLENGED BEFOR E THE DRP.AFTER CONSIDERING THE DIRECTIONS OF THE DRP,THE AO COMPLETED THE ASSESSME NT U/S.143(3) R.W.S. 144C(13) OF THE ACT,DETERMINING ITS INCOME AT RS.4.47 CRORES. 2. EFFECTIVE GROUND OF APPEAL DEALS WITH INCLUSION OF CERTAIN COMPARABLES FOR DETERMINING THE ALP OF THE IT.S.DURING THE TP PROCEEDINGS,THE TPO F IND THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING NON-BINDING INVESTMENT ADVISO RY,THAT IT HAD RECEIVED RS. 15.85 CRORES FROM ITS AE AS ADVISORY FEE,THAT IT BENCH-MARKED TH E IT.S.BY ADOPTING THE TNMM AS MOST APPROPRIATE METHOD AND CLAIMED THAT IT'S OPERATING MARGIN PLI (OP/TC)AT 25.42%% WAS AT ARM'S LENGTH IN COMPARISON TO THE MEAN AVERAGE MAR GIN OF FIVE COMPARABLES SELECTED BY THE ASSESSEE ARRIVED AT 21.18%.THE TPO DIRECTED THE ASS ESSEE TO EXPLAIN AS TO HOW THE COST PLUS 25.42% MARKUP WAS ARRIVED AT AND TO FILE DETAILS RE GARDING THE TOTAL REVENUE EARNED BY THE AE FOR WHICH SERVICES WERE RENDERED BY THE ASSESSEE , PERCENTAGE OF REVENUE RETAINED BY THE 840/M/15(ARISAIG PARTNERS) 2 AE AFTER PAYING THE ASSESSEE ALONGWITH THE JUSTIFIC ATION. AS PER THE AO THE ASSESSEE STATED THAT THERE WAS NO SPECIFIC REQUEST FOR ADVICE FROM THE AE AND IT WOULD COLLECT INFORMATION FROM LIST OF COMPANIES IDENTIFIED BY THE AE.S, THAT DETAILS CALLED FOR WERE NOT SUBMITTED BY THE ASSESSEE.THE TPO HELD THAT IN ABSENCE OF THE SAME T HE FAR ANALYSIS OF THE ASSESSEE WAS INCOMPLETE,THE ASSESSEE FAILED TO PRODUCE NECESSARY DOCUMENTATION TO JUSTIFY THE TRUE NATURE OF TRANSACTION WITHIN THE MEANING OF RULE 10D(1).HE ,THEREFORE, PROCEEDED INDEPENDENTLY TO BENCHMARK THE IT.S IN THE FINAL ANALYSIS. HE ACCEPT ED THREE COMPARABLES PROPOSED BY THE ASSESSEE. IN ADDITION TO IT HE REQUIRED THE ASSESSE E TO SHOW AS TO WHY THREE MORE COMPARABLES NAMELY MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD.( MOIAPL), IDFC INVESTMENT ADVISORS LTD.(IDFC)AND ICRA ONLINE LTD.(ICRA-O)SHOULD NOT BE INCLUDED IN THE FINAL LIST OF COMPARABLES AS THEY WERE FUNCTIONALLY SIMILAR. 2.1. AFTER CONSIDERING THE SUBMISSION/OBJECTIONS OF THE ASSESSEE IN REGARD TO INCLUSION OF THE ABOVE THREE ADDITIONAL COMPARABLES, HE ARRIVED AT A VERAGE PLI AT 39.97%. FINALLY AN ADJUSTMENT OF RS.1.83 CRORES WAS MADE. AFTER RECEIV ING THE DRAFT ORDER FROM ASSESSING OFFICER, THE ASSESSEE FILED OBJECTIONS BEFORE THE D RP AND CONTESTED AGAINST THE INCLUSION OF THE ABOVE MENTIONED THREE COMPARABLES. THE DRP , WI TH REGARD TO MOIAPL STATED THAT THE INCOME FROM OPERATIONS OF THAT COMPANY WAS FROM ADV ISORY SERVICES, THAT THE COMPARABLE COMPANY WAS NOT ENGAGED IN PORTFOLIO MANAGEMENT SER VICES AS ALLEGED BY THE ASSESSEE , THAT THE ARGUMENT REGARDING SUPER NORMAL PROFIT WAS NOT ACCEPTABLE IN VIEW OF THE DECISION DELIVERED IN THE CASE OF MAERSK GLOBAL CENTRES (IND IA) PVT. LTD. (ITA7466/M/2012), THAT THE TPO/ASSESSING OFFICER WERE JUSTIFIED IN INCLUDING I T IN THE LIST OF COMPARABLES. ABOUT IDFC, THE ASSESSEE HAD ARGUED THAT SEGMENTAL INFORMATION WAS NOT AVAILABLE IN THAT CASE, AND THAT IT WAS ENGAGED IN PORTFOLIO MANAGEMENT SERVICES, THE DRP OBSERVED THAT AS PER ANNUAL REPORT OF AY 2010-11 IDFC HAD ENTERED INTO INVESTMENT SEGM ENT, THAT THERE WAS NO LOGIC IN THE ARGUMENT OF THE ASSESSEE THAT SEGMENTAL INFORMATION WAS NOT AVAILABLE. IN THE CASE OF ICRA O THE ASSESSEE HAD CONTENDED THAT IT WAS NOT FUNCTI ONALLY COMPARABLE AS THE COMPANY AS WELL, AS ITS OUTSOURCED SERVICE SEGMENT WERE ENGAGED IN P ROVIDING DIVERSIFIED SERVICES.THE DRP HELD THAT THE OUTSOURCE SERVICE SEGMENT WAS ALMOST SIMILAR IN NATURE SO FAR AS FUNCTIONAL ASPECT OF SERVICE WERE CONCERNED, THAT THE SEGMENT DEALT WITH RESEARCH AND ANALYSIS RELATED TO FINANCIAL SECTOR, THAT THE ADVISORY WERE PROVIDED O N THE BASIS OF VALIDATION AND ANALYSIS, THAT IT WAS A COMPARABLE ACTIVITY, THAT A TALENT POOL OF FI NANCIAL PROFESSIONALS AND INVESTMENT ADVISORS WERE REQUIRED,THAT EVEN IF SUCH SERVICES H AD BEEN OUTSOURCED THE NATURE OF THE 840/M/15(ARISAIG PARTNERS) 3 ACTIVITY WOULD NOT CHANGE,THAT THE TPO HAD RIGHTLY INCLUDED ICRA-O IN THE LIST OF THE COMPARABLES. 3. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR) ARGUED THAT MOIAPL,IDFC AND ICRA-O WERE FUNCTIONALLY DIFFERENT,THAT MOIPAL WAS A MERCH ANT BANKER,THAT IFDC AND ICRA-O WERE NOT PROVIDING ADVISORY SERVICES.HE RELIED UPON THE CASE AGM INDIA ADVISORS PRIVATE LIMITED, THE TRIBUNAL(ITA.S./4757&4801/MUM/2015-AY. 2010-11,DTD.18.05.2016),WHEREIN ALL THE THREE COMPARABLES WERE EXCLUDED.THE DEPARTMENTAL REPRESNETATIVE(DR)SUPPORTED THE ORDER OF THE DRP AND STATED THAT THE TPO HAD CONSID ERED ONE OF THE SEGMEN -TS,NAMELY OUTSOURCED SERVICES FOR THE PURPOSE OF BENCHMARKING IN THE CASE OF ICRA-O, THAT HE HAD NOT CONSIDERED THE ENTITY LEVEL MARGIN OF THE COMPARABL E, THAT THE ORDER OF THE TRIBUNAL IN THE CASE OF CARLYLE WAS DISTINGUISHABLE ON FACTS, THAT NEITHER THE ASSESSEE NOR THE TPO HAD ADOPTED THE FILTER OF 75% REVENUE FROM THE SERVICE AS ADAPTED IN THE CASE OF CARLYLE, THAT EVEN IF THE CRITERIA OR FILTER OF 75% REVENUE FROM SERVI CES WAS APPLIED IT WOULD NOT AFFECT THE FILTER, THAT SERVICES OF ICRA-O WERE BEING USED BY AMC.S /M UTUAL FUNDS,THAT THE COMPARABLE PROVIDED ANALYTICAL SERVICES IN EQUITY/RESEARCH WHI CH WERE SIMILAR TO FUNCTION OF THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE APPEAL/CO FILED BY THE AO AND THE ASSE SSEE,FOR THE AY. 2009-10(ITA/ 1083/ MUM/2014 & CO 62 OF 2014,DTD.25. 03.2015),THE TRIBU NAL HAD DEALT WITH THE COMPARABILITY OF MOIAPL AS UNDER: 11. THE GRIEVANCE OF THE ASSESSEE IS REGARDING THE INCLUSION OF MOTILAL OSWAL INVESTMENTS ADVISORS PVT. LTD FOR THE PURPOSE OF DETERMINING TH E ARM'S LENGTH PRICE. 12.WE HAVE HEARD THE LD. AR AS WELL AS LD. OR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AUTHORIZED REPRESENTATIVE OF THE A SSESSEE HAS POINTED OUT THAT THE COMPANY MOTILAL OSWAL INVESTMENTS ADVISORS PVT. LTD. IS NOT FUNCTIONALLY COMPARABLE WITH THE ASSESSEE .IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON TH E DECISION OF THIS TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORS PRIVATE LIMITED VS. DCIT (SU PRA) AS WELL AS IN THE CASE OF ACUMEN FUND ADVISORY SERVICES INDIA PRIVATE LIMITED VS. DC LT (ITA NO. 143/MUM/2014). 13. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF TPO AND DRP 14. AT THE OUTSET, WE NOTE THAT THE TRIBUNAL IN TH E CASE OF CARLYLE INDIA ADVISORS PRIVATE LIMITED VS. DCIT (SUPRA), HAS EXAMINED THE FUNCTION AL COMPARABILITY OF MOTILAL OSWAL INVESTMENTS ADVISORS PVT. LTD IN PARA 8 AND 9 AS U NDER.- ' 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RENDERING INVESTMENT ADVISORY AN D RELATED SUPPORT SERVICES TO ITS PRINCIPAL CARLYLE HONG KONG. THE DISPUTE RAISED IN 6 GROUND N O.4 RELATES TO WHETHER (I) KLG CAPITAL SERVICES LTD (KLG); (II) KJMC CORPORATE ADVISORS (I NDIA) LIMITED (KJMC) AND (III) MOTILAL OSWAL INVESTMENT ADVISORS PVT LTD (MOIAPL) ARE FUNC TIONALLY COMPARABLE CASES OR NOT CONSIDERING THE DECISION OF THE TRIBUNAL AS WELL AS THE JUDGMENT OF THE BOMBAY HIGH COURT RELIED UPON BY THE ASSESSEE. REGARDING MOIAPL, ASSE SSEE RELIED HEAVILY ON THE ORDER OF THE 840/M/15(ARISAIG PARTNERS) 4 TRIBUNAL IN ITS OWN CASE FOR THE AY 2008-2009, A CO PY OF WHICH IS PLACED AT PAGE 282 OF THE PAPER BOOK. ON PERUSAL OF THE SAID ORDER OF THE TRI BUNAL, WE FIND THAT IT IS DECIDED IN FAVOUR OF THE ASSESSEE VIDE ITA NO.7367/MUM/2012 (AY 2008- 2009), DATED 7.2.2014. ON PERUSAL OF PARA 12 OF THE SAID ORDER OF THE TRIBUNAL, WHICH CO NTAINS THE OPERATIONAL PART, WE FIND THE SAME IS RELEVANT AND THE TRIBUNAL HAS GIVEN ITS FIN DING UNDER THE FACTS WHICH ARE SIMILAR TO THAT OF THE AY UNDER CONSIDERATION.THE MOIAPL, WHIC H HAS ENGAGED IN THE BUSINESS OF MERCHANT BANKING IS NOT A GOOD COMPARABLE FOR DETER MINING THE ALP. RELEVANT CONTENTS OF THE SAID PARA 12 ARE REPRODUCED HERE FOR THE SAKE O F COMPLETENESS OF THIS ORDER WHICH READ AS UNDER: 12. ..THE ONLY DISPUTE IS WHETHER MOTILAL OSWA L INVESTMENT ADVISORS PVT LTD CAN BE CONSIDERED AS A COMPARABLE FOR DETERMINATION OF ALP. A PERUSAL OF THREE COMPARABLES CONSIDERED BY THE TPO SHOWS THAT M/S. F UTURE CAPITAL INVESTMENT ADVISORS LTD., HAS OPERATING PROFIT AT 21.79% WHEREAS OPM OF MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD IS 72.33%. THE COMPARABLES USED BY THE TPO THEMSELVES ARE SHOWING EXTREME OPM. A PERUSAL OF THE DIRECTOR S REPORT OF MOTILAL OSWAL INVESTMENT ADVISORS PVT L TD SHOWS THAT DURING THE YEAR UNDER CONSIDERATION, THE SAID COMPANY HAS COMPLETED 23 ASSIGNMENTS SUCCESSFULLY AS AGAINST 14 COMPLETED IN THE IMMEDIATELY PRECEDING YEAR. A CLOSE LOOK AT THE FINANCIAL STATEMENTS OF THE SAID COMPANY SHOW THAT THE INCOME FROM OPERATIONS HAVE BEEN SHOWN ONLY AS ADVISORY FEES WH EREAS IT IS ADMITTEDLY AN UNDISPUTED FACTS THAT THE SAID COMPANY IS ENGAGED IN DIVERSIFI ED ACTIVITIES. SEGMENTAL REPORTING IS NOT AVAILABLE. PROFIT AND LOSS ACCOUNT APPEARS TO B E ONLY OF CONSOLIDATED ACCOUNTS. THE SAID COMPANY IS REGISTERED WITH SEBI AS A MERCHANT BANKER AND THE DIRECTORS REPORT SHOW THAT IT IS INTO TAKEOVER, ACQUISITIONS, DISINV ESTMENTS ETC. IN THE ABSENCE OF SPECIFIC DATA IT IS NOT POSSIBLE TO MAKE COMPARISON. IT CAN THEREFORE, BE SAFELY SAID THAT THE SAID COMPANY BEING INTO MERCHANT BANKING AND CANNOT BE C ONSIDERED AS A COMPARABLE. WE, ACCORDINGLY, DIRECT THE AO NOT TO CONSIDER MOTILAL OSWAL INVESTMENT ADVISORS PVT LTD AS A COMPARABLE FOR DETERMINATION OF ALP. 9.CONSIDERING THE ABOVE, WE DIRECT THE AO TO EXCLUD E THE MOIAPL FROM THE LIST OF THE COMPARABLES FOR DETERMINATION OF ALP OF THE SAID TR ANSACTION. 15. IT WAS FOUND THAT THE SAID COMPANY NAMELY MOTIL AL OSWAL INVESTMENT ADVISORS PVT LTD IS ENGAGED IN THE BUSINESS OF MERCHANT BANKING AND, T HEREFORE, IS NOT A GOOD COMPARABLE OF A COMPANY PROVIDING INVESTMENT ADVISORY SERVICES TO THE AE. WE FURTHER NOTE THAT THAT IN CASE OF ACUMEN FUND ADVISORY SERVICES INDIA PRIVATE LIMI TED VS. DCIT (SUPRA), THE TRIBUNAL WHILE FOLLOWING THE ORDER IN CASE OF CARLYLE INDIA ADVISORS PRIVATE LIMITED VS. DCIT (SUPRA), HAS HELD THAT THE SAID COMPANY IS NOT FUNC TIONALLY COMPARABLE WITH THE BUSINESS OF INVESTMENT ADVISORY SERVICES. 16. IN VIEW OF THE FINDINGS OF THE TRIBUNAL IN THE ABOVE SAID DECISION IN THE CASE OF CARLYLE INDIA ADVISORS PRIVATE LIMITED VS. DCIT (SUPRA), AS WELL AS ACUMEN FUND ADVISORY SERVICES INDIA PRIVATE LIMITED VS. DCIT (SUPRA), WE ARE OF THE VIEW THAT THE COMPANY MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD IS PRIMARILY IN THE BU SINESS OF MERCHANT BANKING AND, THEREFORE, IS NOT FUNCTIONALLY COMPARABLE WITH THE BUSINESS O F THE ASSESSEE BEING INVESTMENT ADVISORY TO ITS AE. ACCORDINGLY, WE DELETE MOTILAL OSWAL INVEST MENT ADVISORS PVT. LTD FROM THE LIST OF COMPARABLES SELECTED BY THE TPO AND DIRECT THE ASS ESSING OFFICER/ TPO TO RECOMPUTED THE ARM'S LENGTH PRICE ON THE BASIS OF THE REMAINING C OMPARABLES. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER AY., WE HOLD THAT MOIAPL SHOULD BE EXCLUDED FROM THE LIS T OF VALID COMPARABLES. AS FAR AS REMAINING TWO OTHER COMPARABLES I.E.IFDC AND ICRA-O,ARE CONCERNED,WE FIND THAT IN THE MATTER OF AGM (SUPRA),THE TRIBUNAL HAS DEALT THEIR COMPARABILITY VISA VIS NON BINDING ADVISORY SERVICES,AS UNDER: 840/M/15(ARISAIG PARTNERS) 5 IN THE CASE OF CARLYLE INDIA ADVISORS INDIA PVT. L TD (SUPRA), FOR THE AY. 2010-11,THE TRIBUNAL HAS HELD THAT IDFC SHOULD NOT BE INCLUDED IN THE LI ST OF COMPARABLES,WHILE CONSIDERING THE MATTERS OF THE ENTITIES ENGAGED IN PROVIDING NON-BINDING-AD VISORY SERVICES.WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL : 17.WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON THIS ASPECT. A PERUSAL OF THE DIRECTORS REPORT OF IDFC INVESTMENT ADVISORS LTD FO R THE INSTANT YEAR REVEALS THAT IT IS REGISTERED AS A PORTFOLIO MANAGER WITH SEBI WHEREBY IT IS CARRYING OUT PORTFOLIO MANAGEMENT SERVICES ENVISAGED UNDER THE SEBI (PORTFOLIO MANAGE RS) REGULATIONS, 1993. THE DETAILED ACTIVITIES ENUMERATED IN THE DIRECTORS REPORT SHOW THAT IT WAS OFFERING PORTFOLIO MANAGEMENT SERVICES FOR THE DOMESTIC RETAIL INVESTO RS IN DIFFERENT FIELDS.THE AFORESAID CLEARLY ESTABLISHES THAT IT IS ENGAGED IN MANAGING OF FUNDS IN ITS PORTFOLIO MANAGEMENT PLATFORM. IN FACT, IN NOTES TO THE ACCOUNTS, ANNEXE D TO THE ANNUAL FINANCIAL STATEMENTS, THE NARRATION ABOUT THE NATURE OF OPERATIONS BEING CAR RIED OUT IS QUITE SIGNIFICANT. AT PAGE 506 OF THE PAPER BOOK IS PLACED A NOTE ON THE NATURE OF O PERATIONS OF THE SAID CONCERN WHICH ENUMERATES THAT IDFC INVESTMENT ADVISORS LIMITED DO ES UNDERTAKE INVESTMENT ADVISORY SERVICES FOR EVALUATING INVESTMENT OPPORTUNITIES AN D TO MONITOR THE INVESTMENTS IN INDIAN COMPANIES AND THAT IT HAD ENTERED INTO AN INVESTME NT ADVISORY AGREEMENT WITH INDIA INFRASTRUCTURE OPPORTUNITIES FUND LTD. SO HOWEVER, IT IS ALSO NOTICED THAT SAID CONCERN RECEIVES 'ADVISORY FEE' COMPUTED ON THE BASIS OF N ET ASSETS OF THE FUND PLUS A PERFORMANCE FEE. THE NARRATION OF BUSINESS OPERATIONS CONTAINED IN T HE NOTES TO ACCOUNTS CLEARLY ESTABLISHES A DISTINCTION BETWEEN THE BUSINESS MODEL BEING PURSUE D BY THE SAID CONCERN AND THE ASSESSEE FOR RENDERING INVESTMENT ADVISORY RELATED SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISE. THE EARNINGS OF IDFC INVESTMENT ADVISORS LIMITED, THOU GH TITLED AS 'ADVISORY FEE', ARE INDEED COMPUTED ON THE BASIS OF AMOUNT OF FUND DEPLOYED BY THE INVESTEE FUND PLUS A PERFORMANCE FEE WHEREAS THE ASSESSEE IS BEING COMPENSATED ON CO ST PLUS FIXED MARKUP BASIS. ON ACCOUNT OF THIS DIFFERENCE IN THE BUSINESS MODEL OF IDFC INVESTMENT ADVISORS LIMITED, IT WOULD NOT BE APPROPRIATE TO COMPARE ASSESSEES INTERNATIONAL TRANSACTION OF PROVISION OF INVESTMENT RELATED SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRIS E WITH THAT OF THE IDFC INVESTMENT ADVISORS LIMITED. BEFORE US, THE LD, REPRESENTATIVE FOR THE ASSESSEE HAD ALSO RELIED UPON THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN THE CASE OF BAIN CA PITAL ADVISORS (INDIA) PRIVATE LTD. VS. DCIT IN ITA NO. 413/ MUM/2015 ORDER DATED 15.5.2015, WHEREIN FOR THE IN STANT ASSESSMENT YEAR ITSELF, IDFC INVESTMENT ADVISORS LIMITED HAS BEEN HELD TO BE INCOMPARABLE WITH AN ASSESSEE WHO IS ENGAGED IN PROVIDING NON-BINDING IN VESTMENT ADVISORY RELATED SUPPORT SERVICES ONLY. IN OUR CONSIDERED OPINION, THE DECIS ION OF THE TRIBUNAL IN THE CASE OF BAIN CAPITAL ADVISORS (INDIA) PRIVATE LTD (SUPRA) ALSO SUPPORTS THE PLEA OF THE ASSESSEE FOR EXCLUSION OF IDFC INVESTMENT ADVISORS LIMITED FROM THE FINAL SET OF COMPARABLES. IN VIEW OF THE AFORESAID DISCUSSION, IN OUR VIEW, IDPC INVESTM ENT ADVISORS LIMITED DESERVES TO BE 840/M/15(ARISAIG PARTNERS) 6 EXCLUDED FROM THE FINAL SET OF COMPARABLES FOR THE PURPOSES OF COMPUTING ARM'S LENGTH PRICE OF ASSESSEE'S INTERNATIONAL TRANSACTION OF PROVISIO N OF INVESTMENT ADVISORY RELATED SUPPORT SERVICES TO ASSOCIATE ENTERPRISE. THUS, ON THIS AS PECT ALSO, ASSESSEE SUCCEEDS. 5.2. WE WOULD ALSO LIKE TO QUOTE THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN THE CASE OF SPARLKES DHANDO ADVISORS PVT. LTD. (ITA/1047/M/2015 -AY.2010-11,DT.31.12.2015),WHEREIN THE TRIBUNAL HAS EXCLUDED MOIALP AND IDFC FROM THE LIST OF THE COMPARABLES.THE RELEVANT PORTION OF THE TRIBUNAL ORDER READS AS FOLLOW: XXXXXXXXX 7.REGARDING IDFC ,IT IS DEMONSTRATED BEFORE US THAT THE SAID COMPANY IS ENGAGED IN RENDERING OF SERVICES AS PORTFOLIO MANAGER, WHOSE F UNCTIONS ARE INTIMATELY DIFFERENT FROM THAT OF THE FUNCTIONS OF NON-BINDING ADVISORY SERVICES R ENDERED BY THE ASSESSEE TO ITS AES. THE FACT OF REJECTION OF THE SAME AS A GOOD COMPARABLE TO A CASE OF SIMILAR SERVICES AS IN THE CASE OF THE ASSESSEE, ASSESSEE WAS ALSO DEMONSTRATED BY REL YING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF BAIN CAPITAL ADVISORS (INDIA) PRIVATE LIMIT ED (SUPRA). AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID DECISION OF THE TRIBUNAL IN THE CASE OF BAIN CAPITAL ADVISORS (INDIA) PRIVATE LIMITED (SUPRA), ORDER DATED 15.5.2 015, WE FIND THE PARA 8 IS RELEVANT IN THIS REGARD AND FOR THE SAKE OF COMPLETENESS OF THIS ORD ER THE SAME IS EXTRACTED AS UNDER:- 8.WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND T HAT ASSESSEE IS ENGAGED IN BUSINESS OF PROVIDING INVESTMENT RESEARCH AND ADVIS ORY SERVICES TO BAIN MAURITIUS, ON A NON-EXCLUSIVE AND NON-BINDING BASIS, IN CONNEC TION WITH POTENTIAL INVESTMENT OPPORTUNITIES IN INDIA. IDFC RENDERED PORTFOLIO MA NAGEMENT SERVICES FOR HYBRID INFRASTRUCTURE PORTFOLIO, AGRICULTURE OPPORTUNITIES PORTFOLIO AND FARM FORK PORTFOLIO. IDFC IS REGISTERED AS PORTFOLIO MANAGER WITH SEBI.T HUS, IDFC IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE WHICH IS ENGAGED MERELY IN NON-BINDING INVESTMENT ADVISORY SUPPORT SERVICES. SINCE, IDFC IS FUNCTION ALLY DIFFERENT, WE DIRECT THE AO TO EXCLUDE THE IDFC FROM THE LIST OF COMPARABLES FOR C OMPUTING ARMS LENGTH ADJUSTMENT. IN VIEW OF THE ABOVE, WE DIRECT THE AO TO RE-COMPUTE THE ARMS LENGTH ADJUSTMENT AFTER EXCLUDING IDFC FROM THE LIST OF COMPARABLES. XXXXXXXXXXXX 7. WE FIND THAT THE ASSESSEE OBJECTED TO THE INCLUSION OF ICRA-O AND IDFC ON THE GROUND THAT THE TPO HAD APPLIED NO SCIENTIFIC METHOD IN AR RIVING AT THE SAID TWO COMPANIES,THAT THE COMPANIES HAD BEEN CHERRY- PICKED BY THE TPO AND HE HAD NOT FURNISHED THE PROCESS APPLIED BY WHICH HE HAD COME TO SELECT THE SAID TWO COMPANI ES,THAT SUCH AN APPROACH TO SELECT COMPARABLES WAS IMPRESSIBLE IN LAW AND ON THAT COUN T ALONE THE SAID TWO COMPANIES SHOULD BE REJECTED,THAT THE FAA HAD REJECTED ICRA-O AS COM PARABLE TO INVESTMENT ADVISORY SERVICES 840/M/15(ARISAIG PARTNERS) 7 RENDERED BY THE ASSESSEE AND HAD STATED ASSESSEE'S KNOWLEDGE PROCESS OUTSOURCING DIVISION PROVIDED FINANCIAL AND ANALYTICAL SERVICES AND SUPP ORT TO CLIENTS IN THE AREAS OF DATA EXTRACTION,AGGREGATION,ELECTRONICCONVERSION OF FINA NCIAL STATEMENTS,VALIDATION AND ANALYSIS,ACCOUNTING AND FINANCE, RESEARCH AND ANALY TICS,THAT THE COMPANY WAS NOT ENGAGED IN INVESTMENT ADVISORY OR CONSULTANCY SERVICES,THAT THE AO WAS DIRECTED TO EXCLUDE ICRA-O FROM THE FINAL SET OF COMPARABLE COMPANIES, THAT HE HAD HELD THAT IT WAS FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE.CHARGING OF FEES BY ICRA -O DID NOT MEAN THAT IT WAS A VALID COMPARABLE TO THE ASSESSEE.AS PER THE SETTLED PRINC IPLES OF TP FOR A COMPANY TO BE TREATED AS A VALID COMPARABLE THE FUNCTIONS PERFORMED,ASSETS E MPLOYED AND RISKS ASSUMED HAVE TO BE COMPARABLE AND NOT NOMENCLATURES IN THE ANNUAL ACCO UNTS.WE WOULD LIKE TO REFER TO PG.507 OF THE PB IN CASE OF ICRA-O AND IT READS AS UNDER: 'ICRA ONLINE LIMITED IS A LEADING INFORMATION SERVI CES, OUTSOURCING AND TECHNOLOGY SOLUTIONS PROVIDER AND CATERS FOR SOME OF THE BIGGE ST NAMES IN THE FINANCIAL SERVICES SECTOR IN(INDIA) AND ABROAD, WHICH IS A TESTIMONY TO ITS P RODUCT QUALITY, COMMITMENT AND CREDIBILITY'. FROM THE ABOVE DESCRIPTION IT IS CLEAR THAT ICRA-O OPERATED IN TWO STRATEGIC LINES OF BUSINESS,I.E.KNOWLEDGE PROCESS OUTSOURCING AND INFO RMATION SERVICES AND TECHNOLOGY SOLUTIONS,WITH A LIST OF REPUTED GLOBAL AND DOMESTI C CLIENTS. NOTE C(III)ON PG.507 OF THE PB ALSO PROVES THAT THE ACTIVITIES PERFORMED BY THE CO MPANY UNDER THE BUSINESS LINE 'OUTSOURCED SERVICES' WERE IN THE NATURE OF 'MAINTENANCE AND MA NAGEMENT OF DATA' AND THEREFORE CANNOT BE COMPARED WITH THE ASSESSEE... IN LIGHT OF THE ABOVE DISCUSSION,WE ARE OF THE OPIN ION THAT THE TPO/DRP WAS NOT JUSTIFIED IN INCLUDING MOIAPL,IDFC AND ICRA-O AS VALID COMPARABL ES FOR DETERMINING THE ALP OF THE IT.S.,ENTERED IN TO BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION.THEREFORE, WE DIRECT THE AO TO EXCLUDE ABOVE MENTIONED THREE COMPARABLES FROM THE FINAL LIST.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FIL ED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER, 2016. SD/- SD/- ( / SAKTIJIT DEY ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11. 11.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 840/M/15(ARISAIG PARTNERS) 8 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.