DCIT CIR 3(3), MUMBAI V. TEMASEK HOLDING ADVISORS P.LTD, MUMBAI

ITA 968/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79201 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI VIJAY PAL RAO , J M ITA NO. 968 / MUM/20 1 4 ( ASSESSMENT YEAR : 20 0 9 - 10 ) DCIT CIR 3(3), MUMBAI - 20 VS. M/S TEMASEK HOLDING ADVISORS PVT. LTD., 12.3 NORTH AVENUE MAKER MAXITY BANDRA KURLA COMPLEX, BANDRA (EAST) , MUMBAI - 400 051 PAN/GIR NO. : A A CCM 4000 H ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. S.D.SHRIVASTAVA /ASSESSEE BY : MR. PORUS KAKA & MR. DIVESH CHAWLA DATE OF HEARING : 1 6 TH JUNE , 20 1 4 DATE OF PRONOUNCEMENT : 27 TH JUNE , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY DCIT, CIRCLE - 3(3), MUMBAI U/S. 143(3) OF THE INCOME TAX ACT, 1961 IN PURSU ANCE OF THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL (IN SHORT DRP) - II, MUMBAI , FOR THE ASSESSMENT YEAR 2009 - 10 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) R.W.S 144 C (1 3 ) OF THE I.T. ACT. FOLLOWING TWO GROUNDS HAVE BEEN TAKEN BY THE REVE NUE : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAD ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE OF RS. 12,73,34,892/ - CLAIMED BY THE ASSESSEE AS REIMBURSEMENT OF COST OF SALARY AND OTHER EXPENSES TO ITS HOLDING COMPANY DUE TO NON - DEDUCTION OF TDS U/S40(A)(IA) OF ITA NO. 968 /1 4 2 THE ACT WITHOUT APPRECIATING THE FACT THAT THE SAME WAS APPROPRIATELY AS PER THE PROVISIONS OF THE ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP WAS JUSTIFIED I N DELETING THE ADJUSTMENT OF RS. 89,56,506/ - MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT UNDER SECTION 92CA, ON THE INTERNATIONAL TRANSACTIONS RELATING TO RECEIPTS IN RESPECT OF INVESTMENT ADVISORY SERVICES RENDERED BY THE ASSESSEE WITHOUT APPRECIATING T HE FACT THAT THE SELECTION OF COMPARABLES WAS DONE APPROPRIATELY AS PER THE PROVISIONS OF THE I.T. ACT. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS TEMASEK HOLDINGS ADVISORS INDIA PVT. LTD. (FOR SHOR T THAIPL), IS WHOLLY OWNED (100%) SUBSIDIARY OF TEMASEK HOLDING PTE. LTD. (FOR SHORT THPL), WHICH IS AN ASIA INVESTMENT FIRM BASED AT SINGAPORE. THE ASSESSEE RENDERS INVESTMENT ADVISORY SERVICES TO THPL, SINGAPORE, WHICH INCLUDES IDENTIFYING AND ANALYZ ING POTENTIAL INVESTMENT PARTICULARS IN INDIA, EVALUATING POLITICAL AND ECONOMIC SCENARIO FOR THE INVESTMENT PURPOSE IN INDIA AND MONITORING AND MAKING RECOMMENDATION TO THPL IN RESPECT OF SPECIFIED INVESTMENT IN INDIA, SPECIFICALLY FOR UNLISTED COMPANIES. ALL THESE SERVICES ARE PROVIDED BY THE ASSESSEE COMPANY TO THE SINGAPORE COMPANY . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE REIMBURSED EXPENDITURE TO ITS ASSOCIATE ENTERPRISE, THPL . DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DISALLOWED AN EX PENDITURE OF RS. 12,73,34,892/ - CLAIMED BY ASSESSEE BEING REIMBURSEMENT MADE BY THE ASSESSEE TO THPL ON THE GROUND THAT NO TAXES WERE DEDUCTED THEREON, BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. AGAINST THE ORDER OF AO, ASSESSEE APPROACHED BEFO RE THE DRP AND THE DRP VIDE ORDER DATED 1 - 11 - 2013 DIRECTED FOR ITA NO. 968 /1 4 3 DELETION OF DISALLOWANCE BY FOLLOWING THE DECISIONS OF TRIBUNAL IN ASSESSEES OWN CASE DATED 30 - 8 - 2013 IN ITA NO.4203/MUM/2012 AND ITA NO. 6504/MUM/2012 . AGAINST THE ORDER OF AO GIVING EFFECT TO THE DIRECTIONS OF DRP, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 3 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE AO HAS MADE DISALLOWANCE OF EXPENDITURE CLAIMED AS REIMBUR SEMENT OF COST OF SALARY AND OTHER EXPENSES TO ITS HOLDING COMPANY BY OBSERVING THAT SIMILAR DISALLOWANCE HAVE BEEN MADE FOR ASSESSMENT YEAR 2007 - 08 AND 2008 - 09, WHICH HAD BEEN CONFIRMED BY THE CIT(A) AND DRP, RESPECTIVELY. FROM THE RECORD WE FOUND THAT IN THE ASSESSMENT YEAR 2007 - 08, SIMILAR EXPENDITURE OF RS. 3,93,03,905/ - WAS CLAIMED BY THE ASSESSEE AND THE SAME WAS DISALLOWED BY THE AO BY INVOKING PROVISIONS OF SECTION 40(A)(IA) . OUT OF RS. 3,93,03,905/ - , MAJOR PORTION OF EXPENDITURE WERE ON ACCOUNT OF RE IMBURSEMENT OF SALARIES AND EXPENSES OF SECONDED EMPLOYEES AND A SUM OF RS. 40,80,740/ - WAS PERT AINING TO BUSINESS PROMOTION, INFORMATION TECHNOLOGY AND PROFESSIONAL FEES. THE TRIBUNAL VIDE ITS ORDER DATED 30 - 8 - 2013 DELETED THE DISALLOWANCE MADE WITH RESPEC T TO SALARIES AND EXPENSES OF SECONDED EMPLOYEES AFTER HAVING FOLLOWING OBSERVATIONS. HOWEVER, THE EXPENDITURE PERT AINING TO REIMBURSEMENT ON ACCOUNT OF PROFESSIONAL FEES HAS BEEN RESTORED BACK TO THE FILE OF THE AO TO EXAMINE IT AFRESH IN ACCORDANCE WITH T HE PROVISIONS OF LAW. ITA NO. 968 /1 4 4 4 . WE FOUND THAT I N APPEAL FILED BY THE ASSESSEE FOR THE A.Y. 2007 - 08 & 2008 - 09 , THE TRIBUNAL HAD DECIDED THE ISSUE VIDE ITS ORDER DATED 30 - 8 - 2013 AND THE DISALLOWAWNCE SO MADE WERE DELETED AFTER HAVING THE FOLLOWING OBSERVATIONS : - 32. WE REITERATE THAT IN THE PRESENT CASE, THE SINGAPORE COMPANY IS AVAILING THE SERVICES RENDERED BY THE INDIAN COMPANY I.E., THE ASSESSEE, FOR WHICH IT HAS BEEN MAKING PAYMENT AT A MARK - UP OF 21%. THE SINGAPORE COMPANY HAS SENT TWO SENCONDED EMPLOYEES UNDER THE SECONDMENT AGREEMENT WHO ARE UNDER THE CONTROL AND SUPERVISION OF THE INDIAN COMPANY FOR THE PURPOSE OF RENDERING SERVICES IN INDIA FOR THE INDIAN COMPANY AND FOR THE INDIAN OPERATION. SINCE THE SECONDED PERSONS WERE THE EMPLOYEES OF SINGAPORE C OMPANY, THE PAYMENT OF SALARY AND COST OF THE EXPENDITURE IN TERMS OF APPOINTMENT LETTER HAS BEEN BORNE BY THE SINGAPORE COMPANY. WHILE DOING TO, IT HAS WITHHELD THE TAXES AND DEPOSITED THE SUM UNDER THE PROVISIONS OF SECTION 192 OF THE ACT WITH THE GOVERN MENT OF INDIA TREASURY. THUS, THE PAYMENT OF SALARY HAS ALREADY BEEN SUBJECTED TO TDS. THE INDIAN COMPANY WHICH IS RENDERING SERVICES FOR SINGAPORE COMPANY HAS UTILIZED THE SERVICES OF THESE SECONDED EMPLOYEES FOR THEIR INDIAN OPERATION. THE CONCEPT OF S ECONDMENT EMPLOYEE IS THAT AN EMPLOYEE IS TEMPORARILY TRANSFERRED TO ANOTHER JOB TO A DIFFERENT PARTY, FOR A DEFINED PERIOD OF TIME OR FOR SPECIFIC PURPOSE AND MAY BE TO THE MUTUAL BENEFIT OF THE PARTIES. THIS CONCEPT IS PREVALENT IN MOST PART OF THE WORL D, WHERE ONE COMPANY TRANSFERS ITS EMPLOYEES UNDER THE SECONDMENT AGREEMENT TO THE OTHER COMPANY AND IN MOST OF THE CASES UNDER CONTROL AND SUPERVISION OF THE OTHER COMPANY. THE SALARY CAN BE PA ID EITHER BY THE FIRST COMPANY TO WHOM THE SECOND EMPLOYEES BE LONG OR THE OTHER COMPANY WHICH ARE AVAILING THE SERVICES OF SECOND EMPLOYEE. IN THE PRESENT CASE, THE SECONDMENT AGREEMENT CLEARLY PROVIDES THAT THESE TWO EMPLOYEES WILL WORK FOR THE ASSESSEE COMPANY UNDER THE SUPERVISION AND UNDER THE CONTROL OF THE BOAR D OF DIRECTORS OF THE INDIAN COMPANY. THEIR SERVICES CAN BE TERMINATED BY THE EITHER PARTY AND THE SALARY WHICH IS BORNE BY THE EMPLOYER COMPANY I.E. SINGAPORE COMPANY, THE ENTIRE COST OF SALARY WOULD BE REIMBURSED BY THE ASSESSEE COMPANY AS PER THE ADVICE RAISED FROM TIME TO TIME. THUS, WE ARE UNABLE TO SUSTAIN THE FINDINGS OF THE ASSESSING OFFICER AS OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE OF REIMBURSEMENT OF SALARY, REIMBURSEMENT OF EXPENDITURE RELATING TO THE SECONDED EMPLOYEES, EXPENDITURE R ELATING TO INFORMATION TECHNOLOGY, EXPENDITURE AND BUSINESS PROMOTION. ACCORDINGLY, THE DISALLOWANCE UNDER SECTION 40(A)(IA) ON ACCOUNT OF THESE EXPENSES STANDS DELETED. 33. HOWEVER, WITH REGARD TO THE PROFESSIONAL FEES, WE FIND THAT THESE EXPENDITURES HAVE BEEN INCURRED FOR THE PURPOSE OF INDIAN COMPANY FOR ITS OPERATION IN INDIA AND THESE PAYMENTS WERE MADE BY THE SINGAPORE COMPANY WHICH HAS BEEN REIMBURSED BY THE INDIAN COMPANY. WE HAVE ITA NO. 968 /1 4 5 ALREADY HELD THAT THE PAYMENT OF PROFESSIONAL FEE DOES ATTRACT WI TH HOLDING OF TAX UNDER THE PROVISIONS OF THE ACT AND THAT THIS ISSUE HAS NOT BEEN PROPERLY DEALT WITH EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED COMMISSIONER (APPEALS) BECAUSE BOTH THESE AUTHORITIES WERE DEALING MOSTLY WITH THE REIMBURSEMENT OF SAL ARY ISSUE, THEREFORE, WE SET ASIDE THE ISSUE OF REIMBURSEMENT OF EXPENDITURE TOWARDS THE PAYMENT OF PROFESSIONAL FEE AND THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE IT AFRESH AND IN ACCORDANCE WITH THE PROVISIONS OF LAW. 5 . IT IS CLEAR FROM THE ORDER OF THE TRIBUNAL THAT DISALLOWANCE MADE WITH RESPECT TO REIMBURSEMENT OF SALARIES AND THE EXPENSES OF SECONDED EMPLOYEES WERE DELETED ON THE PLEA THAT TAX HAS BEEN DEDUCTED AT SOURCE UNDER SECTION 192 OF THE ACT. HOWEVER, THE MA TTER WITH REGARD TO REIMBURSEMENT OF EXPENDITURE TOWARDS PAYMENT OF PROFESSIONAL FEES WAS RESTORED BACK TO THE FILE OF THE AO TO EXAMINE AND DECIDE AFRESH. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DELETE THE DISALLOWANCE MADE WITH RESPECT TO REIMBURSEMENT OF SALARIES AND EXPENSES OF SECONDED EMPLOYEES. HOWEVER, REIMBURSEMENT OF EXPENDITURE ON ACCOUNT OF PROFESSIONAL FEE IS RESTORED BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AS PER THE DIRECTION S GIVEN BY THE TRIBUNAL I N ITS ORDER DATED 30 - 8 - 2013 VIDE ITS PARA 33 AS REPRODUCED ABOVE. 6 . THE REVENUE IS ALSO AGGRIEVED FOR DELETING AN ADJUSTMENT MADE ON ACCOUNT TRANSFER PRICING ADJUSTMENT U/S. 92CA, ON THE INTERNATIONAL TRANSACTIONS RELATING TO RECEIPTS IN RESPECT OF INVESTM ENT ADVISORY SERVICES RENDERED BY THE ASSESSEE. ITA NO. 968 /1 4 6 7 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE AO/TPO HAD MADE UPWARD ADJUSTMENT TO THE VALUE OF INTERNATIONAL TRANSACTION OF INVESTMENT ADVISORY SERVICES RENDERED BY THE ASSE SSEE BY REJECTING ACCESS INDIA SELECTED BY THE ASSESSEE AS COMPARABLE COMPANY IN THE TP DOCUMENTATION MAINTAINED BY THE ASSESSEE. THE AO/TPO HAS ALSO INCLUDED C RISIL AS COMPARABLE COMPANY WITH REGARD TO THE INVESTMENT ADVISORY SERVICES RENDERED BY THE ASSE SSEE. 8 . BY THE IMPUGNED ORDER, DRP AFTER FOLLOWING THE ORDER OF ITAT IN ASSESSEES OWN CASE FOR THE AY 2008 - 09 HELD THAT M/S ACCESS INDIA IS FUNCTIONALLY COMPARABLE AND THAT M/S CRISIL HAS TO BE EX CLUDED. THE PRECISE OBSERVATION OF DRP WAS AS UNDER : - T HE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED. IN VIEW OF THE FACT THAT THE HON BLE ITAT IN ASSESSEES OWN CASE FOR A.Y. 2008 - 09 HAS HELD THAT ACCESS INDIA IS FUNCTIONALLY COMPARABLE IT HAS TO BE INCLUDED. AS CRISIL HAS RPT OF 44.51% THE SAME HAS TO BE EXCLUDED. THE CONTENTION OF ASSESSEE THAT MARGINS OF IDC INDIA AND KINETIC TRUST HAS TO BE RECOMPUTED BY TPO TREATING DEPRECIATION AND BANK CHARGES ARE OPERATING EXPENSES IS ACCEPTABLE. IT IS STATED THAT IF THESE MODIFICATIONS ARE MADE THE ARITHMETIC MEAN OF MARGIN OF COMP A RABLES COMES TO 21.5& AND HENCE NO ADJUSTMENT IS CALLED FOR. TPO IS DIRECTED TO CALCULATE THE ALP AS EXPLAINED ABOVE AND NO ADJUSTMENT MAY BE MADE IF ALP IS WITHIN THE RANGE OF PLUS/MINUS 5% OF THE INTERNATIONAL TRANSACTIONS. 9 . AGAIN ST THE ABOVE DIRECTION OF DRP, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 1 0 . WE HAVE CONSIDERED RIVAL CONTENTIONS, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007 - 08 & 2008 - 09. THE PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER : - ITA NO. 968 /1 4 7 53. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT MATERIAL RELIED UPON BY THE EITHER PARTY BEFORE US AND ALSO THE ORDER OF THE TPO. THE ASSESSEE WHICH IS MAINLY ENGAGED IN RENDERING OF INVES TMENT ADVISORY SERVICES TO ITS PARENT COMPANY AT SINGAPORE HAS RECEIVED MARK UP OF 21%. THIS MARGIN OF 21% HAS BEEN BENCHED MARKED BY USING TNMM AS THE MOST APPROPRIATE METHOD WITH PLI AS OPERATING PROFIT TO OPERATING COST. AFTER DETAIL PROCESS OF SELECTIO N IN PROWESS DATA AND SELECTION CRITERIA, IT HAD SELECTED SIX COMPARABLES IN ITS TRANSFER PRICING STUDY REPORT WITH AVERAGE MARGIN OF 13.85%. SINCE THIS MARGIN WAS LOWER THAN ASSESSEES MARGIN OF 21% AND, HENCE, IT WAS DECLARED THAT ITS MARGIN ON THE TRA NSACTION CARRIED OUT WITH ITS PARENT COMPANY WAS AT ALP. THE TPO, HOWEVER, OUT RIGHTLY REJECTED THE ASSESSEES COMPARABLES, FIRSTLY, ON THE GROUND THAT THEY ARE NOT IN INVESTMENT ADVISORY SERVICES AND SECONDLY THE ASSESSEE HAS NOT CARRIED OUT SEARCH BY USI NG THE KEY PHRASE INVESTMENT ADVISORY SERVICES. HE WAS OF THE OPINION THAT THE DATA SHOULD HAVE BEEN ACCESSED FROM THE CAPITAL LINE DATA BASE. NO PROPER REASONING HAS BEEN GIVEN BY THE TPO AS TO WHY DATA FROM PROWESS IS NOT RELIABLE AND THE CAPITAL LINE DATA SHOULD HAVE BEEN TAKEN. ON A PERUSAL OF HIS OWN SEARCH FOR SELECTION OF COMPARABLES, IT IS SEEN THAT HE HIMSELF HAS SELECTED THE COMPARABLES USING THE PROWESS DATA WHICH IS EVIDENT FROM THE FINANCIALS TAKEN BY THE TPO OF HIS COMPARABLES WHICH ARE APPEARING FROM PAGE 555 TO 564 OF THE PAPER BOOK SUBMITTED BEFORE US. HE HAS ALSO NOT ESTABLISHED THAT BY ENTERING THE KEY PHRASE INVESTMENT ADVISORY SERVICE, THE SELECTION OF THE FUNCTIONALLY SIMILAR COMPANIES ARE AVAILABLE FROM THE DATA. BE THAT A S IT MAY, THE SELECTION OF EIGHT COMPARABLES BY THE TPO, AS HAVE BEEN INCORPORATED IN THE FORGOING PARAGRAPHS, IT IS SEEN THAT THESE COMPANIES ARE EITHER ENGAGED AS A BROKING COMPANY OR MERCHANT BANKER OR ASSET MANAGEMENT COMPANY. IN CASE OF STOCK BROKING COMPANIES, THE MAIN FUNCTIONS ARE MARKETING AND PROSPECTING FOR NEW CLIENTS, EXECUTION AND SETTLEMENT OF THE TRANSACTION AND TRADING OF SHARES WHICH ARE MOSTLY ON OWN ACCOUNT OR ON BEHALF OF THE CUSTOMERS. THE RISK ASSUMED IS FAR MORE THAN THE COMPANIES WH ICH ARE PURELY ENGAGED IN INVESTMENT ADVISORY SERVICES. THE ASSETS EMPLOYED ARE ALSO SIGNIFICANT. IN COMPARISON TO THIS, THE COMPANY WHICH IS ENGAGED IN INVESTMENT ADVISORY SERVICES, ONLY GIVES ADVISE AND ARE FOR DIFFERENT FROM THE ACTIVITIES CARRIED OUT B Y THE STOCK BROKERS. OUT OF EIGHT COMPARABLES, THREE COMPARABLES CHOSEN BY THE TPO VIZ. (I) RELIGARE COMMODITIES LTD., (II) SHRIYAM BROKING INTERMEDIARY LTD., AND (III) TWENTY FIRST CENTURY SHARES AND SECURITIES LTD. ARE PURELY STOCK BROKING COMPANY AND, T HEREFORE, THE SAME ARE NOT COMPARABLE ON FAR ANALYSIS WITH THAT OF THE ASSESSEE COMPANY AND CANNOT BE HELD AS FUNCTIONALLY COMPARABLE. THE COMPANIES WHICH ARE ENGAGED IN THE ASSET MANAGEMENT ARE BASICALLY RESPONSIBLE FOR MOBILIZING THE FUNDS FROM THE INV ESTORS BY MARKETING THE SCHEME. THEIR MAIN FUNCTIONS ARE SALES AND MARKETING, INVESTMENT AND MANAGEMENT OF THE FUNDS MOBILIZED UNDER VARIOUS SCHEMES. THEY ARE RESPONSIBLE FOR PROVIDING ITA NO. 968 /1 4 8 MANAGEMENT AND ADMINISTRATIVE SERVICES MOSTLY TO THE MUTUAL FUNDS AND T O DEPLOY SUCH FUNDS. THE RISK IS ALSO ASSUMED BY SUCH COMPANIES IN THE FORM OF SERVICE LIABILITIES, REGULATORY AND REPUTATIONAL RISK. MOREOVER, THE ASSET MANAGEMENT COM P ANIES ARE ALSO REGULATED ENTITIES WHICH ARE REQUIRED TO BE LICENSED BY SEBI. THUS, THES E COMPANIES ALSO FAIL THE TEST OF FAR ANALYSIS WITH THE INVESTMENT ADVISORY COMPANIES. THUS, SUNDARAM ASSET MANAGEMENT COMPANY, DEUTCHE ASSET MANAGEMENT INDIA LTD. AND RELIGARE COMMODITIES LTD., AS SELECTED BY THE TPO, CANNOT BE COMPARED WITH THE ASSESSEE COMPANY. LASTLY, THERE ARE FEW COMPANIES WHICH ARE DOING ENTIRELY DIFFERENT ACTIVITIES VIZ. ICRA LTD., WHICH IS A CREDIT RATING AGENCY IN INDIA AND BGIL FILMS AND TECHNOLOGIES LTD., WHICH IS MAINLY ENGAGED IN PRODUCTION OF DISTRIBUTION OF MOVIES. BOTH THES E COMPANIES UNDER ANY PARAMETER OR YARDSTICK CANNOT BE SAID TO BE FUNCTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE COMPANY. LASTLY, BRESON CORPORATE FINANCE LTD., ARE MOSTLY INTO MAKING INVESTMENT IN THE COMPANIES USING ITS OWN FUND AND IT IS A LEADING PL AYER IN DISTRESS AND SPECIAL SITUATION ADVISOR AND INVESTMENT COMPANY. THE OVER ALL FUNCTION AS PER THE PROFILE OF THE COMPANY, CANNOT BE SAID TO HAVE MUCH FUNCTIONAL SIMILARITY WITH THAT OF THE ASSESSEE COMPANY. ACCORDINGLY, NONE OF THE COMPARABLES AS SE LECTED BY THE TPO CAN BE SAID TO BE COMPARABLE ON FAR ANALYSIS AND, THEREFORE, NONE OF THE COMPARABLES CAN BE INCLUDED FOR THE COMPARABILITY ANALYSIS FOR BENCH MARKING THE TRANSACTIONS CARRIED ON BY THE ASSESSEE UNDER TNMM. 54. COMING TO THE ASSESSEES C OMPARABLES, IT IS SEEN THAT SOME OF THEM HAVE BEEN FOUND TO BE PROPER COMPARABLE BY THE TPO HIMSELF IN THE ASSESSMENT YEAR 2007 08 AND ALSO IN THE ASSESSMENT YEAR 2009 10. WITHOUT ANY PROPER REASON OR CHANGE IN THE FUNCTIONALITY AND ANY FINANCIAL DATA, IT CANNOT BE HELD THAT THE SAME COMPANIES ARE NOT COMPARABLE IN THE INTERMEDIARY PERIOD OF THE ASSESSMENT YEAR 2008 09. THE TPO HAS TO BRING SOME MATERIAL ON RECORD TO SHOW THAT WHY THESE COMPARABLES WHICH WERE GOOD COMPARABLE IN THE EARLIER YEAR ALSO IN AND SUCCEEDING YEAR, CANNOT BE COMPARED IN THIS YEAR. THUS, THREE COMPARABLES VIZ. ICRA MANAGEMENT CONSULTING SERVICES LTD., ICRA ONLINE LTD. AND IDC INDIA LTD., CANNOT BE REJECTED OUT RIGHTLY. COMING TO THE FUNCTIONAL PROFILES OF ALL THE SIX COMPARABLES, IT I S SEEN THAT (I) ICRA MANAGEMENT CONSULTANT LTD. THIS COMPANY IS ENGAGED IN OPERATIONS OF ADVISORY SERVICES AND IS OFFERING CONSULTATION SERVICE IN THE AREA OF STRATEGY, RISK MANAGEMENT, OPERATIONS, IMPROVEMENT REGULATORY ECONOMICS AND TRANSACTIONS ADVIS ORY. FROM THE VARIOUS FIELDS OF ACTIVITIES AS SEEN FROM THE DIRECTORS REPORT, IT IS SEEN THAT THIS COMPANY IS PROVIDING MANAGEMENT AND ADVISORY SERVICES FOR VARIOUS TYPES OF INDUSTRIES. ALL ITS REVENUE IS GENERATED FROM CONSULTATION FEES. THUS, THIS COMPA NY IS GIVING CONSULTATION IN VARIOUS TYPES OF INDUSTRIES THROUGH INVESTMENT ADVISORS. THUS, THIS COMPANY IS A GOOD COMPARABLE MORE SO WHEN IT HAS BEEN ACCEPTED BY THE TPO IN THE EARLIER YEAR AS WELL AS IN THE SUCCEEDING YE AR; ITA NO. 968 /1 4 9 II) ICRA ONLINE LTD. THE ASSE SSEE HAS TAKEN ITS SEGMENTAL DETAILS OF OUT SOURCE SERVICES WHICH MOSTLY CONSISTS OF INVESTMENT ADVISORY SERVICES ONLY. THUS, GOING BY THE SEGMENTAL DETAILS ONLY, WHICH IS INVESTMENT ADVISORY COMPANY ONLY, IT IS CONSIDERED TO BE A GOOD COMPARABLE AND MORE OVER ON THE BACKGROUND THAT THIS COMPANY HAS BEEN FOUND TO BE A GOOD COMPARABLE IN THE EARLIER YEARS AS WELL AS IN THE SUCCEEDING YEARS BY THE TPO, THE SAME HAS RIGHTLY BEEN INCLUDED AS GOOD COMPARABLE FOR COMPARABILITY ANALYSIS. III) ACCESS INDIA ADVISO RS LTD. THIS COMPANY IS INTO MANAGEMENT CONSULTING AND RENDERING BUSINESS ADVISORY SERVICES. THIS COMPANY MOSTLY FOCUSES ON INWARD INVESTMENT IN INDIA, WHICH IS QUITE SIMILAR TO THE ACTIVITIES CARRIED OUT BY THE ASSESSEE COMPANY. GOING BY ITS PROFILE AND ITS FUNCTIONS ALONG WITH REVENUE GENERATED FROM SUCH ACTIVITIES, IT IS SEEN THAT IT IS QUITE A GOOD COMPARABLE. MOREOVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT HAD ANY OBJECTION FOR INCLUDING THIS COMPARABLE FOR THE COMPARABILITY ANALYSIS. ACCO RDINGLY, THE SAID COMPANY HAS RIGHTLY BEEN INCLUDED IN THE LIST OF COMPARABLES; IV) IDC INDIA LTD. THIS COMPANY IS ALSO ENGAGED IN ADVISORY AND CONSULTANCY AND SERVICES FOR THE PURPOSE OF INVESTMENT MADE IN VARIOUS SECTORS. THIS COMPANY WAS ALSO FOUND T O BE A GOOD COMPARABLE IN CARLYLE INDIA ADVISORIES PVT. LTD. FOR RENDERING SIMILAR KIND OF FUNCTION. MOREOVER, THIS COMPANY HAS ALSO BEEN FOUND TO BE GOOD COMPARABLE BY THE TPO IN THE ASSESSMENT YEARS 2007 08 AND 2009 10 (X) II (V) INFORMED TECHNOLOGIES LT D. THIS COMPANY MOSTLY OFFERS RANGE OF DATA MANAGEMENT SERVICES TO THE FINANCIAL SECTOR IN U.S.A. IT COLLECTS AND ANALYSES DATA ON FINANCIAL FUNDAMENTALS, CORPORATE GOVERNANCE AND CAPITAL MARKET. IT OUTSOURCE SERVICES I.E., BPO SERVICES CONSISTING OF FINAN CIAL DATA BASE AND BACK OFFICE ACTIVITIES FOR RESEARCH AND ADVISORY REPORTS. THUS, THE DATA OUTSOURCING CHARGES ARE MOSTLY RELATED TO ANALYSING OF DATA BASED ON WHICH ADVISE IS GIVEN FOR THE INVESTMENT PURPOSE IN INDIA. MOREOVER, THIS COMPANY HAS BEEN ACCE PTED BY THE TPO IN THE YEAR 2009 10 ALSO. THUS, IT IS A GOOD COMPARABLE. V) KINETIC TRUST LTD. THIS COMPANY THOUGH REGISTERED AS A NBFC BUT IS MAINLY ENGAGED IN CORPORATE CONSULTANCY AND FINANCIAL SERVICES WHICH ALSO INCLUDE INVESTMENT ADVISORY SERVICE. M OREOVER, THIS COMPANY HAS ALSO BEEN ACCEPTED TO BE A GOOD COMPARABLE BY THE TPO IN THE ASSESSMENT YEAR 2009 10. THUS, THIS COMPANY HAS RIGHTLY BEEN INCLUDED BY THE ASSESSEE FOR COMPARABILITY ANALYSIS. 55. THUS, ALL THE SIX COMPANIES SHORTLISTED BY THE AS SESSEE ARE QUITE GOOD COMPARABLES LOOKING TO THE OVERALL FUNCTIONS AND ALSO THAT THE SAME HAVE BEEN FOUND TO BE SO BY THE DEPARTMENT IN THE PRECEDING AND SUCCEEDING YEARS. ACCORDINGLY, THE ENTIRE ITA NO. 968 /1 4 10 ADJUSTMENT MADE BY THE TPO CANNOT BE SUSTAINED AS THE MARGI N OF THE ASSESSEE @ 21% IS AT ARMS LENGTH LOOKING TO THE AVERAGE MARGIN OF THE SIX COMPARABLES. ACCORDINGLY, THE ADJUSTMENTS MADE BY THE TPO ARE DELETED. THUS, THE GROUND NO.2, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 11 . IT IS CLEAR FROM THE ABOV E ORDER OF TRIBUNAL IN ASSESSES OWN CASE THE COMPARABLES CHOSEN BY ASSESSEE FOR DETERMINING THE ARMS LENGTH PRICE WAS FOUND TO BE ACCEPTABLE IN A.Y. 2007 - 08 & 2008 - 09 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFUL LY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE DATED 30 - 8 - 2013, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF DRP FOR ISSUING THE IMPUGNED DIRECTIONS. 1 2 . IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED IN PART IN TERMS INDICATED HEREIN ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH JUNE, 201 4 . 27 TH JUNE ,2014 SD/ - SD/ - ( ) ( VIJAY PAL RAO ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27 /06 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//