Comparibility Analysis - Investment Advisory Industry (PART - 3)

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In this edition of Case Laws Series of?Tax-o-phile ?we are sharing Case Laws on?Comparibility Analysis - Investment Advisory Industry (PART - 3).

Part 1 Link:?Click Here

Part 2 Link: Click Here

Following are the case laws:

1. TPG Capital India Private Limited vs Dy.CIT [TS-1321-ITAT-2018(Mum)-TP]

The Tribunal held that assessee engaged in provision of non-binding investment advisory services to its AE could be compared to ICRA Management Consulting Services Ltd relying on by coordinate bench decision in Temasek and others wherein it was held that it was offering consultation services in the area of strategy, risk management, operations, improvement, regulatory economics and translations advisory and entire revenue was generated from consultation fee and thus was providing consultation to various types of industries through investment advisory. Also, in assessee’s own case in earlier year wherein the Tribunal had clearly stated that the said comparable was functionally comparable and rejected TPO’s reasons for exclusion on basis of being a loss-making company and significant RPT for being factually incorrect. (It was not a loss-making company and had RPT of 14%).

2. Mount Kellett Capital Management India Pvt. Ltd. vs Dy.CIT [TS-967-ITAT-2018(Mum)-TP] IT (TP)A No.1552/Mum/2016

The Tribunal for AY 2011-12 held that assessee engaged in provision of non-binding investment advisory services to its AE could not be compared to:

? Ladderup Corp. Advisory Pvt. Ltd. as it was a category-I merchant banker registered with SEBI and was functionally dissimilar. [It relied on the decision of General Atlantic (Pvt.) Ltd. in view of factual findings being the same for AY 2011-12.]

? Primary Real Estate Advisors Pvt. Ltd as it was engaged in real estate investment and was servicing landowners, overseas and domestic developers and hence the functional profile was different vis-à-vis assessee.

Further, the Tribunal included Cyber Media Research Ltd. (formerly known as IDC (India) Ltd) as a comparable and rejected the reliance placed by Revenue on the case of Teva Pharma (P.) Ltd wherein the comparable was excluded in case of assessee engaged in like activities since it was for the assessment year AY 2007-08. Further the Tribunal also dissented with the case of Actis Advisors (P.) Ltd relied on the by the Revenue noting it was on the wrong footing since the functional profile was obtained from the website link of its holding company which was discussed in the case of TPG Capital India (P.) Ltd. (The TPO had rejected the above comparable on the ground that it was engaged in market research and survey services not comparable to the assessee.)

3. Sparkles Dhandho Advisors Pvt. Ltd v ITO - TS-18-ITAT-2018(Mum)-TP - I.T.A./1047/Mum/2015

The Tribunal held that the assessee engaged in providing non-binding investment advisory services could not be compared to ICRA Online which was engaged in providing e.knowledge Process Outsourcing and information Services and Technology Solutions which was functionally different as compared to the activities of the assessee.

4. Temasek Holdings Advisors India Private Limited v ITO - TS-17-ITAT-2018(Mum)-TP - ITA No. 1429/Mum/2017

The Tribunal held that the assessee engaged in providing non-binding investment advisory services (‘IAS’) to AE could not be compared with Ladderup Corporate Advisory as the said comparable was engaged in providing merchant banking services which was functionally dissimilar.

Following its order in the case of the assessee for the earlier assessment year, it held that ICRA Management Consulting and Informed Technologies were to be considered as comparable.

Vis-à-vis CRISIL and ICRA Techno Analytics, it remanded the matter to the file of AO/TPO considering that that no reasonable opportunity of being heard had been afforded to the assessee by DRP on these companies and also observed that i) CRISIL ought to be excluded if found to have RPT of more than 25% and ii) ICRA Techno Analytics ought to be excluded if verified to be a software development service provider.

5. Wells Fargo Real Estate Advisors Pvt. Ltd. (Previously known as Wachovia Management Services Private Limited) vs. DCIT - TS-66-ITAT-2018(Mum)-TP - /I.T.A./1520/Mum/2016

The Tribunal, relying on the decision of the co-ordinate bench in Temasek Holding Advisors India [477/Mum/2016] held that the assessee engaged in providing non-binding investment advisory services could not be compared with:

? Motilal Oswal Private Equity Advisers India Private Ltd as the company was engaged in investment in portfolio companies, managing the ‘India Business Excellence Fund I’ and ‘India Reality Excellence Fund I’ and also had multiple sectors of operations for which no segmental information was available.

? Ladderup Corporate Advisory Private Ltd. as it was engaged in merchant banking /investment banking services.

Further, it held that the TPO erred in excluding i) ICRA Management Consulting Services Ltd merely on the ground that it had fluctuating profit margins without appreciating that the company was accepted to be comparable in the prior assessment year and ii) Informed Technologies Ltd on the ground that it had declining turnover without appreciating that the company was accepted to be comparable in the prior years. Vis-à-vis Informed Technologies, it held that declining turnover was not relevant for service companies as their margins were not dependent on the scale of operations.

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