Comparibility Analysis - Investment Advisory Industry (PART -1)
VAIBHAV BANSAL
Research Executive | CA- Finalist | ADIT (UK) - PIT | International Tax | Transfer Pricing | B.Com (A&F) | Ex- SRD | Authored articles in Taxsutra, Taxmann, CTC, Taxguru | 2 times Best Paper Presenter Award by ICAI
Hello Everyone,
In this edition of Case Laws Series of Tax-o-phile we are sharing Case Laws on Comparibility Analysis - Investment Advisory Industry (PART -1).
Following are the case laws:
The Court dismissed Revenue’s appeal and upheld Tribunal’s order wherein Motilal Oswal Investment Advisors (“MOIL”) was excluded as a comparable for assessee engaged in rendering non-binding investment advisory services relying on its decision in case of Carlyle India Pvt. Ltd wherein it was held that MOIL was declaring a solitary stream of operating income under the head “advisory fee” but engaged in diversified activities without segmental information in respect of each of them. It held that that the factual finding of the Tribunal was not perverse and it was in full agreement with respect to the Tribunal’s findings that MOIL was engaged in diversified activities and no segmental information was available in respect of the activites and thus, no substantial question of law arose.
2. Pr.CIT vs. Arisaig Partner India Pvt Ltd [TS-1115-HC-2018(BOM)-TP]] ITA No.609 of 2016 dated 10.10.2018
The Court dismissed Revenue's appeal and upheld ITAT’s order excluding Motilal Oswal Investment Advisors Pvt Ltd [“MOIL”] as comparable in case of assessee engaged in providing investment advisory services to AE, by relying on HC ruling of NVP Venture wherein it held that Tribunal’s findings that MOIL was declaring a solitary stream of operating income under the head “advisory fee” but engaged in diversified activities without segmental information in respect of each of them and thus could not be compared with a non-binding investment advisory company were not perverse. Further, the Court observed that the findings of Tribunal had not been shown to be perverse nor vitiated by error of law apparent on face of the record.
3. CIT v UBS Securities India Pvt Ltd – TS-951-HC-2016 (Bom) – TP
The Court admitted the Revenue’s appeal against the order of the Tribunal wherein the Tribunal had excluded certain companies as comparable on the ground that they were not functionally comparable with the assessee who was engaged in equity broking and investment banking and marketing support services in relation to investment banking. The questions urged before the Court were as follows (i) whether research and information services segment of comparables could be compared to advisory services and (ii) whether the Tribunal was justified in not considering the Segmental financial and advisory services segment as comparable to the assesse.
4. CIT v Temasek Holdings Advisors India Pvt Ltd – TS-928-HC-2016 (Bom) – TP
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The Court, relying on the decision of the High Court in CIT v Carlyle India Advisors Ltd and CIT v General Atlantic P Ltd, dismissed the appeal of the Revenue filed against the order of the Tribunal, wherein the Tribunal held that broking companies, asset management companies and merchant banking companies were not comparable with the assessee, who was engaged in providing investment advisory services.
5. Avenue Asia Advisors Pvt. Limited vs. DCIT-TS-737-HC-2017(DEL)-TP ITA No. 350 / 2016 dated 18.09.2017
Where the Tribunal had excluded 3 comparables on the ground that they were engaged in debt syndication, debt financing, IPO advisory etc, the Court set aside Tribunal’s order on comparable selection for benchmarking the international transactions of the assessee providing non-binding investment advisory services. It noted that the Tribunal had gone by usage of terms such as debt syndication, debt financing, IPO advisory etc appearing in annual reports of the 3 contested comparables (merchant bankers) to be functionally dissimilar. Observing that the services of the assessee could not be termed as that of merchant banking though there may be some overlap in the advisory segment of the services provided by merchant bankers, it restored the comparability of 3 companies back to CIT(A).
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