ITXA1377_17.odt IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1377 OF 2017 Principal Commissioner of Income Tax-14 Appellant Vs. AGM India Advisors Pvt. Ltd. Respondent Mr. Suresh Kumar with Ms Mohini Chougule for Appellant. Mr. Madhur Agarwal with Mr. Upendra Lokegaonkar i/b. M/s. Mint and Confreres for Respondent. CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : MARCH 11, 2020 P.C.: Heard Mr. Suresh Kumar, learned standing counsel, Revenue for appellant and Mr. Madhur Agarwal, learned counsel for respondent / assessee. 2. By filing this appeal under Section 260-A of Inome Tax Act, 1961 (briefly 'Act' hereinafter), Revenue as appellant has assailed common order dated 04.01.2017 passed by Income Tax Appellate Tribunal, 'K' Bench, Mumbai ('Tribunal' for short) in Income Tax Appeal No.537/Mumbai/2016 for assessment year 2011-12 filed by assessee and Income Tax (TP) No.199/Mumbai/2016 for assessment year 2011-12 filed by Revenue. 3. appeal has been preferred by Revenue proposing following questions as substantial questions of law:- I. Whether on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to exclude case of Motilal Oswal Investment Advisors Pvt. Ltd. as comparable, basing its decision on decision in case of Carlyle Advisors Pvt. Ltd., in which said comparable was not even discussed? 1/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt I(a). Whether on facts and in circumstances of case and in law, Tribunal was correct in directing exclusion of comparable M/s. Motilal Oswal Investment Advisors Pvt. Ltd. holding that same is engaged in M & advisory services and that these activities are far wider and much different from investment advisory services carried on by assessee, when it has accepted in same year, inclusion of ICRA Management Services, which is also engaged in M & advisory services, as comparable? II. Whether on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to include case of ICRA Management Consulting Services Ltd. as comparable without appreciating fact that said company is engaged primarily in technical and operational consultancy across fields as against financial consultancy and hence cannot be taken as comparable to assessee which is engaged in investment advisory services? II(a). Whether without prejudice to ground I(a) taken above, on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to include case of ICRA Management Consulting Services Ltd. as comparable, based on order in case of Temasek Holdings for assessment year 2010-11, in which Tribunal had clearly stated that said company was engaged in M&A advisory services, but this does not preclude it from being taken as comparable for investment advisory cases, while excluding Motilal Oswal Investment Advisors Pvt. Ltd. on same basis? II(b). Whether on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to include case of ICRA Management Consulting Services Ltd. as comparable for investment advisory services, without considering decision of Hon'ble Bombay High Court in case of Lloyd TSB Global Services P Limited for assessment year 2008-09 (ITA No.453 of 2014), in which said comparable has been held to be business support service comparable? III. Whether on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to include case of IDC (India) Ltd. as comparable, without considering submission of Revenue recorded in para 4.1 of impugned order that said comparable earns business convention income apart from market research and management consultancy, but has not provided any separate segmental results for these varying income streams? 2/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt III(a). Whether on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to include case of IDC (India) Ltd. as comparable, without considering functional sketch of same company given by same Tribunal Bench in case of Tevapharma India (P) Ltd. (18 taxmann.com 148) from which it is clear that comparable is engaged in activities significantly different from investment advisory functions undertaken by assessee? III(b). Whether on facts and in circumstances of case and in law, Tribunal was correct in directing Assessing Officer / Transfer Pricing Officer to include case of IDC (India) Ltd. as comparable, ignoring fact that said company engages in use of intangibles which is not done by assessee and hence cannot be taken as fit comparable as per decisions in Motorolla Solutions India P Ltd. (48 taxmann.com 248), MSC Software (80 taxmann.com 55) and 24/7 Customer.Com (28 taxmann.com 258)? 4. As would be evident from above, first two questions relate to exclusion of Motilal Oswal Investment Advisors Pvt. Ltd. as comparable; question numbers II to II(b) relate to inclusion of ICRA Management Consulting Services Ltd. as comparable; again question numbers III to III(b) relate to inclusion of IDC (India) Ltd. as comparable. 5. above questions have been raised on basis of following factual narrative. 6. Respondent is assessee under Act, its status being that of resident company. It is engaged in business of providing non-binding investment advisory services. assessment year under consideration is 2011-12. 7. Assessee (also referred to as 'respondent') filed its return of income for assessment year under consideration on 25.11.2011 declaring total income of Rs.4,23,83,300.00. case was selected for scrutiny whereafter various statutory notices were issued. Assessing Officer made reference under Section 92CA(1) of Act to Transfer Pricing Officer for computation of Arm's Length Price 3/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt in relation to international transactions. 8. Deputy Commissioner of Income Tax, Transfer Pricing Officer - 1(1)(1), Mumbai acting as Transfer Pricing Officer passed order dated 27.01.2015 under Section 92CA(3) of Act. It was noticed that assessee had entered into various international transactions with its Associated Enterprise to provide investment advisory services. It may be mentioned that assessee is subsidiary of Apollo Mauritius which is company incorporated in Mauritius. role of assessee is to provide non-binding investment advisory services to Apollo Mauritius, its Associated Enterprise. Assessee selected Transactional Net Margin Method as most appropriate method for determining Arm's Length Price and submitted set of seven companies that were considered to be broadly comparable to functional profile of assessee. This included ICRA Management Consulting Services Ltd. (briefly 'ICRA' hereinafter) and IDC India Ltd. (briefly 'IDC' hereinafter). While assessee was asked to explain as to how these companies were functionally similar, it was also provided with list of four companies including Motilal Oswal Investment Advisors Pvt. Ltd. (briefly 'Motilal Oswal' hereinafter) and was asked to show cause as to why those companies should not be considered as comparables. comparables submitted by assessee, including ICRA and IDC, were rejected by Transfer Pricing Officer on ground that those companies were functionally dissimilar to that of assessee. On other hand, three out of four companies suggested by Transfer Pricing Officer, including Motilal Oswal, were accepted as comparables. Thereafter Arm's Length Price was computed. On basis of such computation, Transfer Pricing Officer worked out difference of Rs.8,43,43,070.00 which was treated as transfer pricing adjustment under Section 92CA of Act for said assessment year. 9. Based on above order passed by Transfer Pricing Officer, Assessing Offier passed draft assessment order dated 20.03.2015 under Section 4/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt 143(3) read with Section 144-C(1) of Act adding quantum of transfer pricing adjustment to total income of assessee. It was mentioned therein that if assessee desired, it could file objection before Dispute Resolution Panel within stipulated period failing which final assessment order would be passed. 10. Respondent filed objection to draft assessment order before Dispute Resolution Panel-1, Mumbai which heard both assessee and Assessing Officer. Regarding exclusion of ICRA as comparable, Dispute Resolution Panel agreed with views of Transfer Pricing Officer. It was held that activities performed by ICRA being functionally different from assessee it could not be considered as good comparable. As regards IDC, Dispute Resolution Panel also took similar view affirming finding of Transfer Pricing Officer. In so far Motilal Oswal is concerned, Dispute Resolution Panel followed earlier decisions of Tribunal and directed Assessing Officer to exclude Motilal Oswal from list of comparables. Accordingly order dated 02.11.2015 was passed by Dispute Resolution Panel directing Assessing Offier to give effect to its directions in accordance with provisions of Section 144C(13) of Act. 11. Following same, Assessing Officer referred matter to Transfer Pricing Officer to give effect to directions of Dispute Resolution Panel. After order was passed by Transfer Pricing Officer on 23.12.2015, quantum of transfer pricing adjustment was revised to Rs.6,67,12,196.00 which was added to income of assessee by Assessing Officer vide final order of assessment dated 30.12.2015. 12. Against aforesaid order, assessee preferred appeal before Tribunal which was registered as Income Tax Appeal No.537/Mumbai/2016. Assessing Officer also filed cross appeal being Income Tax (TP) No.199/Mumbai/2016. Both 5/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt appeals were heard together by Tribunal and disposed off by common order dated 04.01.2017. 13. Tribunal first took up appeal of Assessing Officer. One of grounds of challenge in appeal was exclusion of Motilal Oswal from list of comparables by Dispute Resolution Panel. Tribunal referred to its decision for earlier year wherein it was held that Motilal Oswal could not be compared with assessee who is engaged in providing investment advisory services. Tribunal extensively referred to its earlier decision and came to definite conclusion that job profile of Motilal Oswal was different as compared to activities undertaken by assessee. While assessee was rendering investment advisory services specifically related to real estate business, Motilal Oswal was merchant banker. Therefore, Tribunal held that Motilal Oswal was liable to be excluded from final set of comparables. 14. Tribunal also considered cases of ICRA and IDC which were projected as comparables by assessee but excluded by Dispute Resolution Panel. Tribunal referred to one of its earlier decisions where ICRA was accepted as comparable considering its broader functional comparability. Tribunal also referred to one of its orders where IDC was accepted as valid comparable. In so far ICRA is concerned it was found that Tribunal had consistently held all along that ICRA was valid comparable for investment advisory company. Regarding IDC it was found by Tribunal that it was not product company but was research company primarily dealing in research and survey services. It was also found that operational efficiency, future outlook etc. of IDC were similar to that of functions and activities performed by assessee for rendering investment advisory services. Considering above, Tribunal held that ICRA and IDC should be included in final list of valid comparables. Accordingly appeal of Assessing Officer was dismissed and appeal filed by assessee was allowed with consequential deletion of adjustment made by Assessing 6/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt Officer. 15. Aggrieved, Revenue is in appeal before us raising above questions for consideration. 16. Submissions made by learned counsel for parties have been duly considered. 17. As would be evident from above, grievance of appellant i.e., Revenue primarily revolves around exclusion of Motilal Oswal from list of valid comparables and inclusion of ICRA and IDC as valid comparables. While in case of Motilal Oswal exclusion was directed by Dispute Resolution Panel which decision was approved or rather affirmed by Tribunal, in case of ICRA and IDC Tribunal had interfered with order of Dipute Resolution Panel by directing their inclusion in final set of valid comparables. 18. In case of Motilal Oswal, Tribunal examined in detail job profile and activities undertaken by it viz-a-viz that of assessee. finding of fact was rendered by Tribunal that while assessee was rendering investment advisory services more particularly with respect to real estate business, Motilal Oswal was merchant banker. Therefore, Tribunal held that Motilal Oswal was liable to be excluded from final set of comparables being functionally dissimilar to that of assessee. 19. Regarding ICRA, Tribunal found that it had consistently held that ICRA was valid comparable for investment advisory company. It was held that ICRA was providing consultancy services in diverse areas and its core competence was mainly advisory services in various industries. It was held to be purely advisory service rendering company. Therefore, Tribunal following rule of consistency held that ICRA should be included in final list of valid 7/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt comparables. 20. In so far IDC is concerned, categorical finding was rendered by Tribunal that it was not product company, rather it was research company primarily dealing in research and survey services similar to that of functions and activities performed by assessee while rendering investment advisory services. 21. Thus from above it is seen that Tribunal after exhaustive analysis came to conclusion that Motilal Oswal was not functionally similar to that of assessee whereas ICRA and IDC were found to be functionally similar to that of assessee. Consequently, while Motilal Oswal was excluded, ICRA and IDC were included in final set of comparables. 22. Whether two entities are functionally similar or not and consequently whether one should be treated as comparable of other is question of fact. answer arrived at to such question would be finding of fact. Unless such answer is vitiated by perversity, no substantial question of law can be said to arise therefrom. In context of international transactions and resultant transfer pricing analysis to determine Arm's Length Price, Karnataka High Court in case of Principal Commisioner of Income Tax Vs. M/s. Softbrands India Pvt. Ltd., ITA Nos.536 and 537 of 2015, decided on 25.06.2018, held that it is not open to either assessee or Revenue to invoke jurisdiction of High Court under Section 260-A of Act merely because Tribunal comes to reverse or modify findings given by Transfer Pricing Officer and / or by Dispute Resolution Panel leaving out certain comparables or adding certain comparables for determining Arm's Length Price in hands of assessee. Unless perversity in finding(s) of Tribunal is established, appeal under Section 260-A of Act should not be entertained as no substantial question of law can be said to arise therefrom. 8/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: ITXA1377_17.odt 23. Recently this Court in Income Tax Appeal No.1125 of 2017, Principal Commissioner of Income Tax Vs. M/s. Eight Roads Investment Pvt. Ltd., decided on 27.02.2020, declined to entertain appeal by Revenue under Section 260- of Act raising similar questions of exclusion and inclusion of comparables. 24. Therefore, on thorough consideration, we are of view that no substantial question of law arises from impugned order of Tribunal. Appeal filed by Revenue is devoid of merit and is accordingly dismissed. However, there shall be no order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) Minal Parab 9/9 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:19 ::: Principal Commissioner of Income-tax-14 v. AGM India Advisors Pvt. Ltd