Income Tax Appellate Tribunal - Mumbai
Sbi Macquarie Infrastructure ... vs Dcit 14(3)(2), Mumbai on 16 November, 2018
SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 1 ITA No. 324/Mum/2016, AY. 2011-12. IN THE INCOME TAX APPELLATE TRIBUNAL "J" BENCH, MUMBAI BEFORE SHRI G.S. PANNU, VP AND SHRI RAVISH SOOD, JM ITA No. 324/Mum/2016 ( िनधा रण वष / Assessment Year: 2011-12) SBI Macquarie DCIT 14(3)(2) Infrastructure Management R.No. 475, 4th Floor, Private Limited, Aayakar Bhavan, M.K. Road, 92 Level 9, 2 North Avenue बनाम/ Mumbai - 400020.
Maker Maxity, Bandra Vs.
Kurla Complex,
Mumbai - 400051.
थायी ले खा सं . / जीआइआर सं . /PAN No. AAECP7936K
(अपीलाथ /Appellant) : (
यथ / Respondent)
अपीलाथ क
ओर से / Appellant by : Shri Nishant Thakkar /
Ms. Jasmin Amalsadwala
यथ क
ओर से/Respondent by : Ms. Nilu Jaggi, D.R
सुनवाई क
तारीख / : 15.11.2018
Date of Hearing
घोषणा क
तारीख / : 16.11.2018
Date of Pronouncement
आदेश / O R D E R
PER G.S. PANNU, VICE PRESIDENT:
The present appeal is directed against an order passed by the Assessing Officer u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (in short 'the Act') dated 18.12.2015, which has been passed in terms of the Directions of the Dispute Resolution Panel - 2, Mumbai u/s 144C(5) of the Act dated 30.10.2015.
SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 2 ITA No. 324/Mum/2016, AY. 2011-12.
2. The Grounds of appeal raised by the assessee read as under:
"1. In re-computing the arm's length price of the international transaction undertaken by the appellant relating to the provision of non-binding investment advisory services and enhancing the cost plus mark-up from 17.41% to 52.42%, thereby making an upward transfer pricing adjustment of Rs. 6,47,24,374/-
2. The Ld. A.O erred in determining the arm's length price of the international transaction undertaken by the Appellant relating to provision of non-binding investment advisory services on account of the following;
a) Rejecting all the companies selected as comparables by the Appellant in the transfer pricing documentation on the basis that they are not comparable.
b) Rejecting the use of contemporaneous and multiple year date available for computing the ALP as on the date of filing of return of income and relying only on the singly year data (i.e for the year ended 31 March 2011) for the purpose of determining the ALP
c) Cherry picking of an additional company as comparable without following a scientific search prices, namely, Ladderup Corporate Advisory Pvt Ltd. which is functionally not comparable to the Appellant's non-binding investment advisory services;
d) Without prejudice to the above, not providing a detailed search process undertaken in identifying the company which has been alleged to be comparable to the appellant.
e) Not granting the Appellant the benefit of working capital adjustment and adjustment or difference to risk profile.
3. The Ld. A.O erred in incorrectly computing the interest levied under Section 234D of the Act.
4. The Ld. AO erred in incorrectly computing interest receivable under section 244A of the Act.
3. As a perusal of the aforesaid Grounds of appeal reveal, although multiple Grounds have been raised, but the solitary issue is an addition of Rs. 6,47,24,374/- made by the Assessing Officer while determining the Arm's Length Price (in short 'the ALP') of the international transactions entered by the assessee with its associate enterprise. In order to appreciate the controversy brief background of the case can be summarised as follows.
SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 3 ITA No. 324/Mum/2016, AY. 2011-12.
4. The assessee is a company incorporated under the Companies Act, 1956 and is a joint venture between Mecquarie India Infrastructure Management Holdings Pte. Limited, State Bank of India and International Finance Corporation. The assessee is engaged in the business of rendering non-binding investment advisory services to its associated enterprises in respect of unlisted Indian equities. The services provided, inter-alia, include identifying and analysing potential investment opportunities; evaluating and making recommendations to the associated enterprise with respect to investment opportunities; making recommendations to the associate enterprise with respect to specified investments; and, any other advisory services as may be required from time to time. For the year under consideration, the assessee had received a consideration of Rs. 21,70,60,516/- for providing such-like services to its associated enterprise, which constituted an 'international transaction' within the meaning of Sec. 92B of the Act. The Assessing Officer referred the matter for determination of ALP of such 'international transaction' to the Transfer Pricing Officer (in short 'the TPO') in terms of Sec. 92C(1) of the Act. The TPO vide an order dated 27.01.2015 passed u/s 92CA(3) of the Act has worked out an adjustment of Rs 9,22,89,891/- that was required to be made in order to bring the stated value of the international transaction to the level of ALP. The Assessing Officer passed a draft assessment order proposing the aforesaid addition to the returned income, against which objection was raised by the assessee before the Dispute Resolution Panel i.e DRP. The DRP partly accepted the objections of the assessee and as per Directions dated 30.10.2015, in terms of which the Assessing Officer has passed the final assessment order u/s 143(3) r.w.s 143C(13) of the Act dated 18.12.2015, the transfer pricing adjustment has been re-determined SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 4 ITA No. 324/Mum/2016, AY. 2011-12. at Rs. 6,47,24,374/-, which is the subject matter of the appeal before us.
5. In the above background, the Ld. AR for the assessee has made two specific pleas-firstly, that the income-tax authorities have wrongly included M/s Ladderup Corporate Advisory Private Limited as a comparable as the same is functionally incomparable. Secondly, that the concerns selected by the assessee as comparables has been wrongly excluded by the income tax authorities, such concerns being:
(1) ICRA Management Consulting Services Limited; (2) ICRA Online Limited;
(3) IDC (India) Limited;
(4) Informed Technologies Limited;
(5) Integrated Capital Services Limited.
6. In order to appreciate the pleas of the Ld. Representative, it would suffice to note that there is no difference between assessee and the Revenue so far as the selection of the method for benchmarking of the international transaction is concerned. The assessee as well as the Revenue have adopted the Transactional Net Marginal Method (TNMM) as the most appropriate method for benchmarking the international transaction of provision of non-binding investment advisory services. There is also no dispute so far as calculation of assessee's operating margin on Cost is concerned i.e 17.41%. Though in the Transfer Pricing Study assessee had selected a set of comparables and determined their margins based on multiple year's financial data but, during the proceedings before the TPO, the assessee furnished revised margins of such comparables based on their single year's financial data. This aspect is also not dispute. Before the TPO, assessee asserted that the following five concerns SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 5 ITA No. 324/Mum/2016, AY. 2011-12. were good comparables whose arithmetic mean of margin based on the single years financial date came to 13.24%.
Margins of Assessee's Comparables (Single year data) Name of the comparable company Arithmetic mean ICRA Management Consulting services Limited 15.90% ICRA Online Limited 22.32% IDC (India) Limited 10.33% Informed Technologies 11.70% Integrated Capital Services Limited 5.95% Arithmetic Mean 13.24
7. Based on the aforesaid analysis, assessee asserted that the arithmetic mean of the comparables was within the +/- 5% variation and thus no adjustment was required to be made to the stated value of the international transactions. However, the TPO rejected the concerns selected by the assessee as comparables an instead adopted two concerns, namely (1) M/s Ladderup Corporate Advisory Private Limited - 52.42%; and, (2) Mothilal Investment Oswal Investment Advisory Pvt Ltd., - 82.23% as comparables, whose arithmetic mean was worked out at 57.33%. Since then, the DRP has accepted the plea of the assessee for exclusion of Motilal Oswal Investment Advisory Pvt Ltd, therefore we do not deal any further on this aspect.
8. Before us, the Ld. AR for the assessee pointed out that M/s Ladderup Corporate Advisory Private Limited is functionally in- comparable to the activities rendered by the assessee to its associated enterprise and therefore the same is not a good comparable. In this context, he has referred to the decision of the Mumbai bench of the Tribunal in the case of Temasek Holdings Advisors India (P) Ltd., [2017] 87 taxmann.com 168, wherein in the case of a similarly placed SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 6 ITA No. 324/Mum/2016, AY. 2011-12. assessee, M/s Ladderup Corporate Advisory Private Limited has not been found to be a good comparable. It was also pointed out that subsequently for the very same assessment year the decision of the Tribunal in the case Temasek Holdings Advisors (I) P. Ltd., (supra) was also followed and applied by the Tribunal in the case of DCIT Vs. General Atlantic (P.) Ltd., [2018] 91 taxmann.com 406 (Mumbai), wherein also the Bench was considering an assessee who was rendering non-binding investment advisory services to its associated enterprise.
9. On the aspect of exclusion of M/s Ladderup Corporate Advisory Private Limited, the Ld. DR appearing for the Revenue has not disputed the factual matrix brought out by the Ld. Representative regarding the precedents, but reiterated the stand of the TPO and the DRP. According to her, the relevant discussion in the order of the TPO as well as that of the DRP notes that the said concern is receiving income by way of advisory fee and therefore it was a good comparable. Our attention has also been invited to the discussion in para 6.1.12 of the order of the TPO to say that the Annual Accounts of the said concern also mention that it was operating in one business segment, viz financial and management consultancy. It was therefore contended by the Ld. DR that the said concern was not rendering general consultancy services but it was providing financial consultancy, which is comparable to the instant services rendered by the assessee to its associated enterprise.
10. We have considered the rival submissions with regard to the exclusion of M/s Ladderup Corporate Advisory Private Limited, and find that for the very assessment year in question, the Tribunal has already considered the comparability of such concern viz-a-viz the activity of rendering non-binding investment advisory services. For SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 7 ITA No. 324/Mum/2016, AY. 2011-12. A.Y 2011-12, which is also the year before us, the Tribunal case of Temasek Holdings Advisors (I) P. Ltd. (supra), considered the comparability of M/s Ladderup Corporate Advisory Private Limited to a concern which was rendering non-binding investment advisory services, and the relevant discussion in the order of the Tribunal reads as under:
12. We now advert to the new comparables which had been included by the TPO in the final list of comparables. The ld. A.R strongly assailing the inclusion of M/s. Ladderup Corporate Advisory Private Limited as a comparable by the TPO, which thereafter had been upheld by the DRP, therein submitted that the aforesaid company was functionally not comparable and had wrongly been included by the TPO in the final set of comparables. The ld. A.R drew our attention to the 'Profit and loss account' of the said comparable (Page 322 of APB) and the 'Schedule' forming part of the same (Page 329), which revealed that the main source of the said comparable was by way of 'Financial and Management Consultancy Fees', and thus was entirely different from the activities of the assessee company which was not into the business of managing anybody's finances. The ld.
A.R further drew our attention to the 'Cash flow' statement of the aforesaid comparable for the year under consideration (Page 323), 'Schedule 16' which formed part of the accounts for the year (Page 330) and 'Segment information' (Page 334), which therein did go to fortify the claim of the assessee that the aforesaid comparable was into 'Financial and Management Consultancy'. The ld. A.R further referring to the 'Companies general business profile' (Page 338) therein submitted that the aforesaid comaparable, viz. M/s. Ladderup Corporate Advisory Private Limited, unlike the assessee company was engaged in the business of 'Financial and Management Consultancy'. The ld. A.R further drew our attention to the information about the aforesaid comparable as had been downloaded on 12.03.2014 from its aforesaid site, viz. www.ladderup.com/about- ladderup.htm (Page 340), which revealed that the said comparable, viz. Ladderup Corporate Advisory Private Limited was formed in 2007 as a subsidiary company of M/s. Ladderup Finance Limited, and was engaged in the business of Investment banking. It was submitted by the ld. A.R that the aforesaid downloaded extract revealed that the said comparable was formed as a separate group entity offering Investment banking, Corporate finance and Corporate advisory services. Thus in the backdrop of the aforesaid factual matrix, it was submitted by the ld. A.R that it stood revealed beyond any scope of doubt that the aforesaid comparable, viz. M/s. Ladderup Corporate Advisory Private Limited was into 'Investment SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 8 ITA No. 324/Mum/2016, AY. 2011-12. banking business', which by no means could be compared with the 'Investment advisory business' as that of the assessee company. The ld. A.R relying on the order of the Tribunal so passed in the case of General Atlantic (P) Limited Vs. DCIT, Circle 3(1), Mumbai (2013) 32 Taxmann.com 178 (Mumbai Trib) (Page 85-97 of APB), which thereafter had been affirmed by the Hon'ble High Court of Bombay in the case of CIT-3, Mumbai Vs. General Atlantic (P) limited. (2016) 68 taxmann.com 88 (Page 98-101 of APB), therein submitted that pursuant to the aforesaid judgment of the Hon'ble jurisdictional High Court, the issue that an 'Investment advisor' cannot be compared to a 'Merchant banker' is no more res-integra. It was thus submitted by the Ld. A.R that now when the aforesaid comparable, viz. M/s Ladderup Corporate Advisory Private limited was functionally different as in comparison to the assessee company, therefore, it could by no means be adopted as a comparable and thus was liable to be excluded from the final list of the comparables. That on the other hand the ld. D.R submitted that as per the 'Annual report' of the aforesaid comparable, the latter was in the business of corporate advisory services and had received advisory fees. It was submitted by the ld. D.R that the aforesaid comparable, viz. Ladderup Corporate Advisory Services Limited had received merchant banking registration in the month of July, 2010 from SEBI, but no actual income was received from the said activity. Thus in the backdrop of the aforesaid facts it was submitted by the ld. D.R that the aforesaid comparable was deriving income only from advisory services, and as such if the functioning of the assessee company were pitted as against that of the aforesaid comparable, it stood revealed that the said comparable was providing advisory functions on restructuring like the assessee, as well as providing advisory services on acquisition, i.e in the manner the assessee company helped its AE in carrying out acquisitions. It was thus submitted by the ld. D.R that the functions of the aforesaid comparable, viz. Ladderup Corporate Advisory Services Limited were similar to that of the assessee company, and as such after thorough vetting and verification of the said functional comparability the same had been included in the final set of comparables by the TPO. The Ld. D.R in support of his aforesaid contention therein placed on record the copy of the order passed by a coordinate bench of the Tribunal, i.e ITAT, Delhi, in the case of Avenue Asia Advisors Private limited Vs. DCIT, Circle 2(1), New Delhi, A.Y. 2009- 10, wherein the Tribunal referring to the aforesaid comparable, viz. Ladderup Corporate Advisory Services Limited, had therein held that though the aforesaid company was planning to expand its wings by venturing into merchant banking activities and broaden its horizon, which revealed that during the year it was not engaged in merchant banking activities. It was thus in the backdrop of the aforesaid facts submitted by the ld. D.R that the aforesaid comparable was not engaged in merchant SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 9 ITA No. 324/Mum/2016, AY. 2011-12. banking activities during the year under consideration and had rightly been included by the TPO in the final list of the comparables.
11. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material placed on record before us. We have given a thoughtful consideration to the facts of the case and find that the aforesaid comparable, viz. Ladderup Corporate Advisory Pvt. Limited is registered as a category one merchant banking with SEBI and is engaged in rendering merchant banking services w.e.f July 2010, which factual position stands duly substantiated from the perusal of the web portal extracts of the aforesaid company. We further find that as per the 'Annual report' the aforesaid comparable is engaged in only one segment, which includes merchant banking. We thus in the backdrop of the very fact that the aforesaid comparable is engaged in the merchant banking/investment banking and other similar activities, are of the considered view that the same cannot be considered as functionally comparable to the assessee company which is engaged in the business of rendering non binding investment advisory services. We are further not impressed by the averrment of the Ld. D.R who by referring to the observations recorded by the coordinate bench of the Tribunal in the case of Avenue Asia (supra) had therein averred that though the aforesaid comparable was planning to expand its wings by venturing into merchant banking activities and broaden its horizon, which revealed that during the year it was not engaged in merchant banking activities, had therein tried to drive home his contention that the aforesaid comparable was not involved in merchant banking activities. We are of the considered view that the aforesaid observations of the coordinate bench of the Tribunal were recorded in context of A.Y. 2009-10 involved in the case before them, while for the year before us in the present appeal is A.Y. 2011-12. Thus the case law relied upon by the Ld. D.R is distinguishable on facts, and as such for the foregoing reason would be of no assistance to him to support his aforesaid contention. That in the backdrop of the aforesaid facts as had been brought to our notice, and as such are irrebuttably supported by the records produced before us, we hold a strong conviction that now when the aforesaid comparable, viz. Ladder up Corporate Advisory Pvt. Ltd. is engaged in Merchant banking/Investment banking and other similar activities during the year under consideration, therefore, the same cannot be considered as functionally comparable to the assessee company which is engaged in rendering non binding investment advisory services. We thus are persuaded to subscribe to the contention of the ld. A.R that the aforesaid comparable, viz. Ladder up Corporate Advisory Pvt. Ltd. is functionally incomparable to the assessee company and had wrongly been included by the AO/TPO in the final list of the comparables. We thus in light of our aforesaid observations direct the AO/TPO to exclude the SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 10 ITA No. 324/Mum/2016, AY. 2011-12. aforesaid comparable, viz. Ladderup Corporate Advisory Pvt. Ltd. from the final list of comparables.
11. The aforesaid discussion would show that the Tribunal has taken into consideration the arguments of the Revenue, which are similar to the case made out by the TPO in the instant case. Subsequently, even in the case of M/s General Atlantic Pvt Ltd (supra) for A.Y 2011-12 the Tribunal reiterated its earlier stand and held that M/s Ladderup Corporate Advisory Private Limited is not comparable to a concern which is rendering non-binding investment advisory services.
12. In view of the aforesaid precedents which clearly hold the field as they have been rendered under similar circumstances, we find that the action of the income-tax authorities of including M/s Ladderup Corporate Advisory Private Limited in the set of comparables is untenable. We hold so.
13. The next point sought to be made out by the assessee is for inclusion of ICRA Online Ltd in the final set of comparables. Pertinently, the said concern has been excluded by the income-tax authorities on the ground that the same is functionally incomparable as it provides consultancy services pertaining to software services, KPO services, ITES services, etc. Though the Ld. Representative has pleaded for its inclusion, but the Mumbai bench of the Tribunal in the case of AGM India Advisors India Pvt Ltd., Vs. DCIT, Mumbai in ITA No. 4757/Mum/2015 vide order dated 18.05.2016 has held that such concern is not comparable to a concern undertaking activity of rendering non-binding investment advisory services. Following the said precedent we hereby decline to interfere and uphold the action of SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 11 ITA No. 324/Mum/2016, AY. 2011-12. the lower authorities in excluding ICRA Online Ltd, from the final set of comparables.
14. The next point raised by the assessee is for inclusion of Integrated Capital Services Limited, a concern which has been excluded by the income tax authorities on the basis of its functional incomparability. Referring to the order of the DRP, the Ld. DR had pointed out that such concern renders advisory and consulting services in area of mergers, acquisition and reconstruction, and is engaged in the business of trading of shares and speculation business.
15. On this aspect also, we do not find any justifiable reasons to interfere with the stand of the income tax authorities in view of the decision of the Mumbai Bench of the Tribunal in the case of New Silk Route advisors Private Ltd., Vs. DCIT in ITA No. 1327/Mum/2014 dated 20.02.2014, wherein in the case of a similarly placed assessee, involved in rendering non-binding investment advisory services, the said concern has been found to be incomparable. Following the aforesaid precedent, on this aspect also, we hereby confirm the stand of the lower authorities and assessee fails on this aspect.
16. The third point raised by the Ld. Representative was for inclusion of ICRA Management Consulting Services Ltd., which according to him, has been unjustly excluded by the income-tax authorities. In this context, it has been pointed out by the Ld. DR that the said concern has been rejected on the basis of functional incomparability in as much as the said concern was engaged in marketing and client management initiative rendering financial services. By referring to the discussion in the order of TPO, it is SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 12 ITA No. 324/Mum/2016, AY. 2011-12. pointed out that the said concern is also providing management consulting advisory services, and thus it is not a good comparable.
17. On this aspect, the point made out by the Ld. Representative is that the objections raised by the lower authorities have been considered by the Tribunal in the case of Temasek Holdings Advisors (I) P. Ltd., (supra), wherein the said concern has been found to be a good comparable. The relevant discussion in the order of the Tribunal dated 11.08.2017 (supra) has been referred to, which is reproduced hereunder:
8. The ld. A.R assailing the rejection of M/s. ICRA Management Consultancy Services Limited by the TPO, which thereafter had been upheld by the DRP, therein drew our attention to Page No. 30 - Para 4.12 of the order of the DRP. It was submitted by the ld. A.R that the DRP had upheld the rejection of the aforesaid comparable by the TPO for the reason that his predecessor in the case of the assessee for the immediately preceding year, i.e A.Y. 2010-11, had upheld the rejection of the said comparable by the TPO. It was thus submitted by the ld. A.R that the upholding of the rejection of the aforesaid comparable, viz. ICRA Management Consultancy Services Limited during the year under consideration was only supported by the observations recorded by the DRP in respect of the said comparable in the case of the assessee for the immediately preceding year, viz. A.Y. 2010-11, and not on the basis of any new facts. The Ld. A.R referring to the aforesaid observations of the DRP submitted that the ITAT, Mumbai bench 'K', vide its order passed in the case of the assessee, marked as: Temasek Holding Advisors India Private Limited Vs. DCIT, Circle 14(3)(1), Mumbai, in ITA No. 776/Mumbai of 2015 for A.Y. 2010-11, dated 25.02.2016, had categorically held that the aforesaid comparable, viz. ICRA Management Consultancy Services Limited was a good comparable qua the functions of the assessee, and as such had directed that it be included in the list of the final comparables. The ld. A.R drew our attention to Page no. 53 of the 'APB', wherein the Tribunal while disposing of the appeal of the assessee for A.Y. 2010-11 had observed as under:-
"Here it is not the case where there is any unique functions materially affecting the revenue or net margins vis-à-vis the functions performed by ICRA. Hence on functional level it is a good SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 13 ITA No. 324/Mum/2016, AY. 2011-12. comparable. As stated earlier, in the earlier years, the TPO has accepted ICRA to be a comparable and in later years the Tribunal in A.Ys 2008-09 & 2009-10 has held ICRA Management to be good comparable qua the functions of the assessee and there being no material change on facts, functional profile or any other factor in this year, then as matter of consistency, we do not want to deviate from our findings given in the earlier years. There cannot be a pick and choose of comparables every year unless there are some material difference in facts and circumstances compelling to take a different conclusion. Thus, we hold that ICRA Management is a good comparable and should be included in the list of final comparables."
It was further submitted by the ld. A.R that in the earlier years the TPO had himself accepted ICRA Management Consultancy Services Limited as a comparable, while for in the later years, viz. A.Y. 2008-09 and 2009-10 the Tribunal had held the aforesaid company to be a good comparable. The ld. A.R in support of his aforesaid contention therein drew our attention to the observations of the coordinate bench of the Tribunal recorded in the case of the assessee for A.Y. 2007-08 and 2008-09, reported as Temasek Holding Advisors (I) Private Limited Vs. DCIT 3(3), Mumbai (2013) 38 taxmann.com 80 (Mumbai-Trib), dated 30.08.2013 (Page 26 of 'APB'), and the order passed by the Tribunal while disposing of the appeal of the revenue, reported as DCIT, Circle 3(3), Mumbai Vs. Temasek Holding Advisors Private Limited (2014) 47 Taxamann.com 311(Mumbai-Trib) (Page No. 32-33 of 'APB'). It was thus in the backdrop of the aforesaid factual position averred by the Ld. A.R that the A.O/TPO without placing on record any material which could go to prove that the aforesaid comparable ,viz. ICRA Management Consultancy Services Limited during the year under consideration was found to be either functionally or otherwise at variance, as in comparison to the preceding years, thus were not justified in most arbitrarily excluding it from the final list of the comparables. The ld. A.R further referring to Page 10 of the order of the TPO for the year under consideration therein submitted that the functions performed, assets used and risk taken ('FAR') of the aforesaid comparable as against that of the assessee company during the year under consideration was concededly the same as in the A.Y. 2010-11, and drew our attention to Page 9-10 of the TPO order for the aforesaid preceding year, i.e A.Y. 2010-11 (copy placed on record). It was thus submitted by the ld. A.R that now when the facts involved in context of the aforesaid comparable during the year under consideration were the same as against those of the immediately preceding year, viz. A.Y. 2010-11, wherein the said company had been accepted by the Tribunal as a good comparable, coupled with the fact that even in the preceding years also it was accepted as a comparable, therefore, in the absence of any substantial variance, either functionally or otherwise during the year under consideration, the said SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 14 ITA No. 324/Mum/2016, AY. 2011-12. comparable could not be summarily rejected. The ld. A.R further submitted that the order of the ITAT, Mumbai in the case of the assessee for A.Y. 2008- 09 wherein ICRA Management Consultancy Services Limited was held to be a good comparable, had been upheld by the Hon'ble High Court of Bombay in CIT-3 Vs. Taemask Holdings Advisors Pvt. Ltd (ITA No. 1051 0f 2014); Dt. 17.11.2016, and placed on record a copy of the order of the Hon'ble High Court. It was further averred by the ld. A.R that the ITAT, Mumbai Bench "K"", in the case of AGM India Advisors (P) Ltd. Vs. DCIT, 10(1), Mumbai (2016) 70 taxmann.com 219 (Mum), had held ICRA Management Consultancy Services Limited as a good comparable, specifically taking note of the fact that it was accepted as such by the TPO in the earlier year as well as in the succeeding year. It was averred by the ld. A.R that the Tribunal in the case of AGM India Advisors (P) Ltd. (supra) had accepted ICRA Management Consultancy Services Limited as a good comparable, after deliberating on three issues, viz. (i). Skill tests (ii). Functional Comparability and (iii). Consistency. The ld. A.R referring to the judgment of the Hon'ble High Court of Delhi in the case of Rampgreen Solution P. Ltd. , therein took us through Para 31 of the order of the Hon'ble High Court, and submitted that it was held by the High Court that a broad comparability on industry base was not to be permitted, and as such high end and low end cannot be compared. The ld. A.R took us through the relevant extracts of the order passed by the Tribunal in its case for A.Y. 2010-11, and therein averred that the Tribunal after deliberating at length had held ICRA Management Consultancy Services Limited as functionally comparable. It was submitted by the ld. A.R that there cannot be cherry picking of comparables, and unless some material difference had arisen during the year under consideration as in comparison to the earlier year, the same could not be whimsically rejected as a comparable. The ld. A.R averred that a fresh filter cannot be introduced for the first time before the Tribunal, because if that be permitted, then all the comparables put up by the TPO will be liable to be excluded. It was lastly submitted by the ld. A.R that now when the functional comparability of ICRA Management Consultancy Services Limited had duly been appreciated by the Tribunal in the case of the assessee in the earlier years, then in the backdrop of the 'Principle of Consistency', a different view on the same set of functional profile cannot be drawn. Per contra, Ld. Departmental Representative (for short D.R) in order to drive home his contention that ICRA Management Consultancy Services Limited could not be accepted as a comparable, therein relied on the order of the ITAT, Delhi in the case of Motorola Solution India (P) Ltd. Vs. ACIT, Circle-2 (2014) 48 taxmann.com 248 (Delhi-Trib), and took us through Para 143-145 of the order. The Ld. D.R further placed reliance on the order of the ITAT, Mumbai 'K' Bench in the case of : Maersk Global Centres (India)(P). Ltd. vs. ACIT (2014) 43 taxmann. Com. 100 (Mumbai
- Trib). The ld. D.R during the course of hearing of the appeal averred that for the purpose of adjudicating the present appeal of the assessee, the earlier SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 15 ITA No. 324/Mum/2016, AY. 2011-12. orders passed by the Tribunal in the assesses own case cannot be characterized as a precedent. The ld. D.R in order to drive home his aforesaid contention, relied on the following judgments of the Hon'ble Supreme Court :-
(i) Dalbir Singh & Others Vs. State of Punjab (1979) 3 SCC 745
(ii). KTMTM Abdul Kayoom & Anr Vs. CIT (1962) Supp (1) SCR 518
(iii). Fida Hussain & Others Vs. Moradabad Dev. Authority (2011) 12 SCC 615
(iv). Executive Engineer, Dhenkanal Minor Irrigation Vs. N.C Budhiraja (2001) 2 SCC 721 The ld. D.R thus on the basis of material placed on record, therein submitted that ICRA Management Consultancy Services Limited could not be accepted as a comparable and had rightly been excluded by the TPO and upheld by the DRP.
9. We have heard the Ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material placed on record. We have given a thoughtful consideration to the facts of the case and find that the DRP as a matter of fact relying on the order passed by his predecessor in the case of the assessee for A.Y. 2010-11, wherein the rejection of the aforesaid comparable, viz. ICRA Management Consultancy Services Limited by the TPO was upheld by his predecessor, had merely gone by the said very reason and upheld the rejection of the said comparable during the year under consideration. We find that the rejection of the aforesaid comparable by the AO/TPO in A.Y. 2010-11 had been set aside by the Tribunal in the case of the assessee, reported as Temasek Holding Advisors India Private Limited Vs. DCIT, Circle 14(3)(1), Mumbai, vide order dated 25.02.2016, wherein the Tribunal had categorically held that the aforesaid company, viz. ICRA Management Consultancy Services Limited was a good comparable and had directed the inclusion of the same in the list of the final comparables. We are of the considered view that now when the order of the AO/TPO in the case of the assessee for the immediately preceding year, viz. A.Y. 2010-11, therein excluding the aforesaid comparable, viz. ICRA Management Consultancy Services Limited had been set aside by the Tribunal, therefore, the rejection of the said comparable, viz. ICRA Management Consultancy Services Limited by the A.O during the year under consideration, pursuant SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 16 ITA No. 324/Mum/2016, AY. 2011-12. to the direction of the DRP, who had merely adopted the observations of his predecessor on A.Y. 2010-11, thus cannot be upheld and is liable to be vacated on the said count itself. We are further persuaded to subscribe to the contention of the ld. A.R that cherry picking of the comparables every year by the TPO, without pointing out that the facts in context of the comparables accepted in the preceding years had changed during the year under consideration, cannot be permitted. We further find that the aforesaid comparable, viz. ICRA Management Consultancy Services Limited had also been held to be a good comparable by the Tribunal in the case of the assessee for A.Y(s). 2007-08, 2008-09 and 2009-10, while for in the earlier years the TPO himself had accepted the said company as a comparable. We further find that the order of the ITAT, Mumbai in the case of the assessee for A.Y. 2008-09 wherein ICRA Management Consultancy Services Limited was held to be a good comparable, had been upheld by the Hon'ble High Court of Bombay in CIT-3 Vs. Taemask Holdings Advisors Pvt. Ltd (ITA No. 1051 0f 2014); Dt. 17.11.2016. We have given a thoughtful consideration to the contentions of the ld. D.R and are not persuaded to accept his contention that ICRA Management Consultancy Services Limited was functionally different as in comparison to the assessee before us. We have deliberated on the judgments of the Hon'ble Apex Court and find that it has been held that a decision of this court on specific facts does not operate as a precedent for future cases. We are of the considered view that there cannot be a second view on the said aspect, but then, as held by the Hon'ble Apex Court, if the court decides a certain issue for a certain set of facts, then, that issue stands determined for any other matter on the same set of facts. We are of the considered view that now when the ld. D.R had failed to establish as to how the facts involved in the present case are found to be distinguishable in context of the aforesaid comparable, viz. ICRA Management Consultancy Services Limited or the assessee in the year before us, as in comparison to those of the preceding years, therefore, the principle enunciated by the Hon'ble Apex Court in the aforesaid cases would not assist the case of the department. We rather are of the considered view that now when the facts in respect of the assessee or the comparables have not witnessed any change during the year under consideration, as in comparison to the earlier years, therefore, the aforesaid principle so laid down by the Hon'ble Supreme Court would go to support the contention of the assessee that in case of no change in the functional profile of the assessee or ICRA Management Consultancy Services Limited, the latter cannot be rejected as a comparable during the year under consideration. We thus in the backdrop of our aforesaid observations are of the considered view that now when ICRA Management Consultancy Services Limited had been held to be a good comparable in the case of the assessee for the preceding years by the Tribunal, and the order of the Tribunal for A.Y. 2008-09 had SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 17 ITA No. 324/Mum/2016, AY. 2011-12. even been upheld by the Hon'ble High Court of Bombay while dismissing the appeal of the department for A.Y. 2008-09, therefore, we are not persuaded to accept the aforesaid contentions of the ld. D.R. Thus in the totality of the aforesaid facts, we are of the considered view that there is no reason for us to take a view divergent from that arrived at by the Tribunal in the case of the assessee for the preceding years, and thus set aside the order of the AO/TPO rejecting the aforesaid comparable and direct that the same be included in the final list of the comparables.
18. It was also brought out that even in the case of M/s General Atlantic Pvt Ltd (supra), the Tribunal vide order dated 21.02.2018 upheld the comparability of ICRA Management Consulting Services Ltd in the case of non-binding investment advisory services. In the case of M/s General Atlantic Pvt Ltd (supra), the Tribunal followed an earlier decision of the Tribunal in the case of AGM India Advisors Pvt ltd Vs. DCIT, in ITA No. 537/Mum/2016 dated 04.01.2017 which was also rendered in relation to A.Y 2011-12, i.e the year before us.
19. We have considered the rival stands and find that plea of the assessee is supported by the precedents rendered by the Mumbai Bench of the Tribunal under similar circumstances and therefore we deem it fit and proper to direct that ICRA Management Consulting Services Ltd (supra) be adopted as a good comparable.
20. Apart from the aforesaid, assessee had pleaded for inclusion of IDC (India) Ltd as well as Informed Technologies Ltd. However, a pertinent plea was raised to the effect that once M/s Ladderup Corporate Advisory Private Limited is excluded and ICRA Management Consulting services Ltd., is included, the resultant margin of the comparables shall compare favourably with the margin of the assessee. Since we have accepted the pleas of the assessee for exclusion of M/s Ladderup Corporate Advisory Private Limited and inclusion of ICRA Management Consulting Services Ltd, the necessity SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 18 ITA No. 324/Mum/2016, AY. 2011-12. for adjudication of the other pleas for inclusion of IDC (India) Ltd., and Informed Technologies Ltd has been rendered academic and is obviated. Thus, for the aforesaid reasons we do not deal any further.
21. In view of the aforesaid discussion we hereby direct the Assessing Officer to re-determine the total income of the assessee, keeping in view our aforesaid decision.
22. Before parting, we may also put on record another point made by the assessee. The Ld. Representative submitted a chart showing operating margins declared by the assessee from A.Y 2010-11 to A.Y 2015-16. It is pointed out that in the A.Y 2010-11 the margin was 20%, in A.Y 2012-13 the margin was 18.60%, in A.Y 2013-14 the margin was 17.21%, in A.Y 2014-15 the margin was 17.27% and in A.Y 2015-16 the margin was 20%. The aforesaid is sought to be presented to show that the current years margin of 17.41% is quite comparable and is also otherwise justified and does not require any interference. We do not find any reason to adjudicate on this aspect, since we have already adjudicated the specific points raised by the assessee regarding the determination of ALP of the instant international transaction.
23. In the result appeal of the assessee is allowed as above.
24. Order pronounced in the open court on 16.11.2018 Sd/- Sd/-
(RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER VICE PRESIDENT मुंबई Mumbai; दनांक 16.11.2018 व.िन.स./ PS. Ravi Kumar
SBI Macquarie infrastructure Management Pvt Ltd. Vs. DCIT 14(3)(2) Mumbai 19 ITA No. 324/Mum/2016, AY. 2011-12. आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-
4. आयकर आयु / CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
स यािपत ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुबं ई / ITAT, Mumbai