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Judgment
This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act), challenges the order dated 23rd January, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal).The impugned order dated 23rd January, 2013 relates to Assessment Year 2007-08.
The Revenue urges the following question of law for our consideration:
"(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in considering partly irrelevant material and in accepting Capital Trust Limited as a comparable and thereby ignoring accepted Transfer Pricing Audit practise that persistent loss making concerns are not to be considered as comparable in cases of profit making concerns?
(b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in considering partly irrelevant material and rejecting Spanco Telesystems and Solutions Ltd. as a comparable even though the said Spanco Telesystems and Solutions Ltd. was providing similar services and hence was functionally comparable as per Transfer Pricing Regulations with the Assessee Company?
(c) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in law in relying upon the decision of the co-ordinate bench in the case of Carlyle India Advisors Pvt. Ltd. Ignoring the facts of the case which are different from the case relied upon by the Tribunal?".
Brief facts :-
(a) The Respondent-Assessee is an Indian Associate of Goldman Sachs, who are in the business of investment banking, securities and investment management and providing wide range of services to diversified customers including corporation, financial institutions, governments and high net worth individuals. During the relevant Assessment Year, the Respondent-Assessee carried on the business of Investment advisory services, Broking Services, Business Support Services.
(b) As the Respondent-Assessee was engaged in the International Transaction, the Assessing Officer referred the case to the Transfer Pricing Officer (TPO). This to determine Arms Length Price (ALP) in respect of its International Transaction with Associated Enterprises (AE). Consequent to the order of the TPO determining the ALP, the Assessing Officer passed a draft assessment order, dated 30th November, 2011.
(c) The Respondent-Assessee filed its objections to the draft assessment order dated 30th November, 2011 with the Dispute Resolution Panel(DRP).The draft assessment order dated 30th November, 2011 was sustained by DRP''s order dated 16th August, 2011. This resulted in a final order being passed on 24th August, 2011 under Section 143(3) read with Section 144C(13)of the Act by the Assessing Officer;
(d) Being aggrieved, the Respondent-Assessee carried the issue in Appeal to the Tribunal. By impugned order dated 23rd January, 2013, the Tribunal allowed the Respondent-Assessee''s appeal.
Re Question (a) :-
(a) The Respondent-Assessee urged before the Tribunal that the upward adjustment of Rs.1.60 Crores by the TPO pertaining to Business Support Services rendered to its AE was, inter alia, on the basis of having rejected one of the comparable namely Capital Trust Limited, chosen by the Respondent-Assessee. This was rejected on account of the fact that Capital Trust Limited is a loss making unit. Before the Tribunal, the Respondent-Assessee contended that the nature of business as carried out by the Capital Trust Ltd., and that carried out by the Respondent-Assessee are similar. Therefore it ought to have been included in as comparable to arrive at the ALP;
(b) The Revenue on the other hand contended that Capital Trust Limited is a persistent loss making unit and, thus, cannot be used as a comparable for the purpose of determining the ALP. The Tribunal by the impugned order held on a finding of fact that for the Assessment Year 2005-06 - Capital Trust Ltd. has made a profit although it made a loss for the subsequent two years namely Assessment Year 2006-07 and 2007-08. However, the impugned order of the Tribunal inter alia relies upon its order in the case of Brigade Global v. ITO, ITA No. 1494/Hyd of 2010 rendered by the coordinate Bench at Hyderabad- wherein it is held that only persistently loss making unit cannot be said as comparable. In this case, the impugned order holds on facts that Capital Trust Ltd. it is not a persistent loss making unit. Therefore, Capital Trust Ltd. is comparable; and
(c) The view taken by the impugned order of the Tribunal is in the present fact is possible view. Thus question (a) does not give rise to any substantial question of law. Hence, not entertained.
Re Question (b) :-
(a) It is urged on behalf of the Respondent-Assessee before the Tribunal that the TPO had made an upward Transfer pricing adjustment of Rs.1.60 Crores pertaining to Business Support Services inter alia as a result of including Spanco Telesystems and Solutions Limited (Spanco) as comparable. This even though the business areas of Spanco were different from that of the Respondent-Assessee;
(b) The Tribunal in the impugned order records a finding of fact that Spanco was essentially involved in activities with regard to Telecom and providing call center services while the Respondent Assessee was providing financial services. Thus, as the activities of Spanco and Respondent-Assessee are functionally different, they are not comparable;
(c) In the aforesaid view, the impugned order deleted Spanco from amongst the list of comparables included by the TPO while arriving at ALP in respect of Business Support Services. Thus, the view,taken by the Tribunal is, therefore, a possible view; and
(d) Hence, question (b) as framed for our consideration, does not give rise to any substantial question of law. Thus, not entertained.
Re Question (c) :-
(a) We found that during the subject Assessment Year, the Respondent Assessee was providing services of Broking Services, Business Support Services and Investment advisory services to its customers. The TPO had adopted a list of comparable companies which were primarily engaged in providing services as merchant banker as comparable to determine the ALP in respect of the Investment Advisory Services rendered by it to its AEs . The companies selected by the TPO were identical to one selected in Carlyle India Advisors (P) Ltd., The aforesaid decision of the TPO in Carlyle (I) Advisors (P) Ltd. (supra) was a subject matter of consideration by the Tribunal in ITA No. 7901/Mum/2011. The Tribunal after examining the business of each of the individual comparable concluded that they were different from that of the services provided by M/s. Carlyle India (supra). This is so as the comparable used were in the merchant banking business while M/s. Carlyle India (supra) just like the Respondent-Assessee were in Investment Advisory Services. The Revenue carried the issue from the order of the Tribunal rendered on 4th April, 2012 in M/s. Carlyle India (supra) to this Court in appeal. The appeal being Income Tax Appeal (L) No. 1286 of 2012 (CIT v. M/s. Carlyle India Advisors Pvt. Ltd.)reported at (2013) 93 DTR (Bom) 359 - wherein this Court refused to entertain the Revenue''s appeal as is reflected in the order dated 22nd February, 2013. Thus, we see no reason to interfere with the impugned order of the Tribunal;
(b) In the circumstance, the Tribunal in the impugned order adopted the same comparable it had adopted in the case of M/s. Carlyle India (supra) for the purpose of arriving at the ALP in respect of its International Transaction;
(c) Further, Mr. Kotangale, learned Counsel appearing for the Revenue very fairly points out that a similar issue as arising herein, was a subject matter of consideration by this Court in Income Tax Appeal No.1993 of 2013 (CIT v. General Atlantic Pvt. Ltd.) decided on 8th March, 2016 reported in (2016) 136 DTR (413) In the above case also the Assessee was engaged in the business of advisory services like the Respondent here and the TPO had relied upon the comparable selected by him in the case of M/s. Carlyle India (supra) to determine the ALP in the case of Assessee therein i.e. M/s. General Atlantic (P) Ltd. The Tribunal allowed the appeal in General Atlantic Pvt. Ltd. (supra) by following its decision in M/s. Carlyle India Advisory (supra) just as the Tribunal has done in the Respondent''s appeal by the impugned order; and
(d) Accordingly, question (c) does not give rise to any substantial question of law. Thus not entertained.
Accordingly, Appeal dismissed. No order as to costs.