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13-03-2020, Clearwater Capital Partners India, Tribunal Mumbai

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1 year 7 months ago #12372 by amit
Section -
Order Date - 13-03-2020
Favouring - Partly
Court - Tribunal Mumbai
Appellant - Clearwater Capital Partners India Pvt. Ltd.
Respondent - ACIT
Justice - SAKTIJIT DEY JM & G. MANJUNATHA AM
Citation - 320Taxpundit607
Appeal No. - ITA no.4851/Mum./2015
Asstt. Year - 2009–10

Order

PER : SAKTIJIT DEY. J.M.

The captioned appeal has been filed by the assessee challenging the order dated 30th April 2015, passed by the learned Commissioner of Income Tax (Appeals)–55, Mumbai, pertaining to the assessment year 2009–10.

2. Though, the assessee has raised as many as eight grounds of appeal contesting the addition made of ` 77.09.785 on account of transfer pricing adjustment, however, the dispute is basically confined to selection/rejection of certain comparables. Before we proceed to deal with the specific dispute raised before us, it is necessary to briefly narrate the relevant facts relating to the issue in dispute

3. Brief facts are, the assessee is a resident company and part of Clearwater Capital Partners (CCP Group), which is an investment firm founded in the year 2001. The assessee is a subsidiary of CCP Cyprus and is basically engaged in providing investment sub advisory services to its Associated Enterprises (AE) CCP, Singapore. During the year under consideration the assessee provided non–binding investment advisory services to its AE and received an amount of ` 4,44,15,472. In the transfer pricing study report, the assessee benchmarked the aforesaid transaction with the AE by adopting Transactional Net Margin Method (TNMM) as the most appropriate method. The assessee selected ten companies as comparables with average margin of 16.19% as against its own margin of 20%. Thus, the transaction with AE was claimed to be at arm's length. The Transfer Pricing Officer, however, pointed out various defects and deficiency in the transfer pricing study report as well as selection of comparables. After rejecting the transfer pricing study report as well as most of the comparables selected by the assessee, the Transfer Pricing Officer proceeded to select fresh comparables. Though, of–course, he accepted TNMM as the most appropriate method. In the process, the Transfer Pricing Officer selected three comparables viz. (i) ICRA Online Ltd., (ii) IDC India Ltd. and (iii) Integrated Capital Services Ltd., with arithmetic mean of 40.83%. Applying the arithmetic mean of the comparables to the operating cost, he determined the arm’s length price of the service provided at ` 5,21,25,257, as against the amount received by the assessee of ` 4,44,15,472. Due to the difference in operating income, an upward adjustment of 77,09,785, was made to the arm’s length price of international transaction with the AE. The adjustment proposed by the Transfer Pricing Officer was added to the income of the assessee while framing the assessment order. The assessee contested the aforesaid addition by filing the appeal before the first appellate authority.

4. Learned Commissioner (Appeals), however, upheld the adjustment made by the Transfer Pricing Officer.

5. Shri Farookh V. Irani, learned Counsel for the assessee confined his submissions to selection/rejection of three comparables. Hereafter, we will be dealing with these comparables.

i) ICRA MANAGEMENT CONSULTING SERVICES LTD.

6. Objecting to the rejection of this company, the learned Counsel submitted, the company is functionally similar to the assessee, hence, there is no reason to reject this company. He submitted, 75% of the Revenue earned by the company is from consulting fees which is suggestive of the fact that it is providing advisory services, hence, is functionally similar to the assessee. Thus, he submitted, this company should be included as a comparable. In support, he relied upon the following decisions:–

i) Altico Capital India Pvt Ltd. v/s DCIT, ITA no.5142/Mum./ 2017, dated 10.01.2020;

ii) Warburg Pincus India Pvt. Ltd. v/s ACIT, ITA no.6981/ Mum./2012, dated 13.01.2017;

iii) 3i India Pvt. Ltd. v/s DCIT, IT(TP)A no.1292/Mum./2014, dated 30.09.2019;

iv) TPG Capital India Pvt. Ltd. v/s DCIT, [2017] 79 taxmann.com 101 (Mum.)(Trib.);

v) CIT v/s Temasek Holdings Advisors India Pvt. Ltd., ITA no. 359 of 2015, dated 11.07.2017;

vi) DCIT v/s Temasek Holding Advisors Pvt. Ltd., ITA no. 968/Mum./2014, dated 27.06.2014;

vii) CIT v/s Temasek Holdings Advisors India Pvt. Ltd., ITA no. 1051 of 2014, dated 17.11.2016;

viii) Temasek Holdings Advisors India Pvt. Ltd. v/s DCIT, [2013] 38 taxmann.com 80 (Mum.)(Trib.);

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