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03-01-2019, Lehman Brothers Securities, Section 92C(2), Tribunal Mumbai

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2 months 2 weeks ago #8270 by amit
Section - 92C(2)
Order Date - 03-01-2019
Favouring - Assessee allowed for statistical purposes
Court - Tribunal Mumbai
Appellant - Lehman Brothers Securities Pvt. Ltd.
Respondent - ACIT
Justice - MAHAVIR SINGH, JM & RAJESH KUMAR, AM
Citation - 119Taxpundit67
Appeal No. - ITA No.7705/Mum/2012
Asstt. Year - 2008-09

Order

PER : MAHAVIR SINGH, JM

This appeal is arising out of the order of Dispute Resolution Panel1, Mumbai [in short ‘DRP’], directions dated 05.09.2012. The Assessment was framed by the Asst. Commissioner of Income Tax-Range 4(3), Mumbai (in short ‘ACIT/AO’) for the assessment year 2008-09 vide order dated 25.10.2012 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).

2. The first and second issues are common and interconnected. The first issue in this appeal of assessee is against the order of DRP/TPO/AO in making transfer pricing adjustment relating to international taxation of the Investment Banking Division. For this assessee has raised the following ground No. 1: -

“Ground I - Transfer Pricing Adjustment relating to international transactions of the Investment Bank ng Division of Rs. 342,133,208

I. On the facts and in the circumstances of the case, the learned Transfer Pricing Officer ('TPO') and the learned Assessing Officer ('AO') under the directions of the Hon’ble Dispute Resolution Panel (DRP') erred on facts and in law in making an addition of Rs. 342,133 208 in relation to Investment Banking Division transactions ('IBD Transactions') of the Appellant based on the provisions of Chapter X of the Income-tax Act, I961TiHe Ad).

2. The learned AO under the directions of the Hon'ble DRP erred in confirming the action of the 1 P0 of disregarding the transfer pricing methodology selected by the Appellant and its group companies globally to determine the arm's length price (ALP') of the IBD Transactions. The transfer pricing methodology selected by the Appellant is in fact the most appropriate transfer pricing method to determine the ALP of the IBD Transactions.

3. The learned AO / TPO under the directions of the Hon’ble DRP erred on facts and in law in upholding the action of the learned TPO of requesting the Appellant to conduct a benchmarking analysis using the Transactional Net Margin Method (TNMM) to determine the ALP of the IBD Transactions.

4. The learned AO / TPO under the directions of the Hon’ble DRP erred in the facts of the case and in law in rejecting comparable entities selected by the Appellant, which were in fact comparable to the functions performed by the Appellant in the IBD Transactions.

5. The learned AO I TPO under the directions of the Hon'ble DRP erred on facts and in law in rejecting the use of multiple year data by the Appellant.

6. The learned A0 / TPO under the directions of the Hon'ble DRP erred on facts and in law in not allowing appropriate adjustments for marketing expenses. startup expenses and other adjustments to improve comparability as is required to be done in accordance with the provisions of Rule 10B(1)(3)(iii) of the Income-tax Rules. 1962 to account for difference between the Appellant and the alleged comparables selected by the learned AO/ TPO.

7. The teamed TPO erred and the Hon'ble DRP further erred in upholding / continuing the action the TPO of rejecting the without prejudice contention of the Appellant to provide the benefit reduction of 5 percent from the arithmetic mean as provided in proviso to Section 92C(2) of the Act while determining the ALP for the 180 Transactions.”

3. As regards to the second issue i.e. Transfer Pricing adjustment relating to securities broking transaction of ₹ 78,78,825/-. For this assessee has raised the following ground: -

“Ground 2 - Transfer Pricing Adjustment relating to Securities Broking transactions of Rs 7 878,825/-

1. On the facts and in the circumstances of the case, the learned TPO and the learned AO under the directions of the Hon’ble DRP erred on facts and in law in making an addition of Ks. 7.878.825 in relation to provision of Equity Broking services (The Broking Transactions) of the Appellant based on the provisions of Chapter X of the Act.

2. The learned AO/ TPO under the directions of the Hon'ble DRP erred on in the facts of the case and in law in rejecting the adjustments claimed by the Appellant for differences in volumes transacted and research costs while determining the ALP of the Broking Transactions.

3. The learned AO / TPO under the directions of the Hon'ble DRP erred in the facts of the case and in

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