The Pr. Commissioner Of Income Tax-3,Room v. Warburg Pincus India Pvt. Ltd.,7[Th] Floor, Express Towers,Nariman Point,Mumbai-400 021

Digitallysigned bySHRADDHASHRADDHAKAMLESHKAMLESHTALEKARTALEKARDate:2022.09.1215:24:11+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 376 OF 2018 The Pr. Commissioner of Income Tax-3,Room No. 612, Aayakar Bhavan,M.K. Road,Mumbai-400 020. ....Appellant V/s 1.Warburg Pincus India Pvt. Ltd.,7[th] Floor, Express Towers,Nariman Point,Mumbai-400 021.PAN : AAACW 5205 E ....Respondent *** Mr. Suresh Kumar for appellant. Mr. Manish Kanth i/b Mr. Atul K. Jasani for respondent. **** CORAM : DHIRAJ SINGH THAKUR AND VALMIKI SA MENEZES, JJ. Judgment reserved on : 20[th] July 2022 Judgment pronounced on : 12[th] September 2022. PER DHIRAJ SINGH THAKUR, J. : 1.This is an appeal under section 260A of the Income Tax Act,1961 (hereinafter referred to as, ‘the Act’) against the order dated13[th] January 2017 passed by the Income Tax Appellant Tribunal ‘K’Bench, Mumbai relevant to the assessment year 2009-10. 2.The following questions of law have been proposed for ourconsideration : (i)Whether, on the facts and in the circumstances ofthe case and in law, the Tribunal was right by holdingthat M/s. Integrated Capital Services Ltd. and M/s.Motilal Oswal Investment Advisors Pvt. Ltd. are to beexcluded and M/s. ICRA Management ConsultingServices Ltd. and M/s. IDC Ltd. are to be included ascomparables ignoring the FAR analysis carried out by theTPO? (ii)Whether, on the facts and in circumstances of thecase and in law, the Tribunal erred by relying uponseveral case laws and not judging the comparability onthe facts of the case though facts of each case aredifferent and not squarely applicable to the facts of othercases? 3.The assessee-company is engaged in the business ofinvestment advisory services. The return of income was fled by theassessee declaring total income at Rs.17,44,90,750/- on 30[th]September 2009 and a book proft at Rs.16,47,55,751/- undersection 115JB of the Act. The return of income was processedunder section 143(1). The case was later selected for scrutiny. Areference under section 92CA(1) of the Act was made to theTransfer Pricing Offcer, Mumbai (“TPO”) for computation of theArm’s Length Price in relation to international transactionsentered into by the assessee company. 4.Before the TPO, the comparables relied upon by the assessee were rejected on the ground of functional dissimilarity andproceeded to select the following three comparables : The TPO, based upon the aforementioned comparables,suggested an upward adjustment of Rs.34,16,50,457/-. 5.A draft assessment order was framed by the AO against whichobjections were fled before the Dispute Resolution Panel-II, Mumbai(‘DRP’) under section 144C (13) pursuant to which the AOproceeded to pass a fnal order of assessment, rejecting theobjections of the assessee, an adjustment of Rs.34,16,50,457/- wasmade to the total income under section 92CA(3) of the Act. 6.The issue was fnally considered by the Income Tax AppellateTribunal, Mumbai (‘Tribunal’) in an appeal preferred by theassessee. 7.In regard to Integrated Capital Services Ltd., the Tribunalheld that the said company was engaged in providing investment banking services, as against the assessee company which wasengaged in providing investment advisory services. It thusexcluded this company from being treated as a comparable to aninvestment advisory service provider. 8.In regard to Motilal Oswal Investment Advisors Pvt. Ltd. also,the Tribunal held that the same could not be treated as comparableinasmuch as the said company was a merchant banker. 6.The issue was fnally considered by the Income Tax AppellateTribunal, Mumbai (‘Tribunal’) in an appeal preferred by theassessee. 7.In regard to Integrated Capital Services Ltd., the Tribunalheld that the said company was engaged in providing investment banking services, as against the assessee company which wasengaged in providing investment advisory services. It thusexcluded this company from being treated as a comparable to aninvestment advisory service provider. 8.In regard to Motilal Oswal Investment Advisors Pvt. Ltd. also,the Tribunal held that the same could not be treated as comparableinasmuch as the said company was a merchant banker. 9.In regard to ICRA Management Consulting Services Limited, acompany which was suggested as a comparable, but was rejected bythe TPO and the DRP, as being not functionally similar to theassessee, the Tribunal held that the said company was basicallyengaged in offering consultation services in the area of strategy,risk management, operations, improvement, regulatory economicsand translations advisory and that its entire revenue was beinggenerated from consultation fees. 10.Even in the case of IDC India Limited, the Tribunal held thesame as comparable to an investment advisory service provider,keeping in mind, the view already expressed on similar lines in thecase of The Commissioner of Income Tax-3 Vs. Temasek HoldingAdvisors India Pvt. Ltd. [1]. Based upon the above observations, the 1[2014] 46 ITR (Trib.) 311 (Mum.) Tribunal accordingly directed the Transfer Pricing Offcer tocompute/determine the Arm’s Length Price by considering theaforementioned two comparables. 11.Learned counsel for the Revenue vehemently urged that theview expressed by the Tribunal in rejecting the selection ofIntegrated Capital Services Ltd. and Motilal Oswal InvestmentAdvisors Pvt. Ltd. was without any basis at all. Equally so it wasurged that there was no basis for the Tribunal to hold ICRAManagement Consulting Services Limited and IDC India Limited ascomparables. 12.We have heard learned counsel for the parties. 13.The issue as to whether Integrated Capital Services Ltd. andMotilal Oswal Investment Advisors Pvt. Ltd., which are engaged inproviding investment banking services, could be declared ascomparable to a company which was providing investment advisoryservices is no longer res-integra. 14.The Apex Court in the case of Commissioner of Income-tax 10,Mumbai Vs. Carlyle India Advisors (P.) Ltd. [2]has already held thatthe case of an investment advisor or sub-advisory cannot becompared with a merchant banker or investment banker. This view 2[2013] 32 taxmann.com 23 (Bombay) was reiterated in the case of Principal Commissioner of Income-tax-3 vs. Blackstone Advisors India (P.) Ltd. [3]. 15.In view of the aforementioned settled legal position,Integrated Capital Services Ltd. and Motilal Oswal InvestmentAdvisors Pvt. Ltd cannot at all be held as comparables with theassessee company. 16.In so far as IDC India Limited is concerned, this Court inCommissioner of Income-tax-3, Mumbai Vs. General Atlantic (P.)Ltd. [4] , the Tribunal adopted only IDC India Ltd. as comparable. TheTribunal had adopted IDC India Limited, which was commonbetween the Revenue and the assessee, as comparable to determinethe Arm’s Length Price, while rejecting the other eight comparablesselected by the Revenue. 17.The decision of the Tribunal was challenged by the Revenue inappeal, which was dismissed in Carlyle India Advisors (P.) Ltd.(Supra). 18.In regard to ICRA Management Consulting Services Ltd., theTribunal relied upon the decision of the Temasek Holdings Advisors India Private Limited Vs. DCIT [5]and held that the same to be a good 3[2020] 114 taxmann.com 221 (SC) 4[2016] 68 taxmann.com 88 (Bombay) 5[2014] 47 ITR (Trib.) 311 17.The decision of the Tribunal was challenged by the Revenue inappeal, which was dismissed in Carlyle India Advisors (P.) Ltd.(Supra). 18.In regard to ICRA Management Consulting Services Ltd., theTribunal relied upon the decision of the Temasek Holdings Advisors India Private Limited Vs. DCIT [5]and held that the same to be a good 3[2020] 114 taxmann.com 221 (SC) 4[2016] 68 taxmann.com 88 (Bombay) 5[2014] 47 ITR (Trib.) 311 comparable in view of the fact that it was offering consultationservices in the area of strategy, risk management and operationsregulatory economics and translations Advisory and that its entirerevenue was being generated from consultation fees. 19.In this regard, learned counsel for the respondent relied uponan order dated 28[th] March 2022 passed in Income Tax Appeal No.117 of 2018, in the case of the assessee, in which a similar issue wasraised and rejected and the appeal dismissed. 20.Be that as it may. We are of the view that no interference iswarranted in the order passed by the Tribunal. The appeal is foundto be without any merit, and is accordingly dismissed with no orderas to costs. [VALMIKI SA MENEZES, J.] [ DHIRAJ SINGH THAKUR, J.]