$~9, 11 & 12
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision 16.4.2018
+ ITA 634/2017
PR COMMISSIONER OF INCOME TAX-2 ...... Appellant
versus
M/S CHRYS CAPITAL INVESMENT ADVISORS PVT LTD
....... Respondent
+ ITA 346/2018
PR. COMMISSIONER OF INCOME TAX ........ Appellant
versus
CHRYSCAPITAL LTD. ..... ... Respondent
+ ITA 349/2018
PRO COMMISSIONER OF INCOME TAX- 2 ....... Appellant
versus
MIS CHRYS CAPITAL INVESTMENT ADVISORS (INDIA) PVT.
LTD. .. ...Respondent
Present : Mr.Zoheb Hossain, Sr. Standing counsel for appellant.
Mr.Vikas Shrivastava, Mr.Mayank Aggarwal and
Ms.Kanika Jain, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
MR. JUSTICE S. RAVINDRA BHAT (Open Court)
1 Revenue's appeal is under Section 260A with respect to inclusion of
Brescon Corporate Advisors Limited as a comparable for the purposes of
ITA 634/2017 & connected appeals Page 1 of 6
ALP determination under Section 92CA of the Income Tax Act. It is
contended that neither before the Transfer Pricing Officer (TPO), nor the
DRP, the assessee objected to the inclusion of Brescon Corporate
Advisors Ltd. on account of functional dissimilarity. Serious objection
has been taken to the finding of the ITAT. It is contended that it is solely
dependent on its previous reasoning in Xander Advisors India (P.) Ltd vs.
Assistant Commissioner of Income Tax 2014 (36) ITR (Trib) 499 (Delhi).
It is pointed out that mere pronunciation of the alleged functional
dissimilarity in another decision cannot be treated per se as a precedent by
the ITAT in these circumstances and that in the absence of analysis as to
the dissimilarity by the lower ranking authority, the ITAT ought not to
have carried out the exercise and excluded the comparable. Learned
counsel also relies upon the decision of this Court in Chryscapital
Investment Advisors (India) Pvt. Ltd. v. Deputy Commissioner of Income
Tax ( 2015) 376 ITR 183 Del and especially highlights the discussion in
this regard in para 41 of the judgment.
2 In the present case, undoubtedly, assessee does not appear to have
sought exclusion of Brescon Corporate Advisors Limited on the ground of
functional dissimilarity, rather it objected to the inclusion of that concern
on the ground that it reported high profits. The per se exclusion of entity
that might otherwise be comparable, in terms of their functional profile,
was ground upon in Chryscapital Investment Advisors (India) Pvt. Ltd.
(supra). In that judgment itself the exclusion of Brescon Corporate
Advisors Limited on the sole filter of high profits was not accepted; the
DRP was tasked with the responsibility of ascertaining the factual basis
ITA 634/2017 & connected appeals Page 2 of 6
for functional similarity or dissimilarity as it works considering the risk
profile of that comparable in order to carry out necessary adjustments.
Chryscapital Investment Advisors (India) Pvt. Ltd. (supra) was for
Assessment Year 2008-09.
3 In the present case, the finding with respect to dissimilarity of
Brescon Corporate Advisors Ltd. was rendered for A.Y. 2006-07. Though
the finding rendered in the case of one entity cannot be considered per se
binding, what cannot be lost sight of in the present case is that for A.Y.
2006-07 itself, the Tribunal in Xander Advisors India (P.) Ltd. (supra) had
considered the functional profile of Brescon Corporate Advisors Ltd. and
noted that as against the total amount of Rs.139,563,352/- (reported
towards the financial services of Brescon Corporate Advisors Ltd). The
equity related advisories constituted Rs.25,253,608/-. Furthermore and
crucially in Xander Advisors India (P.) Ltd (supra) vis-à-vis Brescon
Corporate Advisors Ltd., the Tribunal recorded a finding that no
segmental data with respect to the disparage income schemes of Brescon
Corporate Advisors Ltd. was available. In these circumstances, the Court
is of the opinion that the exclusion of Brescon Corporate Advisors Ltd.
does not per se result in any error of law.
4 For the above reasons, this question of law does not arise.
5 The second question of law urged is with respect to exclusion of
Keynote Corporate Services Ltd. as a comparable. Learned counsel relies
upon the order of this Court in Principal Commissioner of Income Tax Vs.
Chryscapital Ltd. (in ITA 286 of 2018 decided on 12.03.2018) which was
for 2009-2010. He submits that the impact of unusual events i.e. the
ITA 634/2017 & connected appeals Page 3 of 6
repercussion of amalgamation with another entity of the comparable was
directed to be reconsidered.
6 In this case, the ITAT took note of the fact that the profitability of
M/s Keynote Corporate Services arose unusual to 185% from the reported
level of 94%. The ITAT recorded finding as follows:
"1.The right to appeal is always given by statute and
unless specific provision of appeal is there, there cannot
be any right to appeal. The appeal and cross objection
are at par as far as their admissibility is concerned.
Following several decisions cited by the assessee, the
Ld.ITAT held that the cross objection filed by the
department is non-maintainable and, thus, rejected.
2. The assessee has raised the additional ground related
to working capital adjustments and the assessee had also
filed an application under Section 154 of the Act before
the learned TPO to rectify the aforesaid error and the
same is pending. The Ld. ITAT had directed the
Assessing Officer to dispose of the petition filed by
assessee under Section 154 pending with him.
3. The Ld. ITAT was not inclined to accept the submission
of learned CIT(DR) that a decision can be applied in
transfer pricing cases only if it pertain to the same
assessment year because ultimately it is the FAR analysis
which is relevant of the tested party as well as of
comparable for selecting/rejecting a comparable. If the
functional profit of a comparable vis-a-vis the tested
party remains the same over the years there is no reason
as to why the decision rendered in regard to one
assessment year may not be applied for any other year
unless it is demonstrated with facts and figures that the
ITA 634/2017 & connected appeals Page 4 of 6
said decision was rendered in entirely different set of
facts.
4. There is no estoppel against the assessee from
demonstrating that a particular comparable was wrongly
included in earlier year and, therefore, it should be
excluded in this year. The Ld. ITAT had held that Xander
Advisors India (P.) Ltd. vs. Deputy Commissioner of
Income Tax, Circle -18(1) New Delhi and Temasek
Holdings Advisors India (P.) Ltd. vs. Deputy
Commissioner of Income Tax clearly supports the
assessee's contention and, therefore, the Ld. ITAT
directed for excluding Brescon Corporate Advisors
Limited from the list of comparables. As far as the
inclusion of ICDS securities is concerned, the same was
not pressed at the item of hearing and, therefore, the
same will remain in the list of comparables.
5. With regard to the inclusion of non-operating incomes
while computing profits of KGMC Global Market (India)
Ltd., Khandwala Securities Ltd. and Sumedha Fiscal
Services Ltd., the Ld. ITAT restored the issue to the file of
learned TPO to examine the contentions of both the
parties and if they are found to be correct then re-
determine operating margin after excluding the impugned
amounts and related expenses.
6. On the issue of the AO concluding that in case of
directors of the company, the sum paid as commission
and bonus could have been paid as profit or dividend
which is not the case here, the issue is covered in favour
of assessee by the decision of Hon'ble Delhi High Court
vide ITA No.417/2014 in assessee's own case for the
assessment year 2008-09. The Learned ITAT found that
the ground raised by the assessee is allowed.
ITA 634/2017 & connected appeals Page 5 of 6
7. Regarding the issue related to severance cost, the
assessee relied on CIT vs.Gobald Motor Services Pvt.Ltd.
100 ITR 240, wherein, it was, inter alia, held that it was
not for the revenue to question the commercial
expediency of the expenditure and it is a matter entirely
left to the judgment of the assessee. There could not be
any other consideration for severance cost of
Rs.35,10,000/- paid to Shri Girish Baliga except the
services rendered by him to assessee company. The
payment made to Shri Girish Baliga by the assessee
company as going concern was in line with the practice
prevalent in the industry. This payment cannot be held to
be in capital field and was an allowable expenditure in
the hands of the assessee company. In the result, the
appeal of the assessee is partly allowed."
7 The Revenue urged that the amalgamation as a matter of fact placed
during Financial Year 2005-06, it was reported that the scheme of
amalgamation was approved by the High Court on 21.12.2006 though
w.e.f. the year 1988. In the circumstances, the financial restructuring of
the company took place later. Given all these peculiar circumstances, the
findings of the ITAT cannot be faulted. No question of law arises.
8 The appeals are accordingly dismissed.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
APRIL 16, 2018/ndn
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