Broad functionality not sufficient to find comparable entity unless similarity with controlled transaction

Broadly, it appears that the ITAT has gone on the usage of several terms such as debt syndication, debt financing, IPO advisory, corporate restructuring, mergers, acquisitions etc, appearing in the annual reports of the comparable to hold that the Assessee and the said comparables perform similar functions. The analysis at such a broad level, based upon the appearance of such similar terminologies, does not by itself make the functions similar in nature.

23. The argument of the Assessee appears to be that while the Assessee was merely advising on these issues and providing advisory services to its AE, these three comparables appear to be actually involved in the providing of services relating to debt restructuring, debt financing, issuance of IPOs, mergers and de-mergers, etc. There is a difference between giving advice on these matters and actually undertaking the said services. A similar illustration, in the context of litigation, would be the difference between giving advice on what to argue in Court and actually arguing the matter in the Court. This difference needs to be borne in mind and the mere appearance of similar sounding words does not by itself constitute similar Further, as laid down in Rampgreen Solutions (supra), all these three companies demonstrated a wide deviation in the percentage of margins. Thus, it requires a deeper analysis to determine as to whether they were in fact comparables to be retained for the purpose of fixing the ALP.

In this backdrop, when sub-advisory agreement dated 1^st July, 2006 along with the addendum thereto, is examined, the services of the Assessee cannot be termed as that of merchant banking though there may be some overlap in the advisory segment of the services provided by merchant In view of the services rendered by the Assessee, Question (i) is answered in the negative i.e. in favour of the Assessee and against the Revenue.

CORAM: JUSTICE S. MURALIDHAR

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