Marketing & liasoning services can’t be equated with advisory services for ALP adjustment

Brief Facts

1. The assessee company is engaged in the business of providing investment advisory and marketing support services. The assessee company provided advisory services to its Associated Enterprises (“AEs”) named Deutsche Asset Management (Asia) Limited (in short “DAMAL”), Singapore. DAMAL is a fund Manager for Deutsche India Equity Fund.

2. In consideration for providing such advisory services, DAMAL has given 50% shares of the fees received by it to the assessee. The TPO noticed that the assessee has received share of 70% of the fees from another AE, Germany for providing liaisoning/marketing support services to it.

3. Though the assessee had bench marked the transactions under TNMM with net cost plus margin, the TPO held that the said method is not acceptable. The TPO further held that the assessee should have taken share of 70% of fees for advisory services provided to DAMAL also. Accordingly, he proposed to adjustment of Rs. 1.50 crores to the income returned by the assessee.

“A transactional profit method examines the net profit margin relative to an appropriate base (e.g., costs, sales, assets) that a taxpayer realises from a controlled transaction (or transactions that it is appropriate to aggregate).”

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