JUDGMENT :

MILIND N. JADHAV, J.

1. This appeal has been preferred under Section 260A of the INCOME TAX ACT 1961 (for short ‘the said Act’) for the assessment year 2010 – 2011, against the order dated 25th October 2016 passed by the Income Tax Appellate Tribunal “K” Bench, Mumbai (hereinafter referred to as “Tribunal”).

2. The respondent/assessee entered into an international transaction of non-binding investment advisory services with its Associate Enterprises (for short ‘A.E.’) and earned revenue of Rs.25.83 crores during the assessment year 2010 - 2011. The assessee for the purpose of bench marking the transaction adopted Transnational Net Margin Method (for short “TNMM”) as an appropriate method under the provisions of Section 92C of the Act and identified seven comparable companies as comparables with their three years average weighted margin of 18.23% and operating margin being at 19.67% for the purpose of claiming the international transaction to be at arm’s length.

2.1 The Assessing Officer (for short “AO”) framed a draft assessment order dated 26th February 2014 making an upward revision of transfer pricing adjustment of Rs.4,96,42,540.00. The assessee approached the Dispute Resolution Panel (for short “DRP”) against the draft assessment order with its objections. The DRP vide order dated 7th October 2014 rejected the contentions and objections raised by the assessee in relation to upward revision of transfer pricing adjustment and directed the AO to finalize the draft assessment, resulting in passing of the impugned assessment order. The AO/Transfer Pricing Officer (for short “TPO”) by his final order dated 31st October 2014 rejected the transfer pricing study of the assessee on the basis of various defects and deficiencies and rejected six out of seven comparables selected by the assessee while retaining one comparable on the basis of single year data. However in the said order the TPO proceeded and selected six new comparable companies as comparables with an arithmetic mean of 42.66% of operating margin. The TPO applied the aforesaid arithmetic mean to be operating cost of the assessee and determined the arm’s length price of Rs.30,79,92,412.00 as against the international transaction price of Rs.25,83,49,872.00 resulting in a short fall of Rs.4,96,42,540.00. This short fall was treated as transfer pricing by the TPO.

3. The above order was assailed by the assessee before the Tribunal. Tribunal by the impugned order dated 25th October 2016 allowed the appeal filed by the assessee in elaborate detail with respect to selection of each comparable company by the TPO and DRP and directed the AO/TPO to determine the arm’s length price afresh in terms of fresh directions given by the Tribunal in respect of each comparable company. Being aggrieved by the order passed by the Tribunal the revenue is in appeal before us.

4. The revenue has projected the following substantial questions of law :-

“6.1 “Whether on the facts and circumstances of the case and in Law, the Hon’ble ITAT was justified in directing to exclude for functionally comparable companies from the list of comparables selected by the TPO viz. M/s IDFC Investment Advisors Pvt. Ltd, M/s ICRA Online Ltd., M/s Motilal Oswal Investment Advisors Pvt. Ltd. and M/s Kshitij Inv