RHYTHM AND HUES STUDIOS INDIA P.LTD, MUMBAI V. ITO 11(1)(2), MUMBAI

ITA 1849/MUM/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7395 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: AJIT KUMAR JIAN; SIDDESCHAUGLE A R S
• Keywords: Transfer pricing; Search and seizure; Opportunity of being heard; International transaction; Rule of consistency; Wholly owned subsidiary; Set aside
• Section: 43B; 143(3); 92E; 115JB; 40(a)(ia); 10B; 144C; 10

Judgement Text

P A G E | 1 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER I.T (TP) A. NO.1849/MUM/2016 (ASSESSMENT YEAR: 2011 - 12) RHYTHM AND HUES STUDIOS INDIA PVT.LTD.,REGUS TIMES SQUARE , 1, LEVEL 2,B WING, ANDHERI KURLA ROAD,ANDHERI (EAST), MUMBAI 400 059 VS. INCOME - TAX OFFICER - 11(1)(2), INCOME TAX OFFICE, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 PAN AABCR8456P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJIT KUMAR JIAN & SHRI SIDDESCHAUGLE , A.R S RESPONDENT BY: SHRI RIGNESH DAS , D.R DATE OF HEARING : 30 .09.2019 DATE OF PRONOUNCEMENT: 2 5 .10.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 29.01.2016. THE ASSESSEE ASSAILING THE IMPUGNED ORDER HAS R AISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: THE GROUNDS STATED HERE UNDER ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO ONE ANOTHER: A. GROUNDS RELATING TO CORPORATE TAX ADDITIONS GROUND NO. 1 - EXCLUSION OF OTHER INCOME OF RS. 63,02,511 / - FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 10 A OF THE ACT 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN AND THE DRP FURTHER ERRED IN CONFIRMING THE EXCLUSION OF OTHER INCOME' OF RS. 63,02,511 / - (FOREIGN EXCHANGE FLUCTUATION GAIN - RS. 43,81,363 / - INCOME FROM SALE OF SCRAP - RS. 33,120, INTEREST INCOME FROM FIXED DEPOSITS - RS. 18,76,028 / - AND SALE OF FIXED ASSETS RS. 12,000) FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 10 A OF THE ACT. 1.2 THE AO AND DRP FAILED TO APPRECIATE THE FACT AND OUGHT TO HAVE HELD THAT THE APPELLANT, A 100% EOU, WAS ELIGIB LE OF DEDUCTION UNDER SECTION 10 A OF THE ACT FOR THE SAID 'OTHER INCOME', IN P A G E | 2 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) VIEW OF SECTION 10 A(4) OF THE ACT, WHICH PROVIDES THAT ONCE AN INCOM E FORMS PART OF THE BUSINESS OF THE UNDERTAKING, THE SAME WOULD BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. GROUND NO. 2 - RECONCILIATION OF INCOME WITH FORM 26AS - AIR INFORMATION 2.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN AND THE DRP FURTHER ERRED IN DIRECTING THE AO TO ADDING AN AMOUNT OF RS. 2,53,535/ - BEING DIFFERENCE BETWEEN INTEREST INCOME O FFERED BY THE APPELLANT - RS.1 8,76,027 / - AND THE INTEREST I NCOME REFLECTED IN THE AIR INFORMATION - FORM 26AS - RS.21,29,562/ - 2.2 WITHOUT PREJUDICE, THE AO/ DRP ERRED IN MAKING THE ADDITION ON THE BASIS OF AIR INFORMATION WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAS OFFERED TO TAXATION EXCESS INTEREST INCOME THAN THE INTEREST REFLECTED IN FORM 26AS DURING THE FYS 2011 - 2012 AND 2012 - 2013. GROUND NO. 3 - DISALLO WANCE OF RS. 13,91,673/ - UNDER SECTION 43B OF THE ACT ON PROVISION FOR EMPLOYEE BENEFIT VIZ. COMPENSATORY OFF 3.1 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN HOLDING AND THE DRP FURTHER ERRING IN DIRECTING THE AO TO DISALLOW PROVISION FOR EMPLOYEE BENEFITS VIZ. COMPENSATORY OFF OFRS. 13,9 1,673/ - UNDER SECTION 43B OF THE ACT. GROUND NO. 4 - DISALLOWANCE UNDER SECTION 40(A)(IA) OF RS. 2,10,000 BEING RENT PAID TO CO - OWNERS 4.1 THE AO ERRED IN DISALLOWING RS. 2,10,000/ - BEING RENT PAID TO CO - OWNER UNDER SECTION 40(A)(IA) FOR NON - DEDUCTION OF TAX AT SOURCE IN SPITE THAT FACT THAT THE LEARNED DRP HAS GRANTED RELIEF TO THE APPELLANT AND DIRECTED THE AO TO DELETE THE SAME AND SUCH A DIRECTION IS BINDING ON THE AO . 4 2. WITHOUT PREJUDICE, THE AO ERRED IN DISALLOWING THE RENT CHARGES UNDER SECTION 40(A)(IA) EVEN THOUGH THE PROVISIONS OF THE SAID SECTION WERE NOT APPLICABLE TO THE FACTS OF THE CASE. B. GROUNDS RELATING TO TRANSFER PRICINGADJUSTMENTS GROUND NO. 5 - GENERAL GROUND 5 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON BLE DRP ERRED IN MAKING AN ADJUSTMENT OF RS. 6,34,06,680 TO THE APPELLANT'S TOTAL INCOME BASED ON THE PROVISIONS OF CHAPTER X OF THE ACT; GROUND NO. 6 - CHANGE IN METHOD 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN REJECTING THE APPELLANT'S BENCHMARKING BASED ON CUP METHOD AND THE CHANGING THE MOST APPROPRIATE METHOD TO TNM METHOD; GROUND NO. 7 - REJECTION OF CUP 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN NOT APPRECIATING THAT THE INTERNATIONAL TRANSACTIONS OF THE APPELLANT ARE AT ARM'S LENGTH BASED ON THE BENCHMARKING ANALYSIS AS PER CUP METHOD; GROUND NO. 8 CONSISTENCY 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON BLE DRP ERR ED IN NOT FOLLOWING THE PRINCIPLE OF CONSISTENCY; GROUND NO.9 - INCORRECT CHARACTERISATION OF THE APPELLANT P A G E | 3 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) 9. WITHOUT PREJUDICE TO THE GROUNDS TAKEN ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARN ED A.O UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN WRONGLY CHARACTERISING THE APPELLANT AS A SOFTWARE DEVELOPER, GROUND NO. 10 - INCORRECT SELEC TION OF COMPARABLES 10. WITHOUT PREJUDICE TO THE GROUNDS TAKEN ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON BLE DRP ERRED IN SELECTING COMPANIES AS COMPARABLES FOR THE PURPOSE OF DETERMININ G THE ARM'S LENGTH PRICE WITHOUT CONSIDERING THE FACT THAT THEIR FUNCTIONS UNDERTAKEN, ASSETS EMPLOYED AND RISKS BORNE WERE NOT COMPARABLE TO THOSE OF THE APPELLANT; G ROUND NO. 11 - MULTIPLE YEAR DATA 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON B LE DRP ERRED IN NOT ALLOWING USE OF MULTIPLE YEAR DATA AS SPECIFIED IN PROVISO TO RULE 10B (4) OF THE RULES; GROUND NO. 12 - NO INTENTION TO SHIFT PROFITS OUTSIDE INDIA 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN NOT APPRECIATING THAT THE APPELLANT WAS CLAIMING TAX EXEMPTI ON UNDER SECTION 10 A OF THE ACT AND ACCORDINGLY HA D NO INTENTION TO SHIFT PROFITS OUTSIDE INDIA BY MANIPULATING THE PRICES CHARGED IN ITS INTERNATIONAL TRANSACTIONS WHICH IS A PRE - REQUISITE CONDITION TO MAKE ANY ADJUSTMENT UNDER THE PROVISION OF CHAPTER X OF THE ACT; THE APPELLANT PRAYS THAT THE ADDITION MADE BY THE LEARNED AO / TPO AND UPHELD BY THE HON'BLE DRP BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PA PERS AS MAY BE CONSIDERED NECESSARY EITHER AT OR BEFORE THE HEARING OF THIS APPEAL AS PER LA W. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS A WHOLLY OWNED SUBSIDIARY OF RHYTHM AND HUES STUDIOS INC., USA IS ENGAGED IN THE BUSINESS OF PROVIDING GRAPHIC S AND ANIMATION SERVICES TO MOTION PICTURE AND TELEVISION INDUSTRY. THE ASSESEE HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 30.11.2011, DECLARING ITS TOTAL INCOME AT RS.50,91,847/ - UNDER SEC.115JB OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC.143(2) OF THE ACT. 3. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVING THAT THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS A SSOCIATE E NTERPRISE (FOR SHORT AES) EXCEEDING AN AMOUNT OF RS.15 CRORES, THUS MADE A REFERENCE UNDER SEC.92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER - II (3), MUMBAI (FOR SHORT TPO) FOR COMPUTING THE ARM S LENGTH PRICE (FOR SHORT ALP) OF THE SAID TRANSACTIONS. P A G E | 4 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) 4. DURING THE COURSE OF THE PROCE EDINGS, IT WAS OBSERVED BY THE TPO THAT BOTH THE ASSESSEE AND ITS AE I.E M/S RHYTHM AND HUES STUDIOS INC., USA WERE ENGAGED IN THE BUSINESS OF PROVIDING VISUAL EFFECTS AND COMPUTER ANIMATION FOR FEATURE FILMS, TELEVISION COMMERCIAL S, THEME PARK RIDES AND M USIC VIDEOS. IT WAS OBSERVED BY HIM THAT THE ENTIRE BUSINESS OF THE ASSESSEE WAS BASED ON OUTSOURCED WORK GIVEN BY ITS CLIENTS AND UNDERTAKEN ON BEHALF OF ITS AE I.E THE PARENT COMPANY. IT WAS NOTICED BY THE A.O , THAT THE ASSESSEE OFFERED A BROAD RANGE OF SOFTWARE SERVICE S AND POST PRODUCTION SOLUTION S SUCH AS THE V ISUAL EFFECT S (VFX), ANIMATION, DIGITAL INTERMEDIATE, DIGITAL ASSET MANAGEMENT AND DISTRIBUTION. AS PER THE RECORDS, IT WAS OBSERVED BY HIM THAT THE SUBSIDIARIES OF THE ASSESSEE WERE LOCATED IN I NDIA, C ANADA, USA & U.K. A PERUSAL OF THE T.P STUDY REPORT REVEAL ED, THAT THE ASSESSEE FOR THE PURPOSE OF ITS ALP ANALYSIS HAD ADOPTED INTERNAL CUP METHOD AS THE M OST A PPROPRIATE M ETHOD (FOR SHORT MAM) . IT WAS OBSERVED BY THE TPO, THAT THE ASSESSEE DUR ING THE YEAR HAD DONE TRANSACTIONS WITH UNCONTROLLED THIRD PART Y APART FROM DOING TRANSACTIONS WITH ITS AE. HOWEVER, THE TPO WAS OF THE VIEW THAT THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO ITS AE AND THE THIRD PARTIES DID NOT SATISFY THE EXACT LEVE L OF COMPARABILITY AS WAS REQUIRED IN CUP METHOD. IN FACT, THE TPO WAS OF THE VIEW , THAT AS THE ASSESSEE HAD USED SOFTWARE PROGRAMMES TO BUILD ANOTHER SOFTWARE , AND FEATURE S OF THE PRODUCTS VARIED FROM CUSTOMER TO CUSTOMER, THEREFORE, IT WAS NOT POSSIBLE T O COMPARE VARIOUS CUSTOMISED PRODUCTS. ON THE BASIS OF HIS AFORESAID CONVICTION THE TPO REJECTED THE CUP METHOD THAT WAS ADOPTED BY THE ASSESSEE AND APPL IE D TNMM AS THE MOST APPROPRIATE METHOD, ALONG WITH A LIST OF 20 COMPARABLES FOR CAR RYING OUT THE ALP ANALYSIS , AS UNDER: SR. NO. COMPANY LONG NAME 1. ACROPETAL TECHNOLOGIES LIMITED (SEGMENT) 2. AKSHAY SOFTWARE TECHNOLOGIES LTD. 3. CELSTREAM TECHNOLOGIES PVT. LTD. 4. EVOKE TECHNOLOGIES PVT.LTD . 5. E - INFOCHIPS LIMITED 6. E - ZEST SOLUTIONS LIMITED 7. IGATE GLOBAL SOLUTIONS LTD. 8. INFOSYS LTD. 9. KIREETI SOFT TECHNOLOGIES LTD. 10. LARSEN & TOUBRO INFOTECH LTD. 11. MINDTREE LIMITED (SEGMENT) 12. PERSISTENT SYSTEMS & SOLUTIONS LTD. (MERGED) 13. PERSISTENT SYSTEMS LTD. P A G E | 5 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) 14. R.S. SOFTWARE (INDIA) LD. 15. SANKHYA INFOTECH LIMITED 16. SASKEN COMMUNICATION TECHNOLOGIES LTD. 17. TATA ELXSI LTD. (SEGMENT) 18. THIRDWARE SOLUTIONS 19. WIPRO TECHNOLOGIES LTD. 20. ZYLOGSTYSTEMS LTD. OBJECTIONS FILED BY THE ASSESSEE AS REGARDS APPLYING OF TNMM WERE REJECTED BY THE TPO. IN FACT, IT WAS OBSERVED BY THE TPO THAT IN A.Y. 2009 - 10 ALSO TNMM WAS APPLIED IN THE CASE OF THE ASSESSEE AFTER REJECTING THE CUP METHOD. THE TPO JUSTIFIED THE ADOPTION OF TNMM AS THE MOST APPROPRIATE METHOD FOR MULTIPLE REASONS, VIZ. (I) THAT, THE TNMM WAS APPLIED IN THE CASE OF THE ASSESSEE FOR A.Y. 2009 - 10; (II) THAT, AS THE THIRD PARTY TRANSACTIONS IN THE CASE OF THE ASSESSEE WERE ONLY TO A MINIMAL EXTENT OF 1.2% OF THE TOTAL TRANSACTIONS, THEREFORE, IN THE BACKDROP OF THE LIMITED VOLUME OF SUCH TRANSACTIONS THE CUP METHOD COULD NOT BE APPLIED; AND (III) THAT, AS THE ACTIVITIES OF THE ASSESSEE WERE AKIN TO PROVIDING SOFTWARE SERVICES AND NO TWO SOFTWARE S CAN BE SIMILA R AS THE NATURE OF VISUAL EFFECTS WOULD BE DIFFERENT FOR BOTH THE ASSESSEE AND THE THIRD PARTY, THEREFORE, DUE TO DIFFERENCE IN THE NATURE OF WORK ALSO THE CUP METHOD COULD NOT BE APPLIED FOR BENCHMARKING PURPOSES. ON THE BASIS OF HIS AFORESAID DELIBERATIO NS, THE TPO AFTER APPLYING THE TNMM WORKED OUT THE MEAN PLI I.E OP/OC OF THE 20 COMPARABLES AT 23.64%. AS THE PLI OF THE ASSESSEE (OP/OC) WAS WORKED OUT AT - 0.40%, THEREFORE, THE TPO BY APPLYING THE MEAN PLI O F THE COMPARABLES WORKED OUT A TP ADJUSTMENT OF RS.7,18,01,446/ - . 5. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC.92CA(3) OF THE ACT, DATED 29.01.2015, THEREIN PASSED A DRAFT ASSESSMENT ORDER UNDER SEC. 144C R.W.S 143(3), DATED NIL. ON THE BASIS OF THE DRAFT ASSESSMENT ORDER, THE A.O WORKED OUT THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS AT RS.7,91,22,944/ - AND BOOK PROFIT UNDER SEC. 115JB AT RS.50,91,847/ - . 6. AGGRIEVED, THE ASSESSEE FILED OBJECTIONS WITH THE DISPUTE RESOLUTION PANEL - 2, MUMBAI (FOR SHORT DRP) . THE DRP WAS NOT PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE THAT THE TPO WAS IN ERROR IN REJECTING THE CUP METHOD AND SUBSTITUTING THE SAME BY TNMM. IT WAS OBSERVED BY THE DRP , THAT THE CUP METHOD ADOPTED BY THE ASSESSEE COMPANY WAS NOT BROAD BASED AS IT DID NOT INVOLVE MULTIPLE PARTIES. IT WAS NOTICE D BY THE DRP , THAT THE THIRD PARTY TRANSACTIONS OF THE ASSESSEE FORMED ONLY 1.2% OF THE TOTAL TRANSACTIONS , WHICH THUS DID NOT P A G E | 6 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) JUSTIFY THE APPL ICATION OF CUP METHOD. ALSO, IT WAS OBSERV E D BY THE DRP , THAT THE SERVICES PROVIDED BY THE ASSESSEE TO THE THIRD PARTIES WERE DISTINGUISHABLE AS AGAINST THOSE RENDERED TO ITS AE. FURTHER, IT WAS OBSERVED BY THE DRP , THAT THE ASSESSEE HAD PROVIDED ANIMATION SERVICES TO THE THIRD PARTY VIZ. Q . E . D FILMS FOR THREE SMALL ADVERTISEMENT S ONLY , WHICH WERE FOR A SHORT SPAN OF 50 SECOND AND 10 SECOND ONLY. ON THE CONTRARY, THE ASSESSEE COMPANY HAD PROVIDED SERVICES TO ITS AE VIZ. M/S RHYTHM & HUES INC., USA FOR FEATU RE FILMS AND TELEVISION. IT WAS ALSO NOTICED BY THE DRP THAT THE CLAIM OF THE ASSESSEE THAT IT HAD CHARGED ITS AE @ USA 893 PER MAN WEEK AND USD 808 PER MAN WEEK TO THIRD PARTIES ALSO COULD NOT BE VERIFIED IN THE ABSENCE OF THE RELEVANT DATA ON RECORD. APA RT THERE FROM, IT WAS OBSERVED BY THE DRP THAT WHILE FOR THE SAMPLE BILLS RAISED BY THE ASSESSEE ON ITS AE REVEALED THAT THE INVOICES WERE RAISED ON THE BASIS OF USD PER MAN WEEK ALONG WITH DETAILED CALCULATIONS, HOWEVER, THE INVOICES RAISED ON THE SINGLE THIRD PARTY NAMELY Q . E . D FILMS WERE ON A LUMP SUM BASIS AND THERE WAS NO CALCULATION OF RUPEES PER MAN WEEK AVAILABLE IN RESPECT OF THE SAME. ALSO, IT WAS OBSERVED BY THE DRP , THAT A PERUSAL OF THE MOU, DATED 01.11.2010 BETWEEN THE ASSESSEE AND ITS AE I.E RHYTHM AND HUES INC. , USA , REVEALED THAT THE ASSESSEE COMPANY WAS TO PROVIDE TO THE AE NOT ONLY OFFSHORE COMPUTER GRAPHICS AND ANIMATION SERVICES, BUT ALSO SOFTWARE DEVELOPMENT SERVICES. IN THE BACKDROP OF THE AFORESAID FACTS, THE DRP WAS OF THE VIEW THAT AS NO SOFTWARE DEVELOPMENT SERVICES WERE TO BE PROVIDED BY THE ASSESSEE TO THE THIRD PA RTY VIZ. Q . E . D FILMS, THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE FUNCTIONS PERFORMED BY THE ASSESSEE COMPANY IN RELATION TO THE AE VIS - A - VIS THIRD PARTY WERE ENTIRELY DIFFERENT. IT WAS ALSO OBSERVED BY THE DRP, THAT WHILE FOR THE THIRD PARTY WAS BASE D IN INDIA, THE AE VIZ. RHYTHM & HUES INC. W AS STATIONED IN USA. ACCORDINGLY, THE DRP WAS OF THE VIEW THAT THERE WAS A CONSIDERABLE DIFFERENCE IN THE TWO MARKET S BECAUSE OF THE GEOGRAPHICAL LOCATION. THE DRP ALSO NOTED THAT THE ASSESSEE COMPANY HAD PROVIDE D CUSTOMISED SOFTWARE TO THE AE AND THE FEATURES OF THE SE SOFTWARE PRODUCTS VARIED CONSIDERABLY FOR EACH CONTRACT. ON THE BASIS OF HIS AFORESAID DELIBERATIONS, IT WAS CONCLUDED BY THE DRP THAT AS THE ASSESSEE HAD FAILED TO PLACE ON RECORD THE DETAILS OF TH E AE AND THE NON - AE CONTRACTS , THEREFORE, IT COULD SAFELY BE CONCLUDED THAT THE CUP METHOD COULD NOT HAVE BEEN APPLIED AS THE MOST APPROPRIATE METHOD. ACCORDINGLY, THE DRP UPHELD THE REJECTION OF CUP METHOD AND APPLICATION OF THE TNMM BY THE TPO AS THE MOS T APPROPRIATE METHOD . AS REGARDS THE CONTENTION ADVANCED BY THE ASSESSEE THAT THE TPO HAD ERRED IN CONCLUDING THAT THE ASSESSEE WAS PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AE , IT P A G E | 7 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) WAS OBSERVED BY THE DRP , THAT A PERUSAL OF THE FUNCTIONAL ANALYSIS OF THE ASSESSEE IN THE TP STUDY REPORT, AND ALSO THE VARIOUS CLAUSES OF THE MOU AND THE OTHER MATERIAL AVAILABLE ON RECORD REVEALED THAT THE ASSESSEE COMPANY WAS MAINLY PROVID ING SOFTWARE DEVELOPMENT SERVICES. IN FACT, IT WAS OBSERVED BY THE DRP , THAT EVEN TH E OFFSHORE COMPUTER GRAPHICS AND ANIMATION SERVICES WERE BEING PROVIDED BY THE ASSESSEE WITH THE HELP OF SOFTWARE ONLY. ON THE BASIS OF IT S AFORESAID OBSERVATIONS, IT WAS CONCLUDED BY THE DRP THAT NO INFIRMITY DID EMERGE FROM THE ACTION OF THE TPO INSOFAR THE SELECTION OF THE COMPARABLES WHICH WERE PROVIDING SOFTWARE DEVELOPMENT SERVICES WAS CONCERNED. AT THE SAME TIME, THE DRP OBSERVED THAT TWO COMPARABLES VIZ. (I) INFOS Y S LTD.; AND (II) WIPRO TECHNOLOGIES LTD, BOTH OF WHICH WERE SOFTWARE GIANTS HAVING SUBSTANTIAL BRAND VALUE COULD NOT HAVE BEEN SELECTED AS COMPARABLES TO THE ASSESSEE COMPANY. ACCORDINGLY, THE DRP DIRECTED THE AO/TPO TO REMOV E THE AFORESAID TWO COMPANIES FROM THE FINAL LIST OF COMPARABLES AND THEREIN REWORK OUT THE TP ADJUSTMENT. 7. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE DRP UNDER SEC. 144C(5) OF THE ACT, DATED 14.12.2015, THEREIN PASSED THE FINAL ASSESSMENT ORDER UN DER SEC. 143(3) R.W.S 144C(13), DATED 29.01.2016 , AS PER WHICH THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS WAS ASSESSED AT RS.7,05,29,585/ - AND ITS BOOK PROFIT UNDER SEC. 115JB WAS DETERMINED AT RS.50,91,847/ - . 8. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13), DATED 29.01.2016 HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED , THAT AS INSTRUCTED , THE GROUND S OF APPEAL NO. 1 TO 4 AND GROUND S OF APPEAL NO. 11 &12 ARE NOT BEING P RE SSED. ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID CONCESSION OF THE LD. A.R THE G ROUND S OF APPEAL NO. 1 TO 4 & G ROUND S OF APPEAL NO. 11 & 12 ARE DISMISSED AS NOT PRESSED. 9. ON MERITS , THE LD. A.R TOOK US THROUGH THE FACTS OF THE CASE. IT WAS SUBMITTED BY THE LD. A.R , THAT THE ASSESSEE COMPANY WAS PROVIDING GRAPHICS AND ANIMATION SERVICES TO BOTH ITS AE AND THE THIRD PART Y . IT WAS SUBMITTED B Y THE LD. A.R , THAT THE ASSESSEE HAD ADOPTED INTERNAL CUP METHOD FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS. TAKING US THROUGH THE CONTROVERSY INVOLVED IN THE PRESENT CASE, IT WAS SUBMITTED BY THE LD. A.R , THAT THE TPO HAD REJECTED THE P A G E | 8 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) CUP METHOD AND HAD APPLIED TNMM AS THE MAM FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS. OBJECTING TO THE AFORESAID SUBSTITUTION OF THE MOST APPROPRIATE METHOD VIZ. CUP METHOD THAT WAS ADOPTED BY THE ASSESSEE, IT WAS SUBMITTED BY THE LD. A.R THAT THE CUP METHOD WAS AC CEPTED BY THE TPO IN A.Y. 2006 - 07 AND ALSO IN THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2010 - 11. INSOFAR A.Y. 2009 - 10 WAS CONCERNED, IT WAS SUBMITTED BY THE LD. A.R THAT IN THE SAID YEAR THE CUP METHOD WAS REJECTED BY THE TPO , FOR THE REASON , THAT NO COMPARABLE UNCONTROLLED TRANSACTION FOR THE SAID YEAR WAS AVAILABLE. IN ORDER TO FORTIFY HIS AFORESAID CLAIM , THE LD. A.R TOOK US THROUGH THE ORDER PASSED BY THE TPO UNDER SEC. 92CA (3), DATED 18.01.2013 FOR A.Y. 2009 - 10. A PERUSAL OF THE AFORESAID ORDER T HEREIN REVEAL ED, THAT AS IN A.Y. 2009 - 10 THE ASSESSEE DID NOT HAVE ANY UNCONTROLLED THIRD PARTY TRANSACTIONS, THEREFORE, IT HAD RELIED ON THE INTERNAL CUP FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2008 - 09. HOWEVER, THE TPO BEING OF THE VIEW THAT THE INT ERNAL CUP FOR A.Y. 2008 - 09 WOULD NOT BE RELEVANT FOR THE YEAR UNDER CONSIDERATION, THEREFORE, FOR THE SAID REASON HAD REJECTED THE CUP METHOD . IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE LD. A.R THAT CUP METHOD WAS NOT PRINCIPALLY REJECTED BY THE TPO IN A.Y. 2009 - 10, BUT WAS REJECTED FOR THE REASON THAT THERE WAS NO UNCONTROLLED THIRD PARTY TRANSACTION AVAILABLE DURING THE SAID YEAR ITSELF. FURTHER, THE LD. A.R TOOK US THROUGH THE FORM NO. 3CEB OF THE ASSESSEE COMPANY FOR THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2010 - 11, WHEREIN TOO IT HAD DETERMINED THE ALP FOR ITS INTERNATIONAL TRANSACTIONS OF PROVIDING GRAPHICS & ANIMATION SERVICES TO MOTION PICTURES AND TELEVISION INDUSTRY BY ADOPTING CUP METHOD. IT WAS SUBMITTED BY THE LD. A.R , THAT THE SAID CUP ME THOD WAS ACCEPTED BY THE TPO IN A.Y. 2010 - 11. IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION THE LD. A.R HAD DRAWN OUR ATTENTION TO THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 24.01.2014 FOR A.Y. 2010 - 11 IN THE CASE OF THE ASSESSEE. ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BY THE LD. A.R , THAT NOW WHEN THE CONSISTENTLY THE CUP METHOD HAD BEEN ACCEPTED BY THE REVENUE AS THE MAM FOR BENCHMARKING ANALYSIS, THEREFORE, IT WAS INCORRECT ON THE PART OF THE TPO IN TAKING A DE PARTURE FROM THE SAID METHOD AND SUBSTITUTING THE SAME BY TNMM DURING THE YEAR UNDER CONSIDERATION. IN ORDER TO SUPPORT HIS AFORESAID CONTENTION THAT A CONSISTENT APPROACH IS TO BE FOLLOWED BY THE REVENUE WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE D IFFERENT ASSESSMENT YEARS HAD NOT WITNESSED ANY CHANGE, THE LD. A.R HAD RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RADHA SOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC). ALSO, RELIANCE WAS PLACED ON THE ORDER OF THE ITAT, AHMEDABAD I BENCH, AHMEDABAD IN THE P A G E | 9 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) CASE OF SCHNEIDER ELECTRIC INDIA PVT. LTD. VS. DY. CIT (ITA NO. 209/AHD/2015), DATED 31.05.2017). ON THE BASIS OF THE AFORESAID FACT S, IT WAS SUBMITTED BY THE LD. A.R THAT AS IN THE PRESENT CASE NEITHER THE FACTS NOR THE FUNCTIONAL PROFILE OF THE ASSESSEE DURING THE YEAR HAD WITNESSED ANY CHANGE AS IN COMPARISON TO THE PRECEDING YEARS , THEREFORE, THE LOWER AUTHORITIES HAD ERRED IN DISL ODGING THE CUP METHOD WHICH WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE AND ACCEPTED BY THE REVENUE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS IN THE PRECEDING YEARS. ALSO, IN ORDER TO IMPRESS UPON US THAT THE ASSESSEE WAS RENDERING THE SAME GRAPHICS AN D ANIMATION SERVICES TO BOTH ITS AE AND THE NON - AE , THE LD. A.R HAD DRAWN OUR ATTENTION TO THE INVOICE S WHICH WERE RAISED BY THE ASSESSEE ON ITS AE AND THE THIRD PART Y . THE LD. A.R ALSO OBJECTED TO THE OBSERVATIONS OF THE TPO/DRP THAT THE ASSESSEE HAD DURI NG THE YEAR PROVIDED SOFTWARE DEVELOPMENT SERVICES TO ITS AE. APART THERE FROM, THE LD. A.R HAD DRAWN OUR ATTENTION TO THE REPLY DATED 19.01.2014, THAT WAS FILED WITH THE TPO, WHEREIN IT WAS SUBMITTED BEFORE HIM THAT THE ASSESSEE HAD PROVIDED V ISUAL EFFECT S (VFX) FOR THE TELEVISION COMMERCIAL S OF Q . E . D FILMS. AS SUCH , IT WAS THE CLAIM OF THE LD. A.R THAT THE FACT THAT THE ASSESSEE WAS PROVIDING SIMILAR SE RVICES TO ITS AE AND THE NON - AE STOOD PROVED IN THE COURSE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITI ES. AS REGARDS THE ADOPTION OF TNMM AS THE MAM BY THE TPO/DRP, IT WAS SUBMITTED BY THE LD. A.R , THAT FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE , THE TPO HAD WITHOUT MEETING OUT THE OBJECTION S OF THE ASSESSEE HAD ADOPTED 20 C OMPANIES AS COMPARABLES, WHICH HOWEVER WERE SCALED DOWN TO 18 COMPANIES BY THE DRP. IT WAS AVERRED BY THE LD. A.R , THAT AS THE AFORES AID 18 COMPANIES WHICH HAD BEEN FINALLY SELECTED AS COMPARABLES BY THE DRP WERE FUNCTIONALLY INCOMPARABLE, FOR THE REASON , THAT THEY UNLIKE THE ASSESSEE WERE PRIMARILY INTO SOFTWARE DEVELOPMENT, THEREFORE, NO FEASIBLE COMPARABILITY ANALYSIS COULD HAVE BEEN ARRIVED AT ON THE BASIS OF THEIR AVERAGE PLI (OP/OC). IN FACT, THE LD. A.R HAS TAKEN US THROUGH PAGE 47 OF THE A SSESSES PAPER BOOK (FOR SHORT APB) AND HAD CLAIMED THAT THE ASSESSEE WAS ONLY PROVIDED WITH A LIST OF THE 20 COMPANIES BY THE TPO FOR BENCHMARKING ANALYSIS. TO SUM UP, IT WAS THE CLAIM OF THE LD. A.R , THAT NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE FOR PUTTING FO RTH ITS OBJECTIONS TO THE SELECTION OF THE AFORESAID COMPANIES AS COMPARABLES BY THE TPO . 10 . PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE ( FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE CUP METHOD ADOPTED BY THE P A G E | 10 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) ASSESSEE COMPANY WAS NOT BROAD BASED AS IT DID NOT INVOLVED MULTIPLE PARTIES, THEREFORE, THE TPO/DRP HAD RIGHTLY REJECTED THE INTERNAL CUP METHOD THAT WAS ADOPTED BY THE ASSESSEE. ALSO, IT WAS SUBMITTED BY THE LD. D.R , THAT UNLIKE THE SERVICES FOR FEATURE FILMS AND TELEVISION WHICH WERE PROVIDED BY THE ASSESSEE TO ITS AE VIZ. RHYTHM & HUES INC., USA, SERVICES WHICH WERE PROVIDED TO THE SOL ITARY THIRD PARTY/NON - AE I.E Q . E . D FILMS WAS ONLY IN RESPECT OF THREE SMALL ADVERTISEMENT S, WHICH TOO WERE FOR A SHORT TIME SPAN OF 50 SECOND S AND 10 SECOND S ONLY. AS SUCH, IT WAS SUBMITTED BY THE LD. D.R , THAT AS EVEN THE SERVICES PROVIDED BY THE ASSESSEE TO ITS AE AND THE NON - AE WERE SUBSTANTIAL LY AT VARIANCE, THEREFORE, THE CUP METHOD ADOPTED BY THE ASSESSEE HAD RIGHTLY BEEN REJECTED BY THE LOWER AUTHORITIES. 11. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, AS WELL AS CONSIDERED THE JUDICIAL PRONO UNCEMENT S RELIED UPON BY THEM. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING GRAPHICS AND ANIMATION TO MOTION PICTURES AND TELEVISION INDUSTRY. AS OBSERVED BY US HEREINABOVE, THE ASSESSEE DURING THE YEAR HAD PROVIDED SERV IC ES TO ITS AE VIZ. M/S RHYTHM AND HUES INC., USA, AND ALSO TO A THIRD PARTY I.E Q . E . D FILMS. THE ASSESSEE FOR THE PURPOSE OF BENCHMARKING ITS INTERNATIONAL TRANSACTIONS HAD ADOPTED INTERNAL CUP METHOD AS THE MOST APPROPRIATE METHOD (MAM) . HOWEVER, THE TPO HOLDING A CONVICTION THAT INTERNAL CUP METHOD COULD NOT BE SAFELY APPLIED FOR BENCHMARKING ANALYSIS IN THE CASE OF THE ASSESSEE COMPANY, HAD THUS REJECTED THE SAME FOR MULTIPLE REASONS, VIZ. (I) THAT, IN A.Y. 2009 - 10 ALSO TNMM WAS APPLIE D BY THE TPO AS AGAINST CUP METHOD ADOPTED BY THE ASSESSEE; (II) THAT, THE THIRD PARTY TRANSACTIONS FORM ED JUST 1.2% OF THE TOTAL TRANSACTIONS; AND (III) THAT, AS THE ASSESSEE WAS PROVIDING SOFTWARE SERVICES TO ITS AE , THEREFORE, FOR THE REASON THAT NO TWO SOFTWARES CAN BE SIMILAR AS THE NATURE OF VISUAL EFFECTS WOULD BE DIFFERENT FOR BOTH THE ASSESSEE AND THE THIRD PARTY, THUS , CUP METHOD COULD NOT BE ACCEPTED AS THE APPROPRIATE METHOD FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. AS OBS ERVED BY US HEREINABOVE, THE TPO AFTER SUBSTITUTING TNMM AS THE MAM, HAD THEREIN SELECTED 20 PARTIES WHICH WERE INTO SOFTWARE DEVELOPMENT SERVICES, AND ON THE SAID BASIS HAD WORKED OUT AN UPWARD TP ADJUSTMENT OF RS.7,18,01,446/ - . ON OBJECTIONS FILED BY THE ASSESSEE , THE DRP HAD EXCLUDED TWO COMPARABLES VIZ. (I) WIPRO TECHNOLOGIES LTD, AND (II) INFOS Y S LTD. , FOR THE REASON , THAT THE SAID SOFTWARE GIANTS COULD NOT FEASIBLY BE SELECTED AS COMPARABLE TO THE ASSESSEE COMPANY. AT THE SAME TIME, THE P A G E | 11 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) DRP UPHELD THE SUBSTITUTION OF INTERNAL CUP METHOD BY TNMM AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE BY THE TPO. ALSO, IT WAS OBSERVED BY THE DRP , THAT AS THE ASSESSEE WAS INTO SOFTWARE DEVELOPMENT SERVICES, THEREFORE , NO INFIRMITY DID EMERGE FROM THE ORDER OF THE TPO AS REGARDS SELECTION OF REMAINING 18 COMPARABLES FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE . 12 . ON A PERUSAL OF THE RECORDS , IT STANDS REVEALED THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2011 - 12 HAD CARRIED OUT THIRD PARTY TRANSACTIONS OF RS.39,24,600/ - AS AGAINST ITS TOTAL TRANSACTIONS OF RS.30,14,04,799/ - . AS SUCH, THE THIRD PARTY TRANSACTIONS OF THE ASSESSEE WORK S OUT TO T HE TUNE OF 1. 2 0 % OF ITS TOTAL TRANSACTIONS. ADMITTEDLY, AS CLAIMED BY THE LD. A.R, THE FACT SITUATION IN THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2010 - 11 WAS ALSO NOT MUCH DIFFERENT. IN THE SAID PRECEDING YEAR THE ASSESSEE HAD PROVIDED THIRD PARTY TRANSAC TIONS OF RS.46,50,000/ - AS AGAINST ITS TOTAL TRANSACTION S OF RS.25,52,82,998/ - , WHICH THUS WORKED OUT TO 1.84% OF THE TOTAL VALUE OF TRANSACTIONS. ALSO, I N THE IMMEDIATELY PRECEDING YEAR VIZ. A.Y. 2010 - 11 THE ASSESSEE HAD ADOPTED CUP METHOD FOR BENCHMARKIN G ITS INTERNATIONAL TRANSACTIONS. THE AFORESAID FACTS CAN SAFELY BE GATHERED FROM A PERUSAL OF FORM NO. 3CEB FILED BY THE ASSESSEE UNDER SEC. 92E OF THE ACT ( PAGE 190 - 194 OF APB). IT IS ALSO A FACT BORNE FROM THE RECORDS THAT CUP METHOD THAT WAS ADOPTED BY THE ASSESSEE AS MAM FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS WAS ACCEPTED BY THE TPO, VIDE HIS ORDER PASSED UNDER SEC.92CA(3), DATED 24.01.2014 IN A.Y. 2010 - 11. ALSO , IT IS THE CLAIM OF THE LD. A.R THAT THE CUP METHOD WHICH WAS APPLIED IN A.Y. 20 06 - 07 FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS WAS ACCEPTED BY THE DEPARTMENT. IN FACT, WE FIND THAT THE SAID FACT FINDS A CLEAR MENTION IN THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 29.01.2015 FOR THE YEAR UNDER CONSIDERATION. AS FOR TH E A.Y. 2007 - 08 AND A.Y. 2008 - 09 , IT WAS CLAIM ED BY THE LD. A.R THAT NO TP REFERENCE WAS MADE BY THE A . O DURING THE SAID RESPECTIVE YEARS. AS REGARDS A.Y. 2009 - 10, IT WAS SUBMITTED BY THE LD. A.R THAT AS NO CONTEMPORANEOUS TRANSACTIONS OF THE ASSESSEE IN THE DOMESTIC MARKET FOR THE SAID YEAR WERE AVAILABLE, THEREFORE, IT WAS FOR THE SAID REASON THAT THE CUP METHOD THAT WAS ADOPTED BY THE ASSESSEE WAS REJECTED BY THE TPO . IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE LD. A.R THAT THE ADOPTION OF CUP METHOD BY THE ASSESSEE FOR A.Y.2009 - 10 WAS NOT REJECTED ON THE GROUND THAT THE SAME WAS NOT THE MOST APPROPRIATE METHOD, BUT FOR THE REASON , THAT NO CONTEMPORANEOUS TRANSACTIONS FOR THE SAID YEAR IN ORDER TO FACILITATE SUCH COMPARISON WAS P A G E | 12 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) AVAILABLE. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS THE CLAIM OF THE LD. A.R THAT CUP METHOD THAT WAS BEING FOLLOWED BY THE ASSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS RIGHT FROM ITS INCEPTION IN A.Y. 2006 - 07 TILL A.Y. 2010 - 11 WAS CONSISTENTLY ACCEPTED BY THE REVENUE AS THE MOST APPROPRIATE METHOD . LD. A.R DRAWING SUPPORT FROM THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RADHA SOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) , HAD SUBMITTED, THAT AS THE CUP METHOD THAT WAS CONSISTENTLY ADOPTED BY THE A SSESSEE AS MAM IN THE PRECEDING YEARS WAS THROUGHOUT ACCEPTED BY THE REVENUE , THEREFORE, IT WAS NOT CORRECT ON THE PART OF THE LOWER AUTHORITIES TO HAVE ADOPT ED AN INCONSISTENT APPROACH AND REJECT ED THE SAID METHOD DURING T H E YEAR UNDER CONSIDERATION. APAR T THERE FROM, THE LD. A.R IN ORDER TO DRIVE HOME HIS AFORESAID CONTENTION HAD ALSO RELIED ON THE ORDER OF THE ITAT, AHMEDABAD, I BENCH, AHMEDABAD IN CASE OF SCHNIEDRE ELECTRIC INDIA PVT. LTD. VS. DY. CIT, CENTRAL - 1(2), VADODARA (ITA NO. 209/AHD/2015, DATED 31.05.2017) . ON THE BASIS OF HIS AFORESAID SUBMISSIONS , IT WAS THE CASE OF THE LD. A.R , THAT THE REVENUE WITHOUT ANY COGENT REASON COULD NOT HAVE REJECTED THE METHOD OF BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTION S OF THE ASSESSEE , WHICH TI LL DATE HAD CONSISTENTLY BEEN ACCEPTED IN THE PAST . 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTIONS ADVANCED BY THE LD. A.R IN THE BACKDROP OF THE ORDERS OF THE LOWER AUTHORITIES AND TH E MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, WHERE A FU NDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION T O BE CHANGED IN A SUBSEQUENT YEAR. BUT THEN, THE ADHERENCE TO THE AFORESAID PRINCIPLE REQUIRES THAT THERE IS NO CHANGE IN THE FACTUAL POSITION IN THE AFOREMENTIONED YEARS. WE ARE AFRAID THE AFORE SAID PRINCIPLE OF CONSISTENCY CANNOT BE APPLIED TO THE FACTS OF THE CASE OF THE ASSESSEE BEFORE US. IN FACT, I T IS NOT THE CASE OF THE ASSESSEE THAT IT HAD ENTERED INTO SIMILAR TRANSACTIONS WITH THE AFORESAID THIRD PARTY I.E Q . E . D F ILMS I N EITHER OF THE PRECEDING YEARS AND THE SAME WERE ACCEPTED AS A COMPARABLE BY THE REVENUE . RATHER, O N THE CONTRARY, WE FIND THAT THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO THE THIRD PARTY I.E Q . E . D FILMS DURING THE YEAR ARE CLEARLY DISTINGUISHABLE AS AGAINST THOSE RENDERED TO ITS AE. AS OBSE RVED BY US HEREINABOVE, WHILE FOR THE ASSESSEE WAS PROVIDING VFX SERVICES TO ITS AE VIZ. M/S RHYTHM & HUES INC., USA FOR FEATURE FILMS AND TELEVISION, ON THE CONTRARY IT HAD PROVIDED ANIMATION SERVICES TO T H E THIRD PARTY P A G E | 13 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) VIZ. Q . E . D FILMS FOR THREE SMALL AD VERTISEMENTS WHICH WERE SPREAD OVER A SHORT SPAN RANGING BETWEEN 10 SECOND S TO 5 0 SECOND S ONLY. APART THERE FROM, WE FIND THAT A PERUSAL OF THE INVOICES RAISED BY THE ASSESSEE ON ITS AE ARE FOR VISUAL EFFECTS/COMPUTER GRAPHICS DONE ON FEATURE FILMS, WHILE FOR THOSE RAISED ON THE THIRD PARTY VIZ. Q . E . D FILMS ARE ABSOLUTELY SILENT ABOUT T H E NATURE OF SERVICES AND ONLY MAKE A MENTION OF THE RESPECTIVE COMMERCIALS VIZ. CHOCOLIEBE COMMERCIAL, IODEX ETC. IN FACT, AS OBSERVED BY THE DRP, THE ASSESSEE HAD PROVI DED ANIMATION SERVICES TO THE THIRD PARTY VIZ. Q . E . D FILMS. ALSO, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE CUP METHOD ADOPTED BY THE ASSESSEE COMPANY WAS NOT BROAD BASED AS IT DID NOT INVOLVE MULTIPLE PARTIES. AS IS DISCER NIBLE FROM THE RECORDS, THE ASSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS WORTH RS. 29,74,80,199/ - BY ADOPTING CUP METHOD HAS USED ITS TRANSACTION WITH A LOCAL VENDOR I.E Q.E.D FILMS, WHICH WERE WORTH RS, 39,24,600/ - ONLY. AS OBSERVED BY US HEREINABOVE, THE SAID THIRD PARTY TRANSACTION OF THE ASSESSEE FORMS JUST 1.2% OF THE TOTAL TRANSACTIONS. AS THE VOLUME OF SUCH THIRD PARTY TRANSACTIONS ARE SO THIN THAT THE SAME IN OUR CONSIDERED VIEW WOULD NO T JUS TIFY APPLICATION OF CUP METHOD. ALSO, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE DRP THAT IN THE ABSENCE OF THE RELEVANT DATA ON RECORD, INCLUDING THE AGREEMENTS RELATING TO THE VARIOUS SERVICES RENDERED BY THE ASSESSEE TO THE THIRD PART Y AND TH E CONTRACT - WISE SERVICES RENDERED TO ITS AE, THE VERACITY OF THE RATES CHARGED TO ITS AE AND THAT CHARGED TO THE THIRD PARTY COULD NOT BE ASCERTAINED. IN FACT, WE FIND THAT A PERUSAL OF THE INVOICES RAISED BY THE ASSESSEE ON ITS AE THOUGH REVEALS A DETAILE D CALCULATION, BUT THE INVOICES RAISED ON Q . E . D FILMS ARE ON LUMP SUM BASIS. AS REGARDS THE RELIANCE PLACED BY THE LD. A.R ON THE PRINCIPLE OF CONSISTENCY, IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN REJECTING T HE CUP METHOD THAT WAS CONSISTENTLY ACCEPTED IN THE PRECEDING YEARS AS THE MAM FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS, WE ARE OF THE VIEW, THAT NOW WHEN THE FACTS INVOLVED IN THE CASE FOR THE YEAR UNDER CONSIDERATION ARE NOT IN PARITY WITH THOSE F OR THE PRECEDING YEAR S , THEREFORE, THE AFORESAID CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED . ALTERNATIVELY, WE FIND THAT EVEN OTHERWISE AS HELD BY THE HONBLE HIGH COURT OF DELH I IN THE CASE OF CWT VS. MEATLES PVT. LTD. (1984) 156 ITR 569 (DEL) THE REVENUE AUTHORITIES CANNOT BE STOPPED FROM TAKING A CORRECT VIEW OF THE STATUTORY PROVISIONS IN A LATER YEAR. ON A SIMILAR FOOTING, THE ITAT, MUMBAI IN THE CASE OF ONWARD TECHNOLOGIES LIMITED VS. DCIT (2014) 147 ITD 534 (MUM) , HAD OBSERVED, THAT APPLICATION OF A WRONG METHOD FOR P A G E | 14 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE CANNOT BE GRANTED A SEAL OF APPROVAL ON THE BASIS OF ACCEPTANCE BY THE TPO IN A PRECEDING YEAR. 14. ADMITTEDLY, CUP METHOD IS A TRADITIONAL TRANSACTION METHOD AND TH E MOST DIRECT AND RELIABLE WAY OF DETERMINING WHETHER PRICES AND CONDITIONS BETWEEN THE ASSESSEE AND ITS AES ARE AT ARMSS LENGTH, OR NOT. BUT THEN , WE ALSO CANNOT REMAIN OBLIVIOUS OF THE FACT, THAT FOR APPLYING CUP METHOD THERE HAS TO BE ACCESS TO RELIABL E COMPARABLES DATA FOR THE UNCONTROLLED TRANSACTIONS. ACCORDINGLY, IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF A N INTERNAL OR EXTERNAL COMPARABLE UNCONTROLLED TRANSACTION AS IN COMPARISON TO THE CONTROLLED T RANSACTION I.E BETWEEN THE ASSESSEE AND ITS AE VIZ. M/S RHYTHM & HUES INC., USA, THE CUP METHOD COULD NOT HAVE BEEN ADOPTED AS THE MAM FOR BENCHMARKING THE ALP OF ITS INTERNATIONAL TRANSACTIONS . AFTER DELIBERATING AT LENGTH ON THE ISSUE UNDER CONSIDERATION AND ALSO CONSIDERING THE OBSERVATIONS OF THE LOWER AUTHORITIES, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THEM THAT CUP COULD NOT HAVE BEEN ADOPTED AS MAM FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. AS A MATTER OF FACT, WE FIND THAT IN A.Y. 2009 - 10 ALSO THE ASSESSEE HAD ADOPTED CUP METHOD, WHICH HOWEVER WAS REJECTED BY THE TPO, FOR THE REASON, THAT NO CONTEMPORANEOUS TRANSACTIONS OF THE ASSESSEE IN THE DOMESTIC MARKET FOR THE SAID YEAR WERE AVAILABLE. WE FIND THAT DURING THE YEAR UND ER CONSIDERATION ALSO, IN ABSENCE OF AN Y INTERNAL OR EXTERNAL COMPARABLE UNCONTROLLED TRANSACTION AS IN COMPARISON TO THE CONTROLLED TRANSACTION I.E BETWEEN THE ASSESSEE AND ITS AE VIZ. M/S RHYTHM & HUES INC., USA, THE CUP METHOD ADOPTED BY THE ASSESSEE HAD RIGHTLY BEEN REJECTED BY THE LOWER AUTHORITIES. ACCORDINGLY, FINDING NO INFIRMITY IN THE REJECTION OF THE CUP METHOD THAT WAS ADOPTED BY THE ASSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION S, WE UPHOLD THE ORDER OF THE A.O/DRP TO THE SAID EXTENT . 1 5 . WE SHALL NOW ADVERT TO THE OBSERVATIONS OF THE LOWER AUTHORITIES WHICH AFTER REJECTION OF CUP METHOD HAD BENCHMARKED ITS INTERNATIONAL TRANSACTION S BY ADOPTING TNMM AS THE MAM . AS OBSERVED B Y US HEREINABOVE, THE TPO HAD INITIALLY SELECTED 20 COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AS P E R TNMM. DRP AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE EXCLUDED TWO COMPARABLES VIZ. (I). INFOSYS LTD; AND (II). WIPR O TECHNOLOGIES LTD., FOR THE REASON, THAT BOTH OF THEM WERE SOFTWARE GIANTS HAVING SUBSTANTIAL BRAND VALUE AND COULD NOT HAVE BEEN SELECTED AS COMPARABLES TO THE ASSESSEE P A G E | 15 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) COMPANY. IT IS THE GRIEVANCE OF THE LD. A.R, THAT THE TPO /DRP WITHOUT CONSIDERING THE OBJECTION S OF THE ASSESSEE THAT THE FUNCTIONS UNDERTAKEN, ASSETS EMPLOYED AND RISKS BORNE BY THE 20 COMPARABLES SELECTED BY TPO (WHICH WERE RESTRICTED TO 18 COMPARABLES BY THE DRP) WERE NOT COMPARABLE TO THE ASSESSEE, HAD THUS WRONGLY INCLUDED THEM IN THE FINAL LIST OF COMPARABLES AND ON THE BASIS OF THEIR AVERAGE PLI (OP/OC) BENCHMARKED THE ALP OF THE INTERNATIONAL TRANSACTION S OF THE ASSESSEE. IN SUM AND SUBSTANCE , IT IS THE CLAIM OF THE LD. A.R THAT AS THE 18 COMPARABLES ( AS SUSTAINED BY THE DRP) WERE FUNCTIONALLY INCOMPARABLE, THEREFORE, THE ASSESSEE HAD OBJECTED TO THE INCLUSION OF THE SAME IN THE FINAL LIST OF COMPARABLES FOR BENCHMARKING THE ALP OF ITS INTERNATIONAL TRANSACTIONS, HOWEVER, THE LOWER AUTHORITIES WITHOUT DISPOSING OFF THE SAID OBJECTIO NS IN THE RIGHT PERSPECTIVE HAD HUSHED THROUGH THE MATTER. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID CONTENTION OF THE LD. A.R AND FIND SUBSTANTIAL FORCE IN THE SAME. AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, WE FIND , THAT THE ASSESSEE HAD OBJECTED TO THE SELECTION OF THE AFORESAID PARTIES AS COMPARABLE S , FOR THE REASON, THAT THEY UNLIKE THE ASSESSEE WERE PROVI DI NG SOFTWARE DEVELOPMENT SERVICES. BEFORE THE TPO, THE ASSESSEE HAD CATEGORICALLY OBJECTED TO THE SELECTION OF THE AFORESAID 20 COMPARABLES ON THE GROUND THAT ALL OF THEM WERE FUNCTIONALLY DISSIMILAR AS NONE OF THEM WAS ENGAGED IN PROVISION OF VFX SERVICES. IN FACT, A PERUSAL OF THE ORDER OF THE TPO REVEALS THAT THE ASSESSEE HAD DELINEATED THE DIFFERENCE S IN THE FUNCT IONS PERFORMED BY IT AS IN COMPARISON TO THOSE PERFORMED BY THE AFOREMENTIONED 20 COMPARABLES, WHICH CAN BE CHARTED AS UNDER: FUNCTIONS PERFORMED ASSESSEE COMPARABLES (SELECTED BY THE TPO) PRE - VISUALIZATION SOFTWARE DEVELOPMENT CROW SIMULATION CUSTOM APPLICATION DEVELOPMENT MATTER PAINTING APPLICATION MANAGEMENT, MIGRATION & RE - ENGINEERING DIGITAL COMPOSITING SYSTEM INTEGRATION SOFTWARE TESTING ON THE BASIS OF ITS SUBMISSIONS, IT WAS THE CLAIM OF THE ASSESSEE THAT THE BUSINESS PROFILE OF A VFX COMPANY WAS COMPLETELY DIFFERENT FROM THAT OF A SOFTWARE DEVELOPMENT COMPANY. APART P A G E | 16 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) THERE FROM, THE ASSESSEE HAD ALSO FURNISHED ITS EXHAUSTIVE SUBMISSIONS RUNNING INTO 38 PAGES, AS REGARDS ITS FUNCTIONAL DISSIMILARITY AS AGAINST THAT OF THE AFORESAID 20 COMPARABLES. WE FIND THAT THE TPO WITHOUT MEETING OUT THE SPECIFIC OBJECTIONS THAT WERE RAISED BY THE ASSES S EE IN RESPECT OF THE AFOREMENTIONED 20 COMPARABLE S, HAD SUMMARILY , BY WAY OF A CRYPTIC OBSERVATION CONCLUDED THAT AS THE COMPARABLES WERE SELECTED AFTER FOLLOWING A PROPER SEARCH STRATEGY AND THEY BROADLY FELL WITHIN THE DOMAIN OF SOFTWARE SERVICES, THEREFORE, ON FUNCTIONALITY THEY QUALIFIED FOR BEING CHOSEN AS COMPARABLES. ON OBJECTIONS FILED BY THE ASSESSEE, THE DRP WHILE JUSTIFYING INCLUSION OF 18 COMPARABLES (OUT OF 20 COMPARABLES), HAD OBSERVED, THAT THE VARIOUS CLAUSES OF THE MOU OF THE ASSES SEE WITH ITS AE AND ALSO THE MATERIAL ON RECORD REVEAL ED THAT THE ASSESSEE COMPANY WAS MAINLY PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AE . A LSO, IT WAS OBSERVED BY THE DRP THAT EVEN THE OFFSHORE COMPUTER GRAPHICS AND ANIMATION SERVICES WERE BEING PROVIDED BY THE ASSESSEE TO ITS AE WITH THE HELP OF SOFTW ARE ONLY. ACCORDINGLY, ON THE BASIS OF HIS AFORESAID OBSERVATIONS, WE FIND THAT THE DRP HAD UPHELD THE INCLUSION OF 18 COMPARABLES (OUT OF 20 COMPARABLES). AS IS DISCERNIBLE FROM THE RECORDS, BOTH THE TPO AND DRP HAD FAILED TO ADDRESS THE SPECIFIC OBJECTIO NS WHICH WERE RAISED BY THE ASSESSEE BEFORE THEM TO SHOW THAT IT WAS FUNCTIONALLY DIFFERENT AS AGAINST THOSE COMPARABLES. AS A MATTER OF FACT, THE TPO/DRP HAD ARRIVED AT THE CONCLUSION THAT THE ASSESSEE WAS PROVIDING SOFTWARE DEVELOPMENT SERVICES ON TWO GR OUNDS VIZ. (I). THAT, THE MOU AND THE OTHER MATERIAL ON RECORD REVEALED THAT THE ASSESSEE COMPANY WAS PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AE; AND (II). THAT, THE OFFSHORE COMPUTER GRAPHICS AND ANIMATION SERVICES WERE BEING PROVIDED BY THE ASSESE E TO ITS AE WITH THE HELP OF SOFTWARE ONLY. WE FIND THAT THE ASSESSEE HAD CATEGORICALLY DECLINED OF HAVING RENDERED ANY SOFTWARE DEVELOPMENT SERVICES TO ITS AE DURING THE YEAR UNDER CONSIDERATION. W E FIND THAT THOUGH THE ASSES S EE HAD AT LENGTH SPECIFICALLY DELINEATED THE DIFFERENCE IN ITS FUNCTIONS AS AGAINST THAT OF THE AFORESAID COMPARABLES, HOWEVER, NEITHER OF THE LOWER AUTHORITIES HAD ADDRESSED THE SAID ASPECT WHILE SELECTING/APPROVING THE SELECTION OF THE AFORESAID COMPARABLES FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. ALTHOUGH, WE ARE IN AGREEMENT WITH THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT AS THE TRADITIONAL TRANSACTION METHOD I.E CUP METHOD COULD NOT BE RELIABLY APPLIED IN THE CASE OF THE ASSESSEE, THEREFORE, THE TRANSACTIONAL PROFIT METHOD I.E TNMM COULD SAFELY BE APPLIED FOR BENCHMARKING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE, BUT WE ARE AFRAID, THAT THE SELECTION OF THE 18 COMPARABLES BY THE TPO/DRP WITHOUT MEETING P A G E | 17 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2) OUT THE SPECIFIC OBJECT IONS OF THE ASSESSEE AS REGARDS EACH OF THEM, WHEREIN IT WAS DEMONSTRATED AT LENGTH THAT THEY WERE FUNCTIONALLY NOT COMPARABLE, CANNOT BE ACCEPTED. ACCORDINGLY, WE RESTORE THE MATTER TO THE FILE OF THE A.O/TPO, WITH A DIRECTION TO READJUDICATE THE ISSUE AS REGARDS SELECTION OF THE AFOREMENTIONED 18 COMPARABLES AFTER CONSIDERING THE OBJECTIONS FILED BY THE ASSES S E E. NEEDLESS TO SAY, THE A.O/TPO SHALL IN THE COURSE OF THE SET ASIDE PROCEEDINGS AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WHO SHALL REMAIN AT A LIBERTY TO SUBSTANTIATE HIS CLAIM AS REGARDS EXCLUSION OF THE AFORESAID 18 COMPARABLES ON THE BASIS OF FRESH DOCUMENTARY EVIDENCE AND/OR SUBMISSIONS. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE A.O/TPO FOR THE LIMITED PURPO SE OF READJUDICATING THE ISSUE AS REGARDS INCLUSION OF THE AFOREMENTIONED 18 COMPARABLES IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUNDS OF APPEAL NO. 5 TO 10 ARE DISPOSED OFF IN TERMS OF OUR AFORESAID OBSERVATIONS 1 6 . RESULTANTLY, THE APPEAL OF THE ASSES S EE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 2 5 . 10.2019 S D / - S D / - ( N.K. PRADHAN ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 25 .10 .2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 18 IT(TP) A. NO.1849/MUM/2016 A.Y. 2011 - 12 RHYTHM AND HUES STUDIOS INDIA PVT.LTD.VS. INCOME - TAX OFFICER - 11(1)(2)