MSM DISCOVERY P.LTD, MUMBAI V. ASST CIT 12(3)(2), MUMBAI

ITA 1935/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7315 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 20-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMAR
• Assessee Lawyers: PENCY J PARDIWALA HITEN CHANDA
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Avoidance of tax
• Section: 92C; 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM ./ I.T.A. NO. 1935/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) MSM DISCOVERY PRIVATE LIMITED INTERFACE BUILDING NO. 7, 4 TH FLOOR, MALAD LINK ROAD, MALAD (W), MUMBAI - 400 064 / VS. ASST. CIT - 12(3)(2) ROOM NO. 147B, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAGCS 4253 E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI PENCY J. PARDIWALA/ HITEN CHANDA / RESPONDENT BY : SHRI JAYANT KUMAR / DATE OF HEARING : 05.03.2018 / DATE OF PRONOUNCEMENT : 02.05 .2018 / O R D E R PER S HAMIM YAHYA, A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER BY THE ASSESSING OFFICER PASSED U/S. 143(3) READ WITH SECTION 144C OF THE INCOME T AX A CT , 1961 AND PERTAINS TO ASSESSMENT YEAR 2012 - 13. 2. T HE GROUNDS OF APPEAL READ AS UNDER: GENERAL GROUND 1. ERRED IN ASSESSING THE TOTAL INCOME OF THE APPELLANT AT RS 436,47,34,833 AGAINST RS 22,51,21,420 AS COMPUTED BY THE APPELLANT IN ITS RETURN OF INCOME; 2 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED 2. ERRED IN MAKIN G A TRANSFER PRICING ADJUSTMENT OF RS 413,96,13,415 TO THE TOTAL INCOME OF THE APPELLANT ON THE PREMISE THAT THE INTERNATIONAL TRANSACTIONS ENTERED BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES ('AES') WERE NOT AT ARM'S LENGTH; REFERENCE MADE TO THE TRA NSFER PRICING OFFICER 3. ERRED IN REFERRING THE APPELLANT'S CASE TO THE LEARNED TRANSFER PRICING OFFICER ('TPO') UNDER SECTION 92CA(1) OF THE ACT, WITHOUT SATISFYING THE CONDITIONS SPECIFIED THEREIN; TPO ERRED IN CHARACTERIZING THE DISTRIBUTION FEE PAID BY MSMD TO ITS AE AS ROYALTY 4. ERRED IN CHARACTERIZING THE DISTRIBUTION FEE PAID/ PAYABLE BY THE APPELLANT TO ITS AES TO BE IN THE NATURE OF ROYALTY; REJECTION OF ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ITS TRANSFER PRICING STUDY REPORT 5. ERRED IN NOT FOLLOWING THE APPELLANT'S OWN ORDER FOR AY 2010 - 11 WHICH WAS PASSED BY THE HON'BLE DRP ACCEPTING SOFTWARE DISTRIBUTORS AS APPROPRIATE COMPARABLE TO BENCHMARK THE APPELLANT'S INTERNATIONAL TRANSACTIONS INSPITE OF THERE BEING NO CHANGE IN FACTS IN AY 20 11 - 12. 6. ERRED IN REJECTING THE TRANSFER PRICING ANALYSIS UNDERTAKEN BY THE APPELLANT UNDER SECTION 92C OF THE ACT AND DISREGARDING THE FACT THAT SOFTWARE DISTRIBUTORS ARE APPROPRIATE COMPARABLES TO BENCHMARK MSMD'S INTERNATIONAL TRANSACTIONS IN THE ABSEN CE OF ANY DIRECT COMPARABLES. 7. ERRED IN LAW AND IN FACTS, IN REJECTING THE FOLLOWING COMPANIES FROM THE TRANSFER PRICING STUDY FOR FY 2011 - 12 WHICH ARE COMPARABLE TO THE APPELLANT: (I) AVANCE TECHNOLOGY LIMITED (II) EMPOWER INDUSTRIES INDIA LIMITED (III) SONATA INFORMATION TECHNOLOGY LIMITED (IV) INTEGRA TELECOMMUNICATION AND SOFTWARE LIMITED BENCHMARKING ANALYSIS UNDERTAKEN BY THE LEARNED TPQ/ HON'BLE DRP BY CONSIDERING ROYALTY AGREEMENTS AS COMPARABLE UNCONTROLLED PRICE (CUP') TO BENCHMARK APPELLANT'S INTERNATIONAL TRANSACTIONS 8. ERRED IN SELECTING CUP TO BENCHMARK THE INTERNATIONAL TRANSACTIONS OF THE APPELLANT WITHOUT APPRECIATING THAT TRANSACTION NET MARGIN ('TNMM') IS THE MOST APPROPRIATE METHOD TO BENCHMARK THE APPELLANT'S INTERNATIONAL TRANSACTIO NS; 9. ERRED IN NOT APPRECIATING THAT A 'DISTRIBUTION' AGREEMENT LIKE THAT ENTERED INTO BY THE APPELLANT WITH ITS AE IS DIFFERENT FROM A 'LICENSE/ ROYALTY' AGREEMENT SELECTED BY THE HON'BLE DRP/ LEARNED TPO TO BENCHMARK THE APPELLANT'S INTERNATIONAL TRANSA CTIONS; 10. ERRED IN CONSIDERING ROYALTY AGREEMENTS AS COMPARABLE TO BENCHMARK THE APPELLANT'S DISTRIBUTION ACTIVITY WITH ITS AES DISREGARDING THE FACT THAT ALL AGREEMENTS ARE FUNCTIONALLY DIFFERENT AND ARE ENTERED INTO IN DIFFERENT GEOGRAPHIES (IE OTHER THAN INDIA) HENCE THE ECONOMIC AND COMMERCIAL CIRCUMSTANCES UNDER WHICH THEY ARE 3 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED ENTERED WOULD BE DIFFERENT FROM THE DISTRIBUTION AGREEMENT ENTERED INTO BY THE APPELLANT; INTERNAL COMPARABILITY 11. ERRED IN NOT APPRECIATING THAT WHILE SOFTWAR E DISTRIBUTORS ARE APPROPRIATE COMPARABLES, INTERNAL COMPARABLES ARE SUITABLE OVER THE ROYALTY AGREEMENTS SELECTED BY THE HON'BLE DRP/ LEARNED TPO TO BENCHMARK THE APPELLANT'S INTERNATIONAL TRANSACTIONS; 12. ERRED IN NOT SUBTRACTING THE WAIVER OF LI CENSE FEE OF RS 213,750,000 BYNEO SPORTS BROADCAST PRIVATE LIMITED FROM THE SUBSCRIPTION REVENUE IN THIRD PARTY SEGMENT SO AS TO BRING THE THIRD PARTY SEGMENT ON THE SAME FOOTING AS AE SEGMENT SINCE IT IS AN EXTRA - ORDINARY ITEM; 13. ERRED IN NOT APP RECIATING THAT WHERE INTERNAL COMPARABLES ARE CONSIDERED AS SUITABLE COMPARABLES, NET MARGINS SHOULD BE CONSIDERED OVER GROSS MARGINS TO BENCHMARK THE INTERNATIONAL TRANSACTION OF DISTRIBUTION FEE PAID TO AES; 14. ERRED IN COMPUTING THE NET MARGIN E ARNED BY THE APPELLANT FROM DISTRIBUTION OF AE CHANNELS AT 1.32% AND NON AE CHANNELS AT 18.53%; 15. ERRED IN NOT APPRECIATING THAT 'TURNOVER' IS NOT AN APPROPRIATE ALLOCATION KEY TO ALLOCATE THE COMMON OVERHEADS; 16. ERRED IN NOT GRANTING ECO NOMIC ADJUSTMENTS ON ACCOUNT OF THE DIFFERENCES IN AE AND NON AE SEGMENT; SHORT GRANT OF TAX DEDUCTED AT SOURCE (TDS) 17. ERRED IN SHORT GRANTING CREDIT OF TAXES DEDUCTED AT SOURCE OF RS 2,64,14,172 WHILE COMPUTING THE TAX LIABILITY FOR THE YEAR; INTEREST UNDER SECTIOI 234D 18. ERRED IN LEVYING INTEREST OF RS 6,56,14,648 UNDER SECTION 234D OF THE ACT; 19. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN COMPUTING INTEREST UNDER SECTION 234D AT RS 6,56,14,648 INSTEAD OF RS 600,30,423; PENALTY P ROCEEDINGS 20. ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT. 3. T HE EFFECTIVE GROUND OF APPEAL IN THIS CASE IS ABOUT THE ADDITION MADE BY THE ASSESSING OFFICER UNDER THE HEAD TRANSFER PRICING ADJUSTMENT . THE L EARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEE'S OWN CA SE FOR ASSESSMENT YEAR 2011 - 12. V I DE ORDER DATED 26.07. 2017 , T HE TRIBUNAL HAD REMITTED THE ISSUE TO THE FILE OF THE TRANSFER PRICING OFFICER. LEARN ED COUNSEL SUBMITTED THAT THE 4 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED FACTS ARE IDENTICAL AND THE SAME RATIO MAY BE FOLLOWED. HOWEVER , THE LEARNED COUNSEL OF THE ASSESSEE POINTED OUT THAT THE DISPUTE RESOLUTION PANEL IN ITS DIRECTION IN PARAGRAPH 4.2.11 HAD CLEARLY ACCEPTED THAT THE IMPUGNED PAY MENT CANNOT BE TREATED AS ROYALTY ON THE TOUCHSTONE OF HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF SET INDIA PVT . LIMITED IN ITA NO. 1347 OF 2013 DATED 15.6.2015 . HOWEVER , LEARNED COUNSEL SUBMITTED THAT THE DISPUTE RESOLUTION PANEL HAS N OT ACCEPT THE SAME IN VIEW OF THE MATTER THAT SPECIAL LEAVE PETITION BY THE DEPARTMENT AGAINST THIS ORDER IS PENDING BEFORE THE HONBLE APEX COURT . HENCE , THE LEARNED COUNSEL PLEADED THAT WHILE REMITTING THE MATTER A FINDING SHOULD BE GIVEN THAT THE IMPUGN ED PAYMENTS ARE NOT ROYALTY ON THE TOUCHSTONE OF ABOVE SAID JURISDICTIONAL HIGH COURT DECISION. 4. WE HAVE CAREFULLY HEARD THE SUBMISSIONS AND PERUSED THE RECORDS. LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY AGREED WITH THE SUBMISSIONS OF THE LD . COUNSEL O F THE ASSESSEE AND COULD NOT BRING OUT ANY DISTINGUISHING FEATURE IN THIS YEAR'S ASSESSMENT AS COMPARED TO THE ONE WHICH WAS DECIDED BY THE ITAT EARLIER. WE FIND THAT THIS ITAT IN ASSESSEE'S OWN CASE AS REFERRED HERE IN ABOVE HAS HELD AS UNDER; 7.WE HAVE H EARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL, INCLUDING THE WRITTEN SUBMISSIONS FILED BY BOTH ) THE PARTIES, BE FORE US.LT IS A FACT THAT THE ASSESSEE ITSELF HAD ADMITTED THAT IT HAD SELECTED LSD AS A COMPARABLE, AS IN THE PUBLIC DOMAIN COMPARABLES O F CHANNEL DISTRIBUTION WERE NOT AVAILABLE. NON AVAILABILITY OF COMPARABLES IN THE FIELD OF DISTRIBUTION OF CHANNELS IS A COMMON FEATURE OF AY.2010 - 11 AND THE CURRENT A Y. WE FIND THAT THE TPO HAD DIRECTED THE ASSESSEE TO FILE CERTAIN DETAILS,THAT THE ASSES SEE DID NOT FILE THE REQUISITE INFORMATION , THAT THE TPO/AO MADE ADDITION TO THE INCOME OF THE ASSESSEE, THAT BEFORE THE DRP THE ASSESSEE FILED DETAILS AS DIRECTED BY IT, THAT THE DRP CONFIRMED THE ORDER OF THE TPO/AO. 7.1.BEFORE PROCEEDING FURTHER, WE WOU LD LIKE TO DISCUSS THE BASICS OF TP. CHAPTER X OF THE ACT PERTAINS TO SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX AND SECTION 5 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED 92 DEALS WITH A SITUATION WHERE TWO OR MORE AE.S ENTER INTO AN ARRANGEMENT WHEREBY THEY ARE TO RECEIVE ANY BENEFIT/SERVICE/FAC ILITY IN WHICH CASE THE ALLOCATION/APPORTIONMENT/CONTRIBUTION TOWARDS THE COST/EXPENDITURE IS TO BE DETERMINED IN RESPECT OF EACH AE HAVING REGARD TO THE ALP. IN OUR UNDERSTANDING, IT OR AN AGGREGATE OF SIMILAR IT.S, HAVE TO BE EVALUATED, ON A STAND - ALONE BASIS AND THEN COMPARED WITH SIMILAR ANALYSIS UNDERTAKEN ON INDEPENDENT TRANSACTIONS. BUT, THE ALP CANNOT BE DETERMINED ON PREPONDERANCE OF PROBABILITIES OR BASED ON OBJECTIVES SOUGHT TO BE ACHIEVED IN AN ENACTMENT OR IN A POLICY GUIDELINE OF THE GOVERNMEN T. DOCUMENTATION AND DATA HAS TO BE MADE AVAILABLE AND COMPARABILITY DEMONSTRATED BEFORE CLAIMING THAT ALP ADOPTED BY THE ASSESSEE IS VALID. HERE,IT WILL BE USEFUL TO REFER TO THE INCOME - TAX RULES, 1962(RULES)DEALING WITH TP ADJUSTMENTS. THE SEQUITUR OF RU LE 10B(2) AND (3) IS THAT IF THE COMPARABLE ENTITY OR ENTITY'S TRANSACTION BROADLY CONFORMS TO THE ASSESSEE'S FUNCTIONING, IT HAS TO ENTER INTO THE MATRIX AND BE APPROPRIATELY CONSIDERED. THUS, THE STARTING POINT IS TP STUDY AND IT IS TO BE CONDUCTED BY AN ASSESSEE, WHEREIN IT HAS TO DEMONSTRATE THAT THE IT.S ENTERED IN TO IT ARE AT ARM'S LENGTH. THE NEXT STEP, AS ENVISAGED BY THE RULE, CAN BE SEEN BY THE USE OF THE EXPRESSION NONE OF THE DIFFERENCES IF ANY BETWEEN THE TRANSACTIONS BEING COMPARED, OR BETWEE N THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT THE PRICE OR COST CHARGED OR PAID IN SUCH TRANSACTIONS IN THE OPEN MARKET. TH E OTHER EXERCISE WHICH THE TRANSFER PRICING OFFICER HAS TO NECESSARILY PERFORM IS THAT IF THERE A RE SOME DIFFERENCES ,AN ATTEMPT TO ADJUST THEM TO 'ELIMINATE THE MATERIAL EFFECTS' SHOULD BE MADE. THUS, RULE 10B INDICATES THE APPROACH TO BE AD OPTED WHERE DIFFERENCES AND DISSIMILARITIES ARE APPARENT. THE TPO, FIRST, HAS TO BE SATISFIED THAT SUCH DIFFERE NCES DO NOT 'MATERIALLY AFFECT THE PRICE/COST; AND, SECONDLY, AN ATTEMPT TO MAKE REAS ONABLE ADJUSTMENT TO ELIMINATE THE MATERIAL EFFECT OF SUCH DIFFERENCES HAS TO BE MADE. THERE IS SUFFICIENT GUIDANCE AND CLARITY IN RULE I OB ON THE PRINCIPLES APPLICABLE F OR DETERM INATION OF THE ALP. THESE INCLUDE THE VARIOUS FACTORS TO BE TAKEN INTO CONSIDERATION,AND THE APPROACH TO BE ADOPTED (FUNCTIONS PER FORMED,TAKING INTO ACCOUNT RISKS BORNE AND ASSETS EMPLOYED,SIZE OF THE MARKET, THE NATURE OF COMPETITION,TERMS OF LA BOUR,EMPLOYMENT AND COST OF CAPITAL, GEOGRAPHICAL LOCATION, ETC.).IN SHORT,TP IS AN INCOME ALLOCATING EXERCISE TO PREVENT ARTIFICIAL SHIFTING OF NET INCOMES OF CONTROLLED TAXPAYERS AND TO PLACE THEM ON PARITY WITH UNCONTROLLED, UNRELATED TAXPAYERS.IN OTHER WORDS,IT IS A RE - COMPUTATION EXERCISE TO BE CARRIED OUT ONLY WHEN INCOME ARISES IN CASE OF AN IT BETWEEN AE.S.THE HON'BLE DELHI HIGH COURT,HAS IN THE MATTER OF MARUTI SUZUKI,UNDERLINED THE ROLE OF TP PROVISIONS.WE ARE REPRODUCING THE RELEVANT PORTION OF T HE ORDER AND IT READS AS UNDER: THE PARAMOUNT OBJECTIVE BEHIND ENACTMENT OF THESE PROVISIONS IS THAT THE ENTITIES WHICH ARE CO NNECTED TO EACH OTHER ON ACCOUNT OF SHAREHOLDING OR MANAGERIAL CONTROL, ETC., AND THEREBY JRE IN A POSITION TO INFLUENCE THE BUS INESS DECISIONS OF INDIAN ENTITIES, INCLUDING THE PAYMENTS MADE TO OR 6 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED RECEIVED BY THEM FROM THE NON - RESIDENT ENTITY, ARE NOT ABLE TO SHIFT PAYMENT OF '.AXES FROM INDIA TO OTHER COUNTRIES, BY SHIFTING THE INCOME WHICH GENUINELY BELONGS TO THE INDIAN ENTITY, TO THE NON - RESIDENT ENTITY, WHICH IS NOT TAXED IN INDIA. ' 7.2 AFT ER CONSIDERING THE THEORY OF TP PROVISIONS,WE WOULD NOW LIKE TO CONSIDER THE FACTS OF CASE.IT IS ONE OF THE CASES WHERE THE ASSESSEE ITSELF HAS ADMITTED THAT NO RELEVANT OR USEFUL 10 DETER MINE THE ALP OF THE IT.S,WAS AVAILABLE IN PUBLIC DOMAIN.CONSIDERING THE Z ERSITIES OF MODERN COMMERCIAL ACTIVITIES,IT IS QUITE POSSIBLE THAT BASIC OR RELIABLE DATA I.E. ~R ARABLE MAY NOT READILY BE EXISTENT ANYWHERE.THE ONLY ALTERNATE LEFT,IN SUCH A SITUA TIONS ; IDENTIFY SIMILAR TYPE OF COMPARABLES.IN THE PRESENT CASE THE ASSESSEE IS IN THE BUSINESS OF DISTRIBUTION OF CHANNELS THROUGH VARIOUS MODES NAMELY THROUGH DTHO.S/ MOSO.S/ CO.S. XVHILE FILING RETURN FOR THE LAST AY.(FOR A PERIOD OF TWO MONTHS ONLY)AN D FOR THE CURRENT YEAR,IT CARRIED OUT A SEARCH TO IDENTIFY SIMILAR BUSINESS OR ENTITY FOR DETERMINING THE ALP.BUT,THE EXERCISE DID NOT YIELD ANY POSITIVE RESULT ON BOTH THE OCCASIONS.SO,IT ADOPTED THE LSD AS THE NEAREST POSSIBLE COMPARABLE SECTOR.THE TPO I NITIALLY REJECTED THE COMPARABILITY OF LSD AND DISTRIBUTION OF CHANNELS, WHILE PASSING THE ORDER U/S.92 OF THE ACT FOR THE EARLIER AY.BUT,LATER ON ACCEPTED THE'TP STUDY OF THE ASSESSEE FOR THE AY.2010 - 11. WHILE PASSING THE ORDER FOR THE CURRENT AY,THE TPO AGAIN HELD THAT BOTH THE ACTIVITIES CANNOT BE COMPARED AS VALID COMPA - RABIES AND DIRECTED THE ASSESSEE TO SUBMIT AGREEMENTS ENTERED IN TO SIGNED FOR DISTRIBUTION WITH NON - AE ENTITIES LIKE VIACOMLS, NDTV AND TV TODAY.IT IS NOT KNOWN AS TO WHY THE ASSESSEE D ID NOT COMPLY WITH THE DIRECTION OF THE TPO.NOT ONLY THIS,IT REPLIED THAT ITS TRANSACT WITH THE AE S COULD NOT BE COMPARED WITH THE NON - AE.S CONSIDERING THE DIFFERENCE IN VOLUME PERIOD OF AGREEMENT, MINIMUM GUARANTEE FEES.AS PER THE TPO,THE ASSESSEE DID HO T SUBMIT THE AGREEMENT ENTERED INTO WITH THE AE.S AND IT ALSO DID NOT F URNISH THE REVENUE SHARING RATIO WITH THE NON - AE.S. WE ARE UNABLE TO UNDERSTAND THE LOGIC BEHIND THE STAND TAKEN BY THE ASSESSEE. IT IS THE PREROGATIVE OF THE TPO TO DECIDE AS TO WHETHE R A PARTICULAR DOCUMENT STATEMENT/BOOK OF ACCOUNTS WOULD BE USEFUL FOR DETERMINING ALP OR NOT.THE ACT HAS ASSIGNED THIS DUTY TO THE TPO,NOT TO THE ASSESSEE.THERE IS CLEAR DEMARCATION IN DUTIES AND RIGHTS OF BOTH OF THEM. 7.3.RULE 10B OF THE RULES IS QUIT E UNAMBIGUOUS IN THAT REGARD.LT STIPULATES THE DUTIES OF THE ASSESSEE AS WELL AS OF THE TPO.FOR ELIMINATING THE MATERIAL EFFECTS OF DISSIMILARITIES OF THE COMPARED INDUSTRIES,HE HAD CALLED FOR FURTHER DETAILS AND IT WAS THE DUTY OF THE ASSESSEE TO PROVIDE THE SAME.BUT,RATHER THAN FURNISHING THE SAME IT TOOK OVER THE ROLE OF THE TPO AND HELD THAT NO 'USEFUL PURPOSE' WOULD BE SERVED BY EXAMINING THE DOCUMENTS ASKED FOR.IN TAX MATTERS,NEITHER THE SOVEREIGN NOR THE SUBJECTS SHOULD CROSS THE PROVERBIAL LAXMAN - RE KHA AND ENCROACH THE TERRITORY OF OTHER PARTY.THE TPO SELECTED THREE COMPARABTES WHICH ACCORDING TO HIM WERE IN THE SAME LINE OF BUSINESS AND THERE WAS COMPARABILITY OF INDUSTRIES ALSQ.THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO OFFER ITS COMMENTS ABOUT THE N EW 7 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED COMPARABIES.THE APPROACH OF THE OFFICER WAS AS PER LAW,BUT THE METHOD ADOPTED BY HIM WAS NOT.LT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE WAS SUPPLIED ONLY ONE PAGE RESULT OF THE COMPARABLES AND NOT THE ENTIRE DOCUMENT OF THE COMPARABLES SELECTED BY T HE TPO.IT IS FOUND THAT THE COMPARABLES WERE NOT INDIAN ENTITIES.FOR LEVEL PLAYING FIELD I T IS ESSENTIAL THAT COMPARISON SHOULD BE BETWEEN THE EQUALS OR THE DIFFERENCES ARE IRONED OUT. WE FIND THAT THE DRP HAS ADMITTED THAT GEOGRAPHICAL LOCATION WAS ONE OF THE FACTORS THAT WOULD IMPACT THE PROFITABILITY OF THE COMPARABLES. THUS,BY NOT SUPPLYING THE ENTIRE DOCUMENTS THE AO HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTICE.LT IS TRUE THAT THE ASSESSEE COULD ALSO HAVE,ON ITS OWN,GATHERED THE REQUISITE INFORMATION FROM THE INTERNET ABOUT THE COMPARABLES ADOPTED BY THE TPO. BUT, THAT WOULD NOT ABSOLVE THE TPO TO CONFRONT THE ASSESSEE WITH THE MATERIAL THAT HE WANTED TO RELY UPON.IF THE ASSESSEE CANNOT DECIDE AS TO WHICH DOCUMENTS ARE RELEVANT FOR THE TPO TO DETERMIN E THE ALP, THEN TH E TP O ALSO CANNOT DEPRIVE THE ASSESSEE OF THE ITS RIGHTS.THUS,BOTH THE PARTIES HAVE NOT PLAYED THEIR PART IN THE MANNER THEY WERE SUPPOSED TO PLAY.THE LAPSES ON PART OF THE ASSESSEE AND THE TPO ARE OF NOT TRIVIAL OR TECHNICAL NATURE.THEY GO TO THE ROOT OF THE ISSUE. NON AVAILABILITY OF DATA FOR DETERMINING ALP F OR A PARTICULAR INDUSTRY/SECTOR/BUSINESS AND RESULTANT FAILED SEARCH IS NOT AN ABNORMAL PHENOMENON. AS COMPARED TO OTHER SEC TIONS OF THE ACT. TP PROVISIONS ARE AT NFANCY STAGE AND THEREFORE, TEETHING PROBLEMS ARE BOUND TO HAPPEN.THEREFORE,A METHOD ACCEPTABLE TO BOTH THE PARTIES HAS TO BE FOUND. H WILL TAKE SOME TIME TO DUST TO SETTLE.BUT,BASIC PRINCIPLES HAVE TO BE ADHERED.CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT THAT THERE IS NEED FOR FURTHER INVESTIGATION AND VERIFICATION.SO,IN THE INTEREST. OF JUSTICE,WE ARE RESTORING BACK THE ISSUE TO THE FILE OF THE TPO/AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7.4. WE FIND THAT IN THE CASE OF NSG THE TRIBUNAL HAD HELD THAT LSD COULD BE TREATED AS A VALID COMPARABLE WHEREAS IN THE MATTER OF IT HAD SENT BACK THE MATTER TO THE FILE OF THE TPO.HERE,IT IS NOTEWORTHY THAT IN NSG THE TPO HAD NOT CAL LED FOR DETAILS OF AE AND NON AE.S.AND THE AGREEMENTS ENTERED IN TO BY THE ASSESSEE WITH ITS AE.S.SECONDLY,AS TO WHETHER THE COMPARABLES SELECTED BY THE TPO FOR THE YEAR UNDER APPEAL WERE BE VALID COMPARABLES OR RV: WAS NOT CONSIDERED BY THE TRIBUNAL.IN OU R HUMBLE OPINION,FOR A COMPARABLE TO BE A VALID COMPARABLE THERE SHOULD BE SOME SIMILARITY.FOR EXAMPLE IN THE MATTER BEFORE US,ANY KIND OF DISTRIBUTION CANNOT BE ADOPTED AS A VALID COMPARABLE. DISTRIBUTION OF MAGAZINES/NEWS PAPERS CONTAINING ENTERTAINMENT NEWS OR DISTRIBUTION OF TICKETS OF VARIOUS THEATERS OF A PARTICULAR CITY CAN BE TREATED AS PART OF DISTRIBUTION OF ENTERTAINMENT ITEMS. WHETHER THESE OR ANY OTHER ITEM OF SIMILAR KIND CAN BE TREATED AS A VALID COMPARABLE OR NOT IS AN ISSUE THAT FALLS WITHI N THE DOMAIN OF THE TPO/AO. 7.5.AS FAR AS ORDER OF THE TPO FOR THE LAST AY.IS CONCERNED,!! IS SUFFICE TO SAY THAT LAST YEAR THE TPO HAD NOT CONSIDERED OF COMPARING THE FOREIGN ENTERTAINMENT 8 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED ENTITIES FOR DETERMINING THE ALP.BESIDES,NO QUERIES WAS.RAISED A BOUT THE NON AE PARTIES.IN SHORT THE FACTS OF THE CASE FOR YEAR UNDER APPEAL ARE DIFFERENT FROM THE FACTS FOR THE EARLIER YEAR.SO,IN OUR OPINION,THE DRP HAD RIGHTLY HELD THAT RULE OF RES JUDICATA WAS NOT APPLICABLE TO THE FACTS OF THE CASE. 7.6. WHETHER TH E AO WANTED TO USE INTERNAL CUP OR NOT AND AS TO WHETHER IT WOULD HAVE BEEN A FRUITFUL EXERCISE IS A SEPARATE ISSUE.BUT,CNCE HE REACHED TO THE CONCLUSION THAT THE LSD IS N OT A VALID COMPARABLE INDUSTRY,HE HAD THE RIGHT TO SEARCH OUT AN ALTERNATE. FOR THAT PURPOSE HE HAD CALLED FOR FURTHER INFORMATION AND REFERRED TO SOME COMPARABLES THAT ACCORDING TO HIM WERE MORE APPROP RIATE THAN THE LSD.THERE MAY BE MISTAKES IN NOT CONSIDERING THE FACTORS INATION OF ALP.BUT,HE HAS TRIED TO BRING ON RECORD SOMETHING OF SI MILAR NATURE. IN OUR OPINION, THIS IS HOW THE TP LAW WOULD EVOLVE. THUS CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE,WE HOLD THAT MATTER SHOULD BE ANALYSED AND VERIFIED BY THE TPO/AO AFRESH.THE ASSESSEE SHOULD BE ALLOWED A REASONABLE OPPORT UNITY OF HEARING BEFORE DECIDING THE ISSUE.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 5. FOLLOWING THE SAME REASONING AS ABOVE WE REMIT THE ISSUE IN THE PRESENT CASE ALSO TO THE FILE OF THE TRANSFER PRICING OFFICER /A .O. TO CO NSIDER THE ISSUE AFRESH IN LIGHT OF THE DIRECTIONS AS ABOVE. AS REGARDS THE LEARNED COUNSEL OF THE ASSESSEE S SUBMISSION THAT SINCE THE IMPUGNED PAYMENTS CANNOT BE TREATED AS ROYALTY AS SETTLED BY THE DECISION OF HONBLE HIGH COURT IN THE CASE LAW FROM SET INDIA PVT . LIMITED (SUPRA) A FINDING SHOULD BE GIVEN , W E ARE OF THE CONSIDERED OPINION THAT THERE IS NO NEED TO REITERATE THE BINDING NATURE OF HON'BLE JURISDICTIONAL HIGH COURT. W HEN FACTS ARE IDENTICAL , THE HONBLE JURISDICTIONAL HIGH COURT S DECISION I S BINDING UP ON ALL THE AUTHORITIES BELOW. 6. IN THE RESULT THIS APPEAL BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 02.05.2018 SD/ - SD/ - ( AMARJIT SINGH ) (S HAM IM YAHYA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 02.05.2018 9 ITA NO. 1935/MUM/2017 MSM DISCOVERY PRIVATE LIMITED . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI