MEDIA RESEARCH USERS COUNCIL, MUMBAI V. ADDL DIT (E) RG 1, MUMBAI

MA 185/MUM/2022

AI Insights

The case involves M/s. Media Research Users Council, which filed Miscellaneous Applications (MAs) against the orders of the Income Tax Appellate Tribunal concerning the assessment years 2006-07, 2007-08, and 2008-09. The applications sought rectification of the Tribunal's earlier decisions, claiming that there were mistakes apparent from the record regarding the application of section 13 of the Income Tax Act and the interpretation of controlling interest and arm's length pricing in transactions with Hansa Research Group Private Limited (HRG). The Tribunal, after considering the submissions and the records, dismissed the MAs, stating that the issues raised were not mistakes but rather points of contention that could lead to a review of the Tribunal's decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123250 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-06-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2022
• Other Referred Cases: HDFC Bank Ltd [2018] 410 ITR 247 (Bombay), DIT (Exemption) v. Sheth Mafatlal Gagalbhai Foundation Trust (249 ITR 533) (Bombay), CIT (Exemption) v. Audyogik Shikshan Mandal (101 taxmann.com 247) (Bombay)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 11; 254(2); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B”, MUMBAI BEFORE SHRIPAVAN KUMAR GADALE, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER MA.NO. 184/MUM/2022 [ARISING OUT OF ITA NO. 6459/MUM/2012 (A.Y: 2006-07)] & MA.NO. 185/MUM/2022 [ARISING OUT OF ITA NO. 7108/MUM/2010 (A.Y: 2007-08)] & MA.NO. 186/MUM/2022 [ARISING OUT OF ITA.No. 6393/MUM/2011 (A.Y: 2008-09)] M/s. Media Research Users Council 128, TV Industrial Estate S.K. Ahire Marg, Worli Mumbai – 400012 PAN: AAATM5433F v. Addl. DIT(E)– Range (1) Piramal Chambers, Lalbaug Mumbai – 400 012 (Appellant) (Respondent) Assessee Represented by : Shri Niraj Sheth Department Represented by : Shri Milind Chavan Date of conclusion of Hearing : 23.06.2023 Date of Pronouncement : 04.08.2023 MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.2 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through these Miscellaneous Applications assessee is seeking rectification of certain issues in the common order passed by the Tribunal in ITA.No. 6459/Mum/2012, ITA.No. 7108/Mum/2010 and ITA.No. 6393/Mum/2010 dated 29.03.2022 for the A.Ys.2006-07, 2007-08 and 2008-09 respectively. 2. In all these Miscellaneous Applications assessee has raised identical issues for rectification. Therefore, the issues raised in all these appeals are identical, therefore, for the sake of convenience, these MA’s are clubbed, heard and disposed off by this consolidated order. In the Miscellaneous Application No. 184/Mum/2022 assessee has submitted as under: - “2. On a perusal of the consolidated order passed by the Tribunal, the Applicant would like to submit that the order passed by the Tribunal has certain mistakes apparent from the record which makes it a fit case for the Tribunal to exercise the powers vested in it under section 254(2) of the Act to correct the mistakes apparent from record and also in order to render complete justice in the matter. 3. In this regard, the Applicant would like to point out the errors in the order passed by the Tribunal as under: MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.3 3.1. Ground No. III.1 and III.2 • In the above-mentioned ground of appeal, it was submitted by the Applicant that provisions of section 13 of the Act do not apply on the ground that Mr. Shekhar Swamy and/ or his relatives do not have substantial interest in Hansa Research Group Private Limited (hereinafter for sake of brevity referred to as "HRG") and R. K. Swamy BBDO Pvt Ltd. • The Applicant, had relied on the ratio of the decision of the Hon'ble Bombay High Court in the case of HDFC Bank Ltd [2018] 410 ITR 247 (Bombay) to contend that relationship between HRG and the Applicant was such that it would not be covered by section 13 of the Act. • Infact, the record reflects that prior to HRG carrying out work for the Applicant, the said activity was carried out by third party agencies. NFO had carried out work for IRS 2002. The Applicant had first negotiated with NFO for IRS 2003. However, NFO refused to enter into an agreement since the terms were not acceptable [Page no. 30 of additional paper book and page no. 6 of statement of facts before the Hon'ble CIT(A)]. It was only because of this reason, namely, the fees being very low, and therefore, unacceptable to other independent parties that the Applicant approached HRG, who agreed to undertake the work at such low prices. This extremely pertinent fact has been completely overlooked. • Further, it is a matter of record that there were 24 directors in governing board of the Applicant and Mr. Swamy was only one of the 24 directors. None of his other family members or other persons/ entities connected to him were/ are on the Board of the Applicant. The members of the Board were persons of great repute representing well-known companies such as Hindustan Lever Ltd, Raymond Ltd, Godrej & Boyce Mfg. Co. Ltd., The Statesman Ltd, Lintas India Pvt Ltd, Doordarshan etc. The details of the governing board were furnished before the Assessing Officer vide letter dated 6 July 2008. Some of the members of the governing board were direct competitors of Mr. Shekhar Swamy. However, in complete oversight of all these admitted facts, the impugned order proceeds on a completely erroneous basis that Mr. Shekhar Swamy is in MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.4 complete control of the Applicant and in a position to arrange transactions between HRG and the Applicant. This fact was specifically pointed out to the Tribunal vide letter dated 6th November, 2018 where a detailed note was filed upon directions of the Hon'ble Bench. • It is also a matter of record that Mr. Shekhar Swamy had resigned from the governing board of the Applicant with effect from 28th September, 2007 which further shows that there is no question of his being in charge of the affairs of the Applicant. • Despite Mr. Shekhar Swamy resigning from the governing board, the Applicant continued to appoint HRG to carry out the work till the previous year 2011-12 relevant to assessment year 2012-13. These pertinent facts have been overlooked in arriving at, with respect, a wholly erroneous and baseless conclusion that Mr. Shekhar Swamy controls the affairs of the Applicant. Ground for miscellaneous application before the Hon'ble Tribunal • It is submitted that the Tribunal has grievously erred in proceeding on the wholly erroneous and baseless premise that Mr. Shekhar Swamy is a key person wholly controlling the Applicant's affairs and, in position, to influence decisions to be taken by the Applicant. This is not only a complete opposite of the actual facts apparent from the record but also that there is absolutely no basis for arriving at such a conclusion. Proceeding on this erroneous basis, decision of the Hon'ble Bombay High Court in case of HDFC Bank Ltd (supra) has been held not applicable to facts of the Applicant's case. • It is respectfully submitted that it was not the case of any of the lower authorities that Mr. Swamy is wholly in charges of the affairs of the Applicant nor did the Learned Department's Representative raise any such issue. Also, during the course of hearing, the Applicant was not provided any opportunity to address the Hon'ble Bench on this aspect of the matter. In the circumstances, it is submitted that the conclusion that payments have been made to an entity covered under section 13(3) of the Act is wholly erroneous and reflects a mistake apparent from the record. Since the mistake goes to the root of the matter, the same MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.5 can be rectified only by recalling the order and deciding the matter afresh. 3.2. Ground of appeal no. V.1 and V.2 • In the above-mentioned ground of appeal, the case of the Applicant in the appeal was, that assuming without admitting, that Hansa Research Group Private Limited (hereinafter for sake of brevity referred to as "HRG") is to be regarded as a person falling within the scope of section 13(3) of the Act since payment to HRG was not in excess of what may be reasonably paid for such services and since none of the other disqualifying clauses stood attracted, the provisions of section 13 of the Act cannot be invoked to deny claim of exemption under section 11 of the Act. • The Applicant's case all throughout has been that the payments made to HRG are not excessive. Detailed submissions were made before lower authorities. This can be seen from the submission made by the Applicant before the Hon'ble CIT(A) on pages 7 to 9 of the Statement of Facts under heading of 'Reasons why it is wrong to come to conclusion that payments to HRG are in excess of what may be reasonably paid for services rendered by them". • During the hearing before the Tribunal, submissions were made to the effect that (1) HRG is not a person covered under section 13 and (2) payments to HRG are not excessive. • Without prejudice, it was submitted that even if it is held that if the payment made to HRG is regarded as excessive, section 13 of the Act would apply only to the extent of such excess amount. It is submitted that denying the claim of exemption under section 11 of the entire income is contrary to the decisions of the Hon'ble Jurisdictional Bombay High Court in the following cases: a. DIT (Exemption) v. Sheth Mafatlal Gagalbhai Foundation Trust (249 ITR 533) (Bombay) b. CIT (Exemption) v. AudyogikShikshan Mandal (101 taxmann.com 247) (Bombay) At the highest what could be treated as not an application for charitable purpose is the amount of excess. The above submissions have been recorded by the Tribunal at page no. 27 of the order. MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.6 Decision of the Hon'ble Tribunal From a review of the order, it is seen that the Tribunal has not dealt with this aspect of the matter at all. The Tribunal at paragraph 23, while rejecting the Applicant's claim that HRG is not a person covered by section 13(3), observed in passing that: “........Whether the revenue sharing with the other concern are within the arm's length is subjective, considering the fact that it is sharing 90% of the revenue and transaction with the unrelated party is not substantial and assignments in both the cases are totally different. Therefore, we reject the submissions of the assessee and grounds raised in this regard before us". Ground for miscellaneous application before the Hon'ble Tribunal • Thus, it is seen that the question whether the payments are excessive, which I could have been decided only after reference to all the relevant facts and submissions, has not been adjudicated. It is respectfully submitted that non- adjudication of an important issue constitutes a mistake apparent from the record. In any event, the aforesaid observations have been made in complete ignorance of the following: • The effective rates at which payment is made by the Applicant to HRG is not excessive and in fact are lower than the payments made to independent parties. [Page No. 7 to 9 of the Statement of Facts submitted to CIT(A)]. • HRG stepped in since independent persons refused to work at that price on the ground that it was too low (Page no. 10 of statement of facts and page no. 30 of the FPB) • It is submitted that the Tribunal has not considered these arguments which go to the root of the issue under consideration viz. denial of exemption under section 11 of the Act. • Further, there is no reasoning in the order of the Tribunal as to why the comparability analysis carried out by the Applicant is incorrect or why is it not appropriate. It is submitted that this ould, therefore, constitute a mistake as contemplated by section 254(2) of the Act. It is submitted that non- consideration of ground of appeal constitutes a mistake apparent on record. MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.7 • Further, it is submitted that order of the Tribunal does not provide reasons as to how it concludes that arm's length nature of the revenue sharing is subjective. It is settled law that Tribunal is required to record its reasons as to why it comes to a particular conclusion. The failure to do so would, therefore, constitute a mistake for the purpose of section 254(2) of the Act. • It is further submitted that if the provisions of section 13 of the Act are considered to be applicable, it is submitted that the entire claim of exemption under section 11 of the Act cannot be denied since provisions of section 13 of the Act would operate only to the extent of the excess amount paid by the Applicant to HRG. This aspect has not been decided. In view of above, it is submitted that these are grave errors which have completely vitiated the reasoning and conclusion in the impugned order. Accordingly, the Applicant submits that the Hon'ble Bench be pleased to recall the impugned order and adjudicate the question of reasonableness of payment made by the Applicant to HRG for the purpose of examining the application of section 13 of the Act after taking into account all facts and submissions of the Applicant and after providing an opportunity of hearing to the Applicant.” 3. At the time of hearing, Ld.AR brought to our notice facts relating to filing of Miscellaneous Application and he relied on the submissions made in the Miscellaneous Application. At the time of hearing, he agreed that certain aspects were not brought to the notice of the bench in the original hearing but submitted all the aspects in the compilations. He submitted that the bench should have given an opportunity to the assessee on the critical aspects like the issue of controlling interest and comparability of arms length prices before rejecting the arguments. MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.8 4. On the other hand, Ld. DR submitted that there is no mistake apparent on record and the plea raised by the assessee only leads to review of the Tribunal order. Accordingly, he objected to the Miscellaneous Application filed by the assessee. 5. Considered the rival submissions and material placed on record, we observe that the assessee has filed these miscellaneous applications pointing certain issues relating to controlling interest of Mr. Shekar Swamy in the order, at the paragraph numbers 21 to 23, in which the bench has discussed in detail various aspects and how it reached to the such conclusion. The issues raised by the assessee in these miscellaneous applications on the issue of controlling interest, we observe that now assessee relies on various submissions made in the paper book and these were not brought to the notice of the bench in the original hearing. Now the assessee has raised several issues relating to the observations and conclusions reached by the bench by bringing new submissions and new line of arguments. The observations made in particular in Para No. 22 is self-serving. 6. Further, with regard to rejection of comparison of arms length prices, the bench observed that “Whether the revenue sharing with MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.9 the other concern are within the arm’s length is subjective, considering the fact that it is sharing 90% of the revenue and transaction with the unrelated party is not substantial and assignments in both the cases are totally different.” The bench observed that the 90% of the revenue was given to the interested parties and only 10% was given to the unrelated parties, the business given to the unselected parties are not substantial, it cannot be compared with the arm’s length prices. It reached to this conclusion considering the volume of the business given to the related concern “HRG”, these are outside the comparability and doing ALP is meaningless. Hence observed as subjective and which is covered u/s.13(3). Now before us, the assessee tries to impress upon us that there were certain situation arose as per which the third parties have rejected the offer and hence the same was under compulsion and under such circumstances, the HRG has to carry on. These facts were not submitted at the time of original hearing and the bench also not gone into this aspect considering the fact that the majority of the contracts were handled by the HRG and only small portion of contract was awarded to the third party. Hence it was rejected without going into the aspect of verifying the ALP. Further, the assessee has raised ground that MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.10 the question of payments are excessive were not adjudicated and non adjudication of this aspect constitutes a mistake apparent from the record. The reasons for non adjudication is clearly discussed in the order itself, the assessee cannot claim that this aspect was not adjudicated. 7. Further, the assessee has raised another issue in the MA that the entire claim of exemption u/s 11 of the Act cannot be denied since provisions of section 13 of the Act would operate only to the extent of the excess amount paid by the applicant to HRG, which completely new proposition, which was not raised before us. Only the line of argument raised was that the payment to HRG is not excessive and it is not the person to be regarded as a person falling within the scope of section 13(3) of the Act. We have specifically addressed these issues. Hence there is no mistake apparent on record. 8. In our considered view, the pleas raised by the assessee will lead to review of our own order and the assessee has not pointed out any apparent mistake on record and rather it tries to impress upon us that it could have taken other possible views in case certain aspects could have been considered. Certainly the entertainment of these aspects of relooking the issues once again will lead to review of our own order and MA.Nos. 184, 185 & 186/MUM/2022 M/s. Media Research Users Council Page No.11 we are in agreement with the Ld DR that there is not mistake apparent on record to allow the present MA’s field by the assessee. Accordingly, the MA’s filed by the assessee are dismissed. 9. In the result, Miscellaneous Applications filed by the assessee are dismissed. Order pronounced in the open court on 04 th August, 2023. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 04/08/2023 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum