SONY PICTURES NETWORKS INDIA P.LTD(SUCCESSOR OF MSM DISCOVERY PRIVATE LIMITED), MUMBAI V. ACIT-12(3)(2), MUMBAI

MA 81/MUM/2021

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2970 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2014-2015
• Appeal Filed On: 17-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Additional evidence
• Section: 205; 207; 22

Judgement Text

, , . '#$ ,' ( IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER M.A.NO.81/MUM/2021 (ARISING OUT OF ITA NO. 6630/MUM/2018,A.Y.2014-15) SONY PICTURES NETWORKS INDIA PRIVATE LIMITED (SUCCESSOR OF MSM DISCOVERY PRIVATE LIMITED) INTERFACE BUILDING NO.7, 5 TH FLOOR, MALAD LINK ROAD, MALAD (WEST), MUMBAI 400 064 PAN:AABCS1728D ...... APPLIC ANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX-12(3)(2), 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI 400 021 ..... RESPONDENT )*/ APPELLANT BY : SHRI HITEN CHANDE ,- */ RESPONDENT BY : SHRI SUSHIL KUMAR MISHRA .- / DATE OF HEARING : 28/05/2021 /01 .- / DATE OF PRONOUNCEMENT : 14/06/2021 / ORDER PER VIKAS AWASTHY, JM : THIS MISCELLANEOUS APPLICATION UNDER SECTION 254(2 ) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') HAS BEEN FILED BY THE ASS ESSEE SEEKING RECTIFICATION IN THE 2 M.A.NO.81/MUM/2021 ORDER OF TRIBUNAL DATED 21/09/2020 VIDE WHICH THE A PPEAL OF ASSESSEE IN ITA NO.6630/MUM/2018 FOR ASSESSMENT YEAR 2014-15 WAS DE CIDED. 2. SHRI HITEN CHANDE APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT THERE ARE CERTAIN APPARENT MISTAKES IN THE ORDER OF THE T RIBUNAL DATED 21/09/2020(SUPRA) THAT REQUIRE RECTIFICATION. THE LD. AUTHORIZED REPR ESENTATIVE OF THE ASSESSEE POINTED FOLLOWING MISTAKES REQUIRING RECTIFICATION: (I) IN PARA-3 OF THE ORDER THE NATURE OF BUSINESS THAT HAS BEEN STATED WAS OLD BUSINESS OF THE ASSESSEE I.E. PRIOR TO 01/02/2010. WITH EFFECT FROM 01/02/2010, THE ASSESSEE HAS ENTERED INTO DISTRIBUTION AGREEMENT WI TH ITS ASSOCIATED ENTERPRISES (AES). AS PER THE DISTRIBUTION AGREEMENT THE ASSES SEE COLLECTS SUBSCRIPTION REVENUE FROM LOCAL CABLE OPERATORS/MSOS/DTH OPERATORS AND R EMITS 90% OF THE SAME TO ITS AES AS DISTRIBUTION FEE AND RETAINS THE BALANCE 10% . THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE POINTED THAT CURRENT BUSINESS ACTIVITIES OF THE ASSESSEE ARE STATED IN PARA 3.3 OF THE ORDER OF TRA NSFER PRICING OFFICER. (II) IN PARA 3.1 OF THE ORDER IT HAS BEEN MENTIONED THAT IF THE ADDITIONAL GROUND RAISED IS ADMITTED THEN GROUNDS OF APPEAL NO.3, 4 A ND 12 TO 15 WOULD BECOME ACADEMIC. WHEREAS, THE CORRECT POSITION IS THAT IF GROUND NO. 5 TO 11 RAISED IN THE APPEAL AREA ALLOWED THEN GROUNDS OF APPEAL NO.3, 4 AND 12 TO 15 WOULD BECOME ACADEMIC. (III) IN PARA -7 OF THE ORDER ASSESSMENT YEAR 2 011-12 AND ITA NO.971/MUM/2016 BE REPLACED WITH ASSESSMENT YEAR 2013-14, ITA NO.66 76/MUM/2017. 3. SHRI SUSHIL KUMAR MISHRA REPRESENTING THE DEPART MENT RAISED NO OBJECTION FOR CORRECTION OF MISTAKES POINTED BY THE LD. AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE IN THE ORDER OF TRIBUNAL DATED 21/09/2020 (SUPRA). 3 M.A.NO.81/MUM/2021 4. BOTH SIDES HEARD. A PERUSAL OF THE TRIBUNAL ORDE R DATED 21/09/2020(SUPRA) REVEALS CERTAIN FACTUAL/TYPO MISTAKES HAD CREPT IN THE ORDER THAT REQUIRE RECTIFICATION. NECESSARY CORRECTIONS IN THE SAID ORDER ARE MADE. (I) AFTER NECESSARY CORRECTIONS IN PARA-3 OF THE OR DER, PARA 3 WOULD NOW READ AS UNDER:- 3. SHRI JAHANGIR MISTRY, APPEARING ON BEHALF OF TH E ASSESSEE EXPLAINING FACTS OF THE CASE SUBMITTED THAT THE ASSESSEE IS A JOINT VENTURE BETWEEN MULTISCREEN MEDIA PVT. LTD. AND DISCOVERY COMMUNICATION INDIA. THE AS SESSEE IS ENGAGED IN DISTRIBUTION OF CHANNELS OWNED BY AES. UNDER DISTRI BUTION AGREEMENT, THE ASSESSEE COLLECTS SUBSCRIPTION REVENUE AND REMITS 90% OF THE SAME TO ITS AES AND RETAIN BALANCE 10%. (II) PARA 3.1 OF THE ORDER AFTER RECTIFICATION OF M ISTAKE WOULD NOW READ AS UNDER: 3.1 THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBM ITTED THAT THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL IN RESPECT OF DE DUCTION OF EDUCATION AND SECONDARY AND HIGHER EDUCATION CESS PAID ON THE IN COME-TAX LIABILITY UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSIO N. THE LD. COUNSEL OF THE ASSESSEE POINTED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS A LEGAL ISSUE FOR WHICH ALL THE FACTS ARE ALREADY ON RECORD OF TH E LOWER AUTHORITIES. NO NEW FACTS OR ADDITIONAL EVIDENCES ARE REQUIRED TO BE ADDUCED IN SUPPORT OF THE SAME. THE TRIBUNAL IN ASSESSEES APPEAL IN ITA NO.6676/MUM/20 17 FOR ASSESSMENT YEAR 2013- 14 HAS ADMITTED IDENTICAL ADDITIONAL GROUNDS AND HA S ADJUDICATED THE SAME VIDE ORDER DATED 29/06/2020. THE LD. COUNSEL OF THE ASSE SSEE SUBMITTED THAT IF GROUND NO.5 TO 11 RAISED IN THE APPEAL ARE ALLOWED THEN GR OUNDS OF APPEAL NO. 3, 4 AND 12 TO 15 WOULD BECOME ACADEMIC. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE FACTS IN THE ASSESSMENT YEAR UNDER APPEAL ARE IDENT ICAL TO THE FACTS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSME NT YEAR 2013-14. THE LD. 4 M.A.NO.81/MUM/2021 COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOL LOWING DECISIONS TO CONTEND THAT ADDITIONAL GROUND CLAIMING DEDUCTION OF EDUCATION C ESS IS PURELY A LEGAL ISSUE: 1. SESA GOA LTD. VS JCIT, 117 TAXMANN.COM 96 (BOMBA Y); 2. VOLTAS INDIA LTD. VS. ACIT, 117 TAXMANN.COM 547 (MUM-TRIB.); 3. ATLAS COPCO INDIA LTD. VS. ACIT, 112 TAXAMANN.CO M 120 (PUNE-TRIB.); AND 4. SYMANTEC SOFTWARE INDIA P. LTD. VS. DCIT,114 TAX MANN.COM 455 (PUNE- TRIB.). (III) IN PARA 7 OF THE ORDER AMBIGUITY IN EXPRESSIO N IS IRONED OUT BY REPLACING ASSESSMENT YEAR 2012-13 WITH ASSESSMENT YEAR 2013-1 4 AND THE WORDS IN THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2013-14(SU PRA) ARE INSERTED AFTER, FOR THE SAKE OF COMPLETENESS THE RELEVANT EXTRACT OF THE FI NDINGS OF CO-ORDINATE BENCH......... AFTER NECESSARY CORRECTIONS, PARA -7 WOULD READ AS UNDER:- 7. IN GROUND NO.6 TO 8 OF THE APPEAL, THE ASSESSEE HAS ASSAILED REJECTION OF COMPARABLES BY THE TPO. THE ASSESSEE IN ITS TRANSF ER PRICING STUDY FOR THE FINANCIAL YEAR 2013-14 (RELEVANT TO ASSESSMENT YEAR 2014-15) INCLUDED FOLLOWING COMPANIES AS COMPARABLES: (I) ADVANCE TECHNOLOGY LTD. (II) INTEGRA TELECOMMUNICATION AND SOFTWARE LIM ITED. (III) SONATA INFORMATION TECHNOLOGY LIMITED (IV) TRIJAL INDUSTRIES LIMITED. WE FIND THAT THE AFORESAID COMPANIES WERE ALSO INCL UDED BY THE ASSESSEE AS COMPARABLES IN TRANSFER PRICING STUDY FOR ASSESSMEN T YEAR 2013-14 AND THE SAME WERE REJECTED BY THE TPO FOR THE SIMILAR REASONS. THE CO-ORDINATE BENCH PLACING RELIANCE ON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2011-12 (ITA NO. 971/MUM/2016) RESTORED THE ISSUE BACK TO THE FILE O F ASSESSING OFFICER. FOR THE SAKE OF COMPLETENESS THE RELEVANT EXTRACT OF THE FI NDINGS OF CO-ORDINATE BENCH IN THE APPEAL OF ASSESSEE FOR ASSESSMENT YEAR 2013-14 (SUPRA) ARE REPRODUCED AS UNDER: 5 M.A.NO.81/MUM/2021 19. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. WE HAVE AL SO CONSIDERED THE WRITTEN SUBMISSIONS FILED BY LD. BRIEFING COUNSEL SH. HITEN CHANDE, ADVOCATE ON 26.06.2020. WE HAVE ALSO DELIBERATED ON THE CASE LAWS RELIED BY LEARNED SR COUNSEL OF THE ASSESSEE. WE HAVE SEEN THAT IN ASSESSEES OWN CASE FOR AY 2011-12, (ITA NO. 971/MUM/2016) THE COORDINATE BENCH WHILE EXAMINING AND ACCEPTING THE VALIDITY OF COMPARABILITY OF AVANCE AND SONATA PASSED THE FO LLOWING ORDER; 25. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE P ARTIES AND PERUSED THE RECORD. THE TPO DURING THE TP ADJUSTMENT PROCEEDING REJECTED AVANCE ON THE GROUND THAT THIS COMPANIES IS ENGAGED IN SOFTWARE T RADING, SALES OF HARDWARE AND OTHER SERVICES AND NO SEGMENTAL INFORMATION IS AVAI LABLE. DRP UPHELD THE ACTION OF ON THE BASIS OF ORDER FOR A.Y. 2010-11.BEFORE TRIBU NAL, THE ASSESSEE HAS PLACED ON RECORD THE FINANCIAL STATEMENT OF AVANCE. PERUSAL O F FINANCIAL STATEMENT REVEALS THAT THIS COMPANY HAS EARNED RS. 140 CRORE FROM SAL E OF SOFTWARE OUT OF TOTAL SALES OF RS. 176 CRORE. THIS COMPANY HAS APPROXIMATELY 80 % OF ITS INCOME FROM SOFTWARE PRODUCT. THUS, SEGMENTAL INFORMATION AS PLACED BEFO RE US IS AVAILABLE AT (PAGE NO. 204 TO 205 OF PAPER BOOK). FURTHER, WHILE REJECTING EMPOWER, THE TPO HELD THAT THIS COMPANY IS ENGAGED IN SELLING OF HARDWARE AND NO SEGMENTAL ARE AVAILABLE. FROM THE FINANCIAL STATEMENT PLACED BEFORE TRIBUNAL AT (PAGE NO. 207 TO 219 OF THE PAPER BOOK) AS PER DISCUSSION AVAILABLE ON PAGE NO. 22 OF ANNUAL REPORT OF THIS COMPARABLE (PAGE NO. 209) THE COMPANY HAS EARNED MO RE THAN 80% OF ITS REVENUE FROM SOFTWARE SALES. SIMILARLY, SONATA WAS REJECTED BY TPO BY TAKING VIEW THAT THIS COMPANY IS ENGAGED IN SOFTWARE TRADING, CONSULTANCY SERVICES. WE HAVE NOTED THAT THIS COMPARABLE WAS ACCEPTED IN A.Y. 2020-11 BY TPO HIMSELF IN ITS ORDER DATED 29.01.2014. FURTHER, FINANCIALS OF THIS COMPARABLE SHOWN THAT THIS COMPANY HAS EARNED RS. 584 CRORE FROM DISTRIBUTION OF SOFTWARE PRODUCT OUT OF TOTAL SALES OF RS. 597 CRORE, THUS, EARNED 97.49% OF ITS TOTAL REVENUE FROM SOFTWARE PRODUCT (PAGE NO. 224 OF THE PAPER BOOK). SVAM SOFTWARE WAS REJEC TED BY TPO ON THE GROUND THAT THIS COMPARABLE IS ENGAGED IN SOFTWARE DEVELOP MENT, SALE PURCHASE OF SOFTWARE AND COMPUTER RELATED HARDWARE. THE REVENUE OF SOFTWARE IS ONLY RS. 2 CRORE AGAINST THE TOTAL REVENUE OF RS. 20 CRORE. FR OM THE FINANCIAL OF THIS COMPANY IT IS NOTED THAT ENTIRE INCOME OF RS. 2.09 CRORE IS SHOWN FROM SALES (SALE OF PRODUCT). CONSIDERING THE NATURE AND ACTIVITIES CAR RIED OUT BY ALL THESE 4 COMPARABLE COMPANY WHICH ARE PRIMARILY ENGAGED IN D ISTRIBUTION OF SOFTWARE PRODUCT AS NOTED ABOVE. THE SOFTWARE DISTRIBUTION C OMPANY ARE HELD TO BE GOOD COMPARABLE TO DISTRIBUTOR SATELLITE CHANNELS IN TUR NER INTERNATIONAL INDIA (P.) LTD. VS. ACIT (SUPRA). THEREFORE, WE ACCEPT THE SUBMISSI ON OF LD. AR OF THE ASSESSEE TO ACCEPT THESE COMPARABLE AS COMPARABLE WITH ASSESSEE AND DIRECT THE AO/TPO TO WORK OUT THE T.P. ADJUSTMENT AFRESH. NEEDLESS TO OR DER THAT BEFORE PASSING THE ORDER, THE TPO/ASSESSING OFFICER SHALL GRANT OPPORT UNITY TO THE ASSESSEE. IN THE RESULT, THE GROUNDS RELATED TO COMPARABILITY OF COM PARABLE ARE ALLOWED IN ACCORDANCE WITH THE AFORESAID DIRECTIONS. CONSIDERI NG THE FACT THAT WE HAVE ALLOWED THE FUNCTIONAL COMPARABILITY, THEREFORE, DI SCUSSIONS ON ALTERNATIVE ADJUSTMENT HELD BY DRP HAVE BECOME ACADEMIC. 6 M.A.NO.81/MUM/2021 20. WE HAVE FURTHER SEEN THAT DELHI TRIBUNAL IN TURN ER INTERNATIONAL INDIA PRIVATE LIMITED (SUPRA) FOR AY 2012-13 HAS ACCEPTED INTEGRA AND TRIJAL AS VALID COMPARABLE AGAIN IN TURNER INTERNATIONAL INDIA PRIVATE LIMITED (SUPRA) FOR AY 2010-11 (2019 101 TAXMANN.COM 446 DEL TRI) AND IN AY 2006-07 (ITA NO.1204/DEL/2014, WITH CHANNEL DISTRIBUTOR. 21. CONSIDERING THE FACTS THAT THE AVANCE AND SONAT A WERE ACCEPTED AS VALID COMPARABLE IN ASSESSEES OWN CASE IN AY 2011-12 IN ITA NO. 971/MUM/2016 AND TRIJEL AND INTEGRA WAS HELD AS VALID COMPARABLE WIT H CHANNEL DISTRIBUTION, THEREFORE, WE IN PRINCIPAL AGREE AND ACCEPT THE SUB MISSION OF LD. AR OF THE ASSESSEE TO ACCEPT THESE FOUR COMPARABLE AS COMPARABLE WITH ASSESSEE. HOWEVER, WE HAVE SEEN THAT THE TPO REJECTED THE COMPARABILITY OF THE SE COMPARABLE SUMMARILY, WITHOUT EXAMINING THEIR SEGMENTAL DATA, HENCE WE DI RECT THE AO/TPO TO VERIFY THE SEGMENTAL DATA OF THESE FOUR COMPARABLE FOR THE REL EVANT FINANCIAL YEARS AS PER RULE 10B(4) AND RECOMPUTE THE TP ADJUSTMENT AFRESH AND ALLOW APPROPRIATE RELIEF TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO P ROVIDE ALL NECESSARY INFORMATION AND EVIDENCE TO THE TPO/AO. NEEDLESS TO ORDER THAT BEFORE PASSING THE ORDER, THE TPO/ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO TH E ASSESSEE. IN THE RESULT, THE GROUNDS RELATED TO COMPARABILITY OF COMPARABLE ARE ALLOWED IN ACCORDANCE WITH THE AFORESAID DIRECTIONS. SINCE, THE FACT IN THE IMPUGNED ASSESSMENT YEAR ARE PARI-MATERIA TO ASSESSMENT YEAR 2013-14, AND THE REASONS GIVEN BY THE TPO TO E XCLUDE THE AFORESAID COMPANIES ARE SIMILAR, THESE GROUNDS ARE RESTORED T O AO/TPO WITH SIMILAR DIRECTIONS. THE GROUND NO. 6 TO 8 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 5. WITH THE AFORESAID CORRECTIONS IN THE ORDER, THE RE WOULD BE NO CHANGE IN THE FINAL OUTCOME OF THE APPEAL. 6. IN THE RESULT, MISCELLANEOUS APPLICATION BY TH E ASSESSEE IS ALLOWED. ORDER PRONOUNCED COURT ON MONDAY THE 14 TH DAY OF JUNE, 2021. SD/- SD/- ( S.RIFAUR RAHMAN ) (VIKAS AWASTHY) ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 3 / DATED: 14/06/2021 VM , SR. PS (O/S) 7 M.A.NO.81/MUM/2021 COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT , 2. ,- / THE RESPONDENT. 3. 4- ( )/ THE CIT(A)- 4. 4- CIT 5. 78 ,-& , . . . , / DR, ITAT, MUMBAI 6. 8:; #< / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI