AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 1047
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....an appeal against the order passed by the Assistant Commissioner of Income-tax12(3)(2) Mumbai ['Learned A.O'], under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 ('Act') ('Assessment order'), in pursuance of the directions issued by Dispute Resolution Panel-3 (Hon'ble DRP'), Mumbai, on the following grounds: On the facts and circumstances of the case and in law, the Learned A.O, based on the directions of the Hon'ble DRP has: General Ground 1. erred in assessing the total income of the Appellant at Rs. 4,00,08,51,830 against Rs. 49,58,34,942 as computed by the Appellant in its return of income; 2. erred in making a transfer pricing adjustment of Rs. 3,50,50,16,888 to the total income of the Appellant on the premise that the international transactions entered into by the Appellant with its associated enterprises ('AEs') were not at arm's length; Order passed is without jurisdiction and bad in law: 3. order passed under Section 92CA(3) of the Act is passed by Additional Commissioner of Income-Tax, Transfer Pricing-3(2), Mumbai (Addl. CIT) is without jurisdiction and bad in law in as much as the 'Transfer Pricing Offi....
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....llant's international transactions; 11. 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 (i.e. other than India) hence the economic and commercial circumstances under which they are entered would be different from the distribution agreement entered into by the Appellant; Internal comparability 12. Without prejudice to the other grounds, should software distributors not be 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; Selection of Local Cable Operators ('LCOs')/ Multi System Operators ('MSOs')/ Direct to Home ('DTH') as comparables 13. Without prejudice to the other grounds, should software distributors be rejected as comparables then Local Cable Operators ('LCOs')/ Multi System Operators ('MSOs')/ Direct to Home ('DTH') companies can be considered as appropr....
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....ery Communication India. The assessee is engaged in distribution of TV Channels to Local Cable Operators/Multi System Operators/DTH operators. For this activity the assessee is remunerated at cost + mark-up of 5%. The costs include marketing, personnel, general and administrative and depreciation. Apart from above, the assessee is entitled to reimbursement of expenditure viz. distribution commission without any mark-up. 3.1. The ld. Counsel for the assessee further submitted that the assessee has raised additional ground of appeal in respect of deduction of education and secondary and higher education cess paid on the income-tax liability under the head "profits and gains from business or profession". 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 the lower authorities. No new facts or additional evidences are required to be adduced in support of the same. The Tribunal in assessee's appeal in ITA No.6676/Mum/2017 for assessment year 2013-14 has admitted identical additional grounds and has adjudicated the same vide order dated 29/06/2020. The ld. Counsel of the assesse....
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.... 234A of the Act, respectively. The ld. Counsel for the assessee submitted that the assessee has filed rectification petition before the Assessing Officer. The same has not been disposed off till date. The ld. Counsel for the assessee prayed that a direction may be given to the Assessing Officer for an early disposal of application. 4. Per contra, Shri A. Mohan, representing the Department vehemently defended the impugned order. The ld. Departmental Representative opposed the admission of additional ground of appeal filed by the assessee. The ld. Departmental Representative contended that as per section 143(2) of the Act as mended by Finance Act, 1987, only upward revision of income is permissible. The additional ground raised by the assessee, if admitted and allowed would result in an assessment of income less than the returned income. This is impermissible. To support his contention, the ld. Departmental Representative placed reliance on the decision rendered in the case of Goetze (India) Ltd. vs. CIT, 284 ITR 323(SC). The ld.Departmental Representative further placed reliance on CBDT Circular explaining the Finance Act, 1987. As regards the fact that the ground raised by the ....
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....AE) is not "Royalty". The ld. AR of the assessee further submits that "distribution fees" is not in the nature of Royalty has been upheld by Tribunal and affirmed by Hon'ble Bombay High Court in the hands of payer as well as the recipient of distribution fees in case of SET India Private Limited (ITA No. 1347/2013 and in case of recipient of distribution fees in CIT vs. MSM Satellite (Singapore) Pte Limited (ITA No. 103 & 207/2017. The learned AR furnished the copy of decision of Tribunal and copy of decision of Hon'ble Bombay High Court. 14. On the other hand the ld. DR for the revenue supported the order of the lower authorities. 15. We have considered the submissions of both the parties and gone through the order of the lower authorities. We have seen that on similar set of facts the coordinate bench of the Tribunal in assessee's own case for AY 201-12 on the issue held that the distribution fee paid by the assessee to its AE is not 'Royalty'. The coordinate bench (authored by JM) passed the following order; "30. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. The first issue for our co....
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....as comparables in Transfer Pricing Study for assessment year 2012-13 and the same were rejected by the TPO for the similar reasons. The Co-ordinate Bench placing reliance on the decision of Tribunal in assessee's own case for AY 2011-12 (ITA No. 971/Mum/2016) restored the issue back to the file of Assessing Officer. For the sake of completeness the relevant extract of the findings of Co-ordinate Bench are reproduced as under:- "19. We have considered the rival submission of the parties and have gone through the orders of lower authorities. We have also 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 assessee's 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 following order; "25. We have considered the submission of both the parties and perused the record. The TPO during the TP Adjustment proceeding rejected Avance on the ground that this companies is engaged in software trading, ....
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....e TPO/Assessing Officer shall grant opportunity to the assessee. In the result, the grounds related to comparability of comparable are allowed in accordance with the aforesaid directions. Considering the fact that we have allowed the functional comparability, therefore, discussions on alternative adjustment held by DRP have become academic." 20. We have further seen that Delhi Tribunal in Turner 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 Sonata were accepted as valid comparable in assessee's own case in AY 2011-12 in ITA No. 971/Mum/2016 and Trijel and Integra was held as valid comparable with channel distribution, therefore, we in principal agree and accept the submission 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 these comparable summarily, without examining their segme....
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....ssee are dismissed, sans-merit. 11. In ground No.22 of the appeal, the assessee has assailed initiation of penalty proceedings under section 271(1)(c) of the Act. Challenge to penalty proceedings at this stage is premature. This ground of the appeal is dismissed, as such. 12. The assessee has raised additional ground, claiming deduction of education and secondary and higher education cess paid on the income-tax liability under the head "profits and gains from business or profession". The ld. Counsel for the assessee has pointed that identical ground was raised by the assessee in assessment year 2013-14. The Co-ordinate Bench of Tribunal after considering the decision of Hon'ble Bombay High Court in the case of Sesa Goa Ltd. (supra.) admitted additional ground and has restored the same to the file of Assessing Officer. The ld. DR has strongly opposed admission of additional ground and has even expressed reservations that if additional ground is allowed, the assessed income of the assessee would go below the returned income, and the same is impermissible in the light of CBDT Circular. We find that the in the case of Sesa Goa Ltd. (supra.) similar was the situation where the....
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....roceeded to hold that the Appellate Authority under the IT Act had sufficient powers to permit such a deduction. In taking this view, the Division Bench relied upon the Full Bench decision of this Court in Ahmedabad Electricity Co. Ltd. v. CIT (199 ITR 351 to hold that the Appellate Authorities under the IT Act have very wide powers while considering an appeal which may be filed by the Assessee. The Appellate Authorities may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of the Assessee in accordance with law. 40. The decision in Goetze (supra) upon which reliance is placed by the ITAT also makes it clear that the issue involved in the said case was limited to the power of the assessing authority and does not impinge on the powers of the ITAT under section 254 of the said Act. This means that in Goetze (supra), the Hon'ble Apex Court was not dealing with the extent of the powers of the appellate authorities but the observations were in relation to the powers of the assessing authority. This is the distinc....