TMI Blog2020 (9) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion - Admission of additional ground - HELD THAT:- The additional ground raised by the assessee is purely of legal nature. Taking into consideration the facts and the decision rendered in the case of Sesa Goa Ltd.[ 2020 (3) TMI 347 - BOMBAY HIGH COURT] we admit the additional ground and restore the issue to the file of Assessing Officer for consideration. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee and shall pass speaking order, in accordance with law. The additional ground raised by the assessee is thus, allowed for statistical purpose. Short grant of TDS credit while computing tax liability in the impugned assessment year - charging of interest under section 234A - assessee has filed rectification petition under section 154 - HELD THAT:- The Assessing Officer is directed to decide the aforesaid application filed by the assessee, in accordance with law by passing a speaking order within a period of three months from the date of receipt of this order. Levy of interest under section 234B and 234D is mandatory and consequential, hence, aforesaid grounds raised by the assessee are dismissed, sans-merit. - ITA NO. 6630/MUM/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence made to the Transfer Pricing Officer ( TPO ) 4. erred in referring the Appellant s case to the Learned TPO under Section 92 CA(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 5. erred in characterizing the distribution fee paid /payable by the Appellant to its AEs to be in the nature of royalty; Rejections of economic analysis by the Appellant in its transfer pricing study report. 6. 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; 7. 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 transaction in the absence of any direct comparables; 8. erred in law and in facts, in rejecting the following companies from the Transfer Pricing Study for FY 2013-14 which are comparable to the Appellant; (i) Advance T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order in the name of MSM Discovery Private Limited , though the said entity was not in existence as on the date of passing the said order dated 23.10.2018 and that such an assessment order on a non-existent entity is void and an incurable defect in law; Short grant of tax deducted at source (TDS) 16. erred in short granting credit of taxes deducted at source of ₹ 82,64,263 while computing the tax liability for the year; Interest under Section 234A of the Act 17. erred in levying interest of ₹ 1,94,74,594 under Section 234A of the Act since the Appellant had filed its return of income on 28th November 2014 which is before the due date of filing the return of income (i.e. 30th November 2014) Interest under Section 234B of the Act 18. erred in levying interest of ₹ 53,55,51,335 under Section 234B of the Act; 19. without prejudice to the above, erred in computing the interest under Section 234B of the Act at ₹ 53,55,51,335 instead of ₹ 53,10,05,989; Interest under Section 234D of the Act 20. erred in levying interest of ₹ 2,07,16,512 under Section 234D of the Act; 21. without prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions to contend that additional ground claiming deduction of Education Cess is purely a legal issue: 1. Sesa Goa Ltd. vs JCIT, 117 taxmann.com 96 (Bombay); 2. Voltas India Ltd. vs. ACIT, 117 taxmann.com 547 (Mum-Trib.); 3. Atlas Copco India Ltd. vs. ACIT, 112 taxamann.com 120 (Pune-Trib.); and 4. Symantec Software India P. Ltd. vs. DCIT,114 taxmann.com 455 (Pune-Trib.). 3.2. In respect of ground No.5 of the appeal, the ld. Counsel for the assessee submitted that the Transfer Pricing Officer (TPO) has erred in holding that distribution fee paid by the assessee to its Associated Enterprise (AE) is in the nature of royalty. The Tribunal in assessee s appeal for assessment year 2013-14 has already dealt with this issue and after placing reliance on the order of Tribunal in assessee s own case for assessment year 2011-12, held that distribution fee paid by the assessee is not in the nature of royalty. 3.3. In respect of ground No.6 to 8 of the appeal, the ld. Counsel for the assessee again referred to the order of Co-ordinate Bench of the Tribunal in assessee s own case for assessment year 2013-14. The ld. Counsel for the assessee pointed that the ground raised are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(2) vide Direct Tax Laws (Amendment) Act, 1987 were not subjected to the judicial scrutiny. The ld. DR to further buttress his contentions placed reliance on the decision of Hon ble Bombay High Court in the case of M/s. Ultratech Cement Ltd vs. The Additional Commissioner of Income Tax in Income Tax Appeal No. 1060 of 2014, decided on 18.04.2017 and distinguished the judgments rendered in the case of CIT vs. Pruthvi Brokers Shareholders Pvt. Ltd. (349 ITR 336) and National Thermal Power Corporation vs Commissioner of Income Tax 229 ITR 383 (SC) . 5. We have heard the submissions made by rival sides and have examined the orders of authorities below. The ground No.1 and 2 of the appeal are general in nature and hence, require no adjudication. 6. The ground No.5 of the appeal is against re-characterization of distribution fee paid/payable by the assessee to its AE as Royalty . We find that identical ground was raised by the assessee in ITA No.6676/Mum/2007 for assessment year 2013-14(supra) assailing the action of DRP/AO in holding distribution fee as royalty . The Co-ordinate Bench while adjudicating the ground held as under:- 13. We have heard the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This fact in not controverted by ld. DR for the revenue nor any contrary facts were brought on record by the lower authorities. The ld. DRP in assessee s MSM Satellite (Singapore) Pte Ltd in its order dated 19.12.2014 for AY 2010-11 by following the order of Tribunal for AY 2005-06 2006-07 dated 28.08.2015 held that distribution revenue is not Royalty income. The Hon ble Bombay High Court in CIT Vs SET India Pvt Ltd (ITA No. 1347 of 2013) held that the distribution fee paid is not in the nature of royalty. Similar view was affirmed by Hon ble Bombay High Court in CIT Vs MSM Satellite (Singapore) Pte Ltd (ITA No. 103 of 2017). Considering the decision of the Hon ble Jurisdictional High Court and respectfully following the same, we are of the view that the payment of distribution fee cannot be termed as Royalty . Since, we have held that distribution fee cannot be termed as Royalty thus; discussion on the royalty agreement selected for comparability has become academic. The ld. Departmental Representative could not bring any material on record to show that the facts in the assessment year under appeal are distinguishable or any judgment to controvert the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation as placed before 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 more 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 ₹ 584 Crore from distribution of software product out of total sales of ₹ 597 Crore, thus, earned 97.49% of its total revenue from software product (Page No. 224 of the Paper Book). SVAM Software was rejected by TPO on the ground that this comparable is engaged in software development, sale purchase of software and computer related hardware. The revenue of software is only ₹ 2 Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated 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 exclude the aforesaid companies are similar, these grounds are restored to AO/TPO with similar directions. The ground No. 6 to 8 of the appeal are allowed for statistical purposes. 8. In ground of appeal no. 9 to 11, the assessee has assailed benchmarking of international transaction of alleged Royalty payment by applying CUP as the most appropriate method. Since, we have held that distribution fee paid/payable by the assessee is not in the nature of Royalty , the grievance of assessee in ground no. 9 to 11 does not survive. These grounds have become academic and hence, are not deliberated upon. 9. The ground No.16 of the appeal is against short grant of TDS credit while computing tax liability in the impugned assessment year. In ground No.17, the assessee has assailed charging of interest under section 234A of the Act. The ld. Counsel of the assessee pointed that on both the issues, the assessee has filed rectification petition under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the Appellant - Assessee, in its original return, had never claimed deduction towards the amounts paid by it as cess . She submits that neither was any such claim made by filing any revised return before the Assessing Officer. She therefore relied upon the decision of the Supreme Court in Goetze (India) Ltd. v. Commissioner of Income-tax (2006) 284 ITR 323 (SC) to submit that the Assessing Officer, was not only quite right in denying such a deduction, but further the Assessing Officer had no power or jurisdiction to grant such a deduction to the Appellant - Assessee. She submits that this is what precisely held by the ITAT in its impugned judgments and orders and therefore, the same, warrants no interference. 38. Although, it is true that the Appellant - Assessee did not claim any deduction in respect of amounts paid by it towards cess in their original return of income nor did the Appellant - Assessee file any revised return of income, according to us, this was no bar to the Commissioner (Appeals) or the ITAT to consider and allow such deductions to the Appellant - Assessee in the facts and circumstances of the present case. The record bears out that such deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer to consider the claim for deduction in such letter, the Commissioner (Appeals) or the ITAT, before whom such deduction was specifically claimed was duty bound to consider such claim. Accordingly, we are unable to agree with Ms. Linhare's contention based upon the decision in Goetze (supra). We find no merit in the objections raised by the ld. Departmental Representative against admission of additional ground. The ld. Departmental Representative has failed to show that the facts in the assessment year under appeal are distinguishable. Further, the ld.Departmental Representative has also not been able to controvert, that necessary facts for deciding additional ground of appeal are already on record and hence, no new additional evidence is required to be adduced for the adjudication of this legal issue. The additional ground raised by the assessee is purely of legal nature. Taking into consideration the facts and the decision rendered in the case of Sesa Goa Ltd. (supra.), we admit the additional ground and restore the issue to the file of Assessing Officer for consideration. The Assessing Officer shall afford reasonable opportunity of hearing to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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