TMI Blog2020 (6) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... time is sold generally through advertisement agencies - HELD THAT:- As decided in assessee's own case for assessment year 2009 10 [ 2017 (7) TMI 867 - ITAT DELHI] referring to issue is of treatment of commission paid to the advertising agencies AO is directed to not to make this addition in the assessment order. Expenditure on obtaining license for use of accounting software - revenue or capital expenditure - HELD THAT:- This issue has already been decided while deciding the appeal of the revenue wherein following the order of the coordinate bench for assessment year 2009 10 [ 2017 (7) TMI 867 - ITAT DELHI] the software expenditure disallowed by the learned assessing officer deleted. Therefore this ground of appeal of the assessee deserves to be allowed. Even otherwise the assessee has not purchased the software but has purchased the license to use this software for its accounting purposes. That is not capital expenditure but revenue expenditure. In view of this ground of the assessee is allowed. TPA - ALP of the corporate Guarantee - non making reference to the TPO - HELD THAT:- In view of the M/S. S.G. ASIA HOLDINGS (INDIA) PVT. LTD. [ 2019 (8) TMI 661 - SUPRE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri Sachit Jolly, Adv, Shri Rohit Garg, Adv, Shri Siddharth Joshi, Adv For the Revenue : Shri H. K. Choudhary, CIT DR ORDER PER PRASHANT MAHARISHI, A. M 1. These are the cross appeals filed by the assessee, M/s New Delhi Television Ltd (the appellant) in ITA number 3865/Del/2014 and The Asst Commissioner Of Income Tax, Circle 13 (1), New Delhi (The Learned AO) in ITA number 3996/Del/2014 for Assessment Year 2008 09 against the order of The Commissioner Of Income Tax (Appeals) XX, New Delhi (The Learned CIT A) wherein, the appeal filed by the appellant against the order passed under section 143 (3) of The Income Tax Act, 1961 (The Act) dated 3/8/2012 was partly allowed. 2. The assessee has raised the following grounds of appeal in ITA No. 3865/Del/2014 for the Assessment Year 2008-09:- 1. That on facts and in law the Commissioner of Income Tax (Appeals) {hereinafter referred to as CIT(A) erred in not appreciating that the order of assessment dated 3rd August 2008 passed by the Assistant Commissioner of Income Tax, Circle-13(1), New Delhi {hereinafter referred to as the AO } ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 14A r/w Rule 8D of the Act. 5.2 That on facts and in law the CIT(A) erred in sustaining disallowance made by the AO without appreciating the fact that no exempt income was derived by the appellant in the year under consideration. 5.3 That on facts and in law the CIT (A) erred in not appreciating that no expenditure was incurred by the assessee in order to earn any income which is exempt from tax. 5.4 That on facts and in law the CIT(A) erred in not appreciating that investments in group companies and others were made by the appellant only from non-interest bearing funds. 6. That on facts and in law the CIT (A) erred in upholding the disallowance made by the AO of ₹ 7,38,43,516/- being the transmission and up linking charges paid to M/s Intelsat Corporation by invoking provisions of section 40(a)(i) of the Act. 6.1 That on facts and in law the CIT(A) erred in upholding that the transmission and up-linking charges paid to M/s Intelsat Corporation are chargeable to tax in India as income from Royalty so defined under section 9(1 )(vi) of the Act and under the relevant Agreement for Avoidance of Double Taxation (AADT). 6.2 That on facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying on the DRP order in assessee's own case for AY 2009-10, ignoring the fact that the revenue is already in appeal on the issue and the matter is sub-judice. 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance of commission of ₹ 45,53,30,999/- u/s 40(a)(ia) of the Act by relying on the decision of the DRP in the assessee's own case for the AY 2009-10 ignoring the fact ignoring the fact that he revenue is already in appeal on the issue and the matter is sub-judice. 3.1 On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the above disallowance by ignoring the fact that the space for the advertisements was sold through agents and that the assessee and its agencies had relationship of principal and agent and as such the payments were liable for deduction of tax at source. 4. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of ₹ 18,72,00,000/- on account of Corporate Guarantee Charges by relying on the decision of Hon'ble DRP in assessee's own case in the AY 2009-10 ignoring the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission expenditure by applying provisions of section 40 a (ia) for non-deduction of tax at source 455330999 Deleted 4 Corporate guarantee charges 187200000 Deleted 5 Disallowance under section 14 A read with rule 8D of the income tax rules 896000 Deleted 6 Disallowance of transmission and up linking charges 73843516 Deleted 7 Gain on sales of shares of Astra Avani networks Limited 105789125 confirmed 7. We first proceed to decide the ITA number 3996/Del/2014 filed by the learned assessing officer. 8. The first ground of appeal is that during the year under consideration the appellant charged expenses amounting to ₹ 118343111 under the head employee stock option expenses to its profit and loss account. The employees were covered under the ESOP 2004 scheme of the appellant. In its computation of taxable income, the appellant added back sum of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that for assessment year 2006 07 and 2007 08, identical issue travelled up to the level of the coordinate bench which decided the matter in favour of the appellant for those assessment years. Based on this, the learned CIT A held that in appellant s own case for assessment year 2006 07 the coordinate bench has decided the issue in favour of the appellant per its order dated 20/12/2013 in ITA number 852/Del/2012 and 942/Del/2012 wherein it is held that the issue of employee stock option plan is covered by the decision of the special bench of the tribunal in case of Biocon Ltd versus Deputy Commissioner Of Income Tax (LTU) Bangalore (2013) 35 taxmann.com 335. Therefore he directed the learned assessing officer to consider the above expenditure as deductible expenditure under section 37 (1) of the act and the assessing officer was directed to work out the amount of ESOP expenses to be allowed in assessment year 2008 09 in accordance with the decision of the special bench of the tribunal. Thus he deleted the disallowance accordingly. 10. The learned departmental representative supported the order of the learned assessing officer and submitted that ESOPs expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's claim held as follows (page 314 of 1 ITR-OL) : As regards the second issue which is now canvassed before this Court, viz., On the issue of expenditure of ₹ 66.82 lakhs towards the issue of shares to the employees stock option is concerned, the Tribunal pointed out that the shares were issued to the employees only for the interest of the business of the assessee to induce employees to work in the best interest of the assessee. The allotment of shares was done by the assessee in strict compliance with SEBI regulations, which mandate that the difference between the market prices and the price at which the option is exercised by the employees is to be debited to the profit and loss . . . the Tribunal in its order stated that it was a benefit conferred on the employee. So far as the company is concerned, once the option was given and exercised by the employee, the liability in this behalf got ascertained. This was recognised by the SEBI and the entire employees stock option plan was governed by the guidelines issued by the SEBI. On the facts thus found, the Tribunal held that it was not a case of contingent liability depending on the various factors on which the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; because such lapsing options are up for grabs to the other eligible employees. In any case, if some of the options remain unvested or are not exercised, the discount hitherto claimed as deduction is required to be reversed and offered for taxation in such later year. We, therefore, hold that the discount in relation to options vesting during the year cannot be held as a contingent liability. C. Fringe Benefit . . . Act 2005, with effect from April 1, 2006. Memorandum explaining the provisions of the Finance Bill, 2005 highlights the details of the fringe benefits tax. It provides that : 'Fringe benefits as outlined in section 115WB, mean any privilege, service, facility or amenity directly or indirectly provided by an employer to his employees (including former employees) by reason of their employment'. Charging section 115WA of this Chapter provides that : 'In addition to the Income-tax charged under this Act, there shall be charged for every assessment year . . .'fringe benefit tax in respect of fringe benefits provided or deemed to have been provided by an employee to his employees during the previous year'. Section 115WB gives meaning to the expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner, an expense becomes deductible when liability to pay arises irrespective of its actual discharge. The incurring of liability and the resultant deduction cannot be marred by mere reason of some difficulty in proper quantification of such liability at that stage. The very point of incurring the liability enables the assessee to claim deduction under mercantile system of accounting. We have noticed the mandate of the Hon'ble Supreme Court in Bharat Earth Movers [2000] 245 ITR 428 that if a business liability has definitely arisen in an accounting year, then the deduction should be allowed in that year itself notwithstanding the fact that such liability is incapable of proper quantification at that stage and is dischargeable at a future date. It follows that the deduction for an expense is allowable on incurring of liability and the same cannot be disturbed simply because of some difficulty in the proper quantification. A line of distinction needs to be drawn between a situation in which a liability is not incurred and a situation in which the liability is incurred but its quantification is not possible at the material time. Whereas in the first case, there cannot be any ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee extensively relied on those decisions before the learned CIT A. 16. The learned CIT A noted that assessee has made an expenditure of ₹ 21528/ for up gradation of software, ₹ 2216476 for accounting software and ₹ 5 05378 on the software which is having limited useful life. He further noted that the accounting software expenditure has been incurred by the assessee to obtain license to use accounting software such as vision XL financials, FAMS software package and implementation of PMS software. He further noted that the learned Dispute Resolution Panel for assessment year 2009 10 has already allowed the up gradation of software expenditure as well as the expenditure on the software having the limited useful life as revenue expenditure. However he upheld the disallowance on the accounting software of ₹ 2216476/ holding it as capital expenditure. Therefore he deleted the partially addition made by the learned assessing officer. 17. The learned departmental representative vehemently supported the order of the learned assessing officer and held that when the software is held to be capital expenditure, only depreciation is allowable ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced below: From the submission of the appellant it is clear that the appellant has capitalized certain software purchases on its own. The 'up-gradation of software' and under the head 'other software1 were treated as capital in nature by the AO and depreciation at the rate of 60% was allowed by him. However, on going through the details, it is noticed that these software need regular up-gradation or change as per the requirements of fast changing broadcasting industry. The life of these software are for a shorter period and therefore it cannot be said the same is providing enduring benefit to the appellant. For the AY 2006-07 also, my predecessor CIT(A)-XVI has allowed such expenditure as revenue expenditure in para 3.2 of the appeal order dated 30.09.2011 in appeal no. 228/08-09. The nature of software purchased and the business of the appellant for which the software so purchased were applied remains the same. In view of this, the expenditure under the head upgradation of software and other software amounting to ₹ 2,07,009/- and 5,58,006/- respectively is held as allowable deduction during the year. AO is directed to delete the addition made in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the amount retained by those advertisement agents and disallowed ₹ 455330999/ under section 40(a) (ia) of the income tax act. 21. The assessee challenged the same before the learned CIT A. He held that issue squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in CIT versus Living Media india Ltd and also the decision of the honourable Allahabad High Court in case of Jagran Prakashan Ltd versus Deputy Commissioner Of Income Tax (345 ITR 288). He further noted that the learned Dispute Resolution Panel has directed the learned Assessing Officer to not to make addition on this count for assessment year 2009 10 following the above decision. Therefore he directed AO to delete the addition. 22. The learned departmental representative vehemently supported the order of the learned assessing officer whereas the learned authorised representative submitted that the identical issue has been decided by the coordinate bench in assessee s own case for assessment year 2009 10 and therefore the issue is squarely covered in favour of the assessee. 23. We have carefully considered the rival contention and find that the issue is sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarded by INS to the advertising agency which becomes eligible to receive 15 per cent discount from media companies on procuring advertisement space for/time in publication/broadcast for advertisers. It may be noted that even the discount is not at the will or contractual discretion; it is governed by INS regulations. DRP has carefully examined the above issue. DRP is convinced that the decision of the Hon'ble Jurisdictional High Court in the case of Living Media India Ltd. is applicable in this case since the issue is of treatment of commission paid to the advertising agencies. Therefore, the AO is directed to not to make this addition in the assessment order. In this way, objection 2 along with its sub-objections are disposed off. ' 55. Before us the ld DR relied upon the draft assessment order whereas the ld AR vehemently submitted that the issue is squarely covered by the decision of Hon'ble Delhi High Court in case of CIT v. Living Media India Ltd. [2013] 35 taxmann.com 105/359 ITR 106. He therefore stated that there is no error in the order of the ld DRP. 56. We have carefully considered the rival contentions and also perused the facts of the case as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we consider it appropriate to deal with when decideing the relevant grounds of appeal in case of appeal of assessee. 26. Thus except ground number four of the appeal of the learned assessing officer all other grounds are dismissed. 27. Now we come to the appeal of the assessee in ITA number 3865/Del/2014. 28. The first ground of appeal is against the order of the learned CIT A holding that the order of the assessment dated 3 August 2008 passed by the Asst Commissioner of income tax is not barred by limitation and hence is not bad in law. The assessee was also aggrieved stating that the impugned assessment completed under section 143 (3) of the act is not a valid order in the light of the extended time limit provided under section 153 of the income tax act. 29. The learned authorised representative submitted that this issue is covered against the assessee by the decision of the coordinate bench in case of AT T Ltd AT T Global Network Services (India) (P.) Ltd. v. Dy. CIT [2017] 86 taxmann.com 158 (Delhi - Trib.) However keep the issue alive this ground is contested. 30. The learned departmental representative vehemently supported the order of the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re at arms length and did not propose any adjustment. However, on enquiry by ld AO asked / enquired from the ld TPO whether the issue of ALP of Corporate Guarantee as per letter forwarded by the AO to him on 6/6/2011 has been considered or not while finalizing the transfer pricing assessment. As per letter dated 01/6/2012, the learned Transfer Pricing Officer informed ld AO that the issue regarding computation of the arm s length price of the corporate guarantee issued by the assessee has not been considered by him while finalizing the transfer pricing orders. Therefore, the learned assessing officer noted that such transaction has not been examined by the learned TPO. He therefore was of the view that an international transaction coming to the notice of the ld AO subsequent to original reference made to ld TPO, ld TPO could have determined the ALP of International Transaction. In this case ld TPO failed to do so despite ld AO informing him. Therefore he proceeded to examine the issue of ALP of the corporate Guarantee. 34. Ld AO noted that during the year NDTV network plc United Kingdom [ subsidiary of appellant] has raised step up coupon Bonds 100 million US dollars. NDTV [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a corporate guarantee for and on behalf of subsidiary as and when required. The assessee then explained the meaning of the word guarantee relying on the OECD commentary. 38. On 20/7/2012 the assessee further explained to the assessing officer about the above fact. 39. However the learned assessing officer rejected the contentions of the assessee and held that financial guarantees are usually provided in relation to loans by affiliates and can be either ‗explicit or ‗implicit . Explicit guarantees are those where a direct assurances given by an affiliate and implicit guarantees are those where being part of a multinational group makes it possible to raise a step-up coupon bonds, which one might not have been able to obtain as an independent entity, or secure more favourable terms. In these instances, the step-up coupon bond holders perceives that the apparent would intervene in the case of any default. The AO also referred to the paragraph number 7.13 of the OECD transfer pricing guidelines on this issue. The AO also noted that no services could be said to be received wherein associated enterprises for reasons of its affiliation alone has a credit rating higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and all the relevant material placed on record. The issue has been adequately dealt with by the special bench of honourable ITAT Bangalore in case of Aztec software and technology services Ltd versus the Asst Commissioner of income tax, Circle 11 (1) Bangalore in ITA number 584/585/Bangalore/2006 dated 12 June 2007. It has been held by the honourable tribunal that a combined reading of the provisions of section 92C and 92CA of the act reveals that these provisions can be invoked by the AO for determining the arm s length price of international transactions. The AO himself can proceed to determine the ALP when he finds the existence of the circumstances specified in clause (a) to (d) of subsection 3 of section 92C of the act. On the other hand, if the AO considers it necessary or expedient to refer the determination of ALP to the TPO the same can be done under 92 CA (1) of the act. It has further been held by the honourable ITA T that AO is not required to demonstrate the existence of the circumstances set out in clause (a) to (d) of subsection (3) of section 92C of the act before referring the case to the TPO for the following reasons:- (i) proceedings under section 92C and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uer company] and New Delhi television Ltd [ Parent company ] [ Appellant] , UK subsidiary company proposed to issue step up coupon convertible bonds due on 30 May 2012 in a principal amount of $ 100 Million. This issue was underwritten by Jefferies international Ltd who was placing agent. The appellant New Delhi television Ltd was parent company. The subscription agreement is placed at page number 49 126 of his paper book. He referred to the clause 4 of that agreement where issuer company undertakes that issuer and the parent copany undertakes to procure the bonds at a certain dates. According to clause 4.2 the parent company (appellant) undertakes to the placing agent and the initial investors (a) to implement the guarantee specified in the conditions in the manner and by the time specified in the conditions. Therefore it was the submission that the undertaking was to be given for gurantee at a future date. He further referred to the terms and conditions of the issue of the bonds placed at appendix 1 of the subscription agreement. According to clause .2 of that appendix, guarantee in relation to bondholders redemption was mentioned that the parent company (appellant) under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twork has not paid any amount to Indian company i.e. New Delhi television Ltd in year ending on 31st of March 2008 or any other year for giving an undertaking to provide a corporate guarantee for and on behalf of NDTV networks PLc. He therefore submitted that there is a categorical information received on exchange of information from the UK authorities that there is no guarantee issued by the New Delhi television Ltd in respect of the above transaction and it is only giving an undertaking to provide a corporate guarantee for and behalf of subsidiary. He therefore submitted that it is categorically proved that no corporate guarantee is issued by the appellant to the subsidiary company. He further submitted that when the UK tax authorities has given an information under the exchange of information article confirming that no guarantee was provided by the appellant to its subsidiaries, the AO should have dropped proceedings and could not have gone beyond the information. 45. He further submitted that in the present case the learned transfer pricing officer did not make any transfer pricing adjustment, however, the learned assessing officer has made the adjustment. He stated that hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the special bench before the honourable Delhi High Court. In view of this he submitted that when the concurrent authorities have held that there is no corporate guarantee issued by the appellant in favour of its subsidiaries, the learned AO could not have made the addition by determining the arm s length price. 47. Coming to the merits of the case, he submitted that first of all to determine an arm s length price there has to be an international transaction. The learned assessing officer should have established first that there is an international transaction. He submitted that merely giving an undertaking to give a corporate guarantee at a future date cannot be called a transaction and therefore it cannot be an international transaction at all. He referred to the provisions of section 92B where the meaning of ‗international transaction is provided. He further stated that by giving such an undertaking there is no impact on the profit, loss, income or assets of the appellant and therefore the giving of an undertaking cannot result into an international transactions. He further referred to the explanation 1 of section 92B and submitted that the transactions relating to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be the events in which the guarantee would be issued by the appellant company. Thus the minutes of the appellant as well as the Subsidiary both also confirmed about the undertaking only. 52. In the end he referred to the notice issued under section 148 of the income tax act on 4/8/2015 by the learned assessing officer wherein in para number [6] the issue of raising funds issuing US dollar hundred million coupon convertible bonds are discussed. He submitted that the learned assessing officer in para number [7] has mentioned that that the funds received by subsidiary company are the funds of the assessee under sham transaction and there is no reason to believe that the funds amounting to ₹ 405.09 crores introduced into the books of the subsidiary company during the financial year 2007 08 in the form of stepp-up coupon bonds pertain to the assessee only. On this reason, case of the assessee for this very year is reopened. He therefore submitted that if that is a sham transaction and if the money belongs to the assessee itself, there cannot be any reason of giving a corporate guarantee. He submitted that nobody gives a corporate guarantee for security of his own money. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the order of the special bench, the learned departmental representative submitted that the order of special bench was of disbanding of special bench. The special bench was constituted to just determine whether the issue of corporate guarantee can be a international transaction or not. He submitted that the issue before the special bench was not that such an undertaking can also be considered as a corporate guarantee or not. In view of this the order of the special bench does not come in between the powers of the learned assessing officer as that was not the issue before the special bench. 57. With respect to the international transaction he submitted that according to section 92B of the act issue of a guarantee is a service and therefore it is a financial transaction which is covered specifically by introduction of an explanation [1] as international transaction. 58. He further submitted that even the undertaking to give a corporate guarantee is an assurance by the appellant to the investor that the assessee will give a corporate guarantee even if at a future date. It is amounting to issuing the guarantee today itself. He submitted so because of the reason that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nourable Supreme Court held that view of the guidelines issued by the CBDT in Instruction No.3/2003 the Tribunal was right in observing that by not making reference to the TPO, the Assessing Officer had breached the mandatory instructions issued by the CBDT. The conclusion so arrived at by the Tribunal is not found to be incorrect. The honourable Supreme Court held as under:- 2. The facts leading to the filing of this Appeal are as under:- (A) The respondent had received certain amount of brokerage from its parent company. During the assessment proceedings the respondent was directed to furnish details about the parent company and the rate of brokerage that was charged. After the details were furnished, the respondent was asked to establish if the parent company was involved in arbitrage activity and whether the rate charged was higher. After considering the material on record, according to the Assessing Officer, the brokerage charged by the respondent was only 0.05% which was found to be at a lower rate as compared to the prevalent rates in market. The Assessing Officer, therefore, while computing the assessment under Section 143(3) of the Income Tax Act, 1961 ('the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 3. The view so taken by the Tribunal was affirmed by the High Court which is presently under Appeal. We heard Mr. Mahabir Singh, learned Senior Advocate in support of the Appeal and Mr. Arijit Chakravarty, learned Advocate for the Respondent. 4. Instruction No.3/2003 dated 20.05.2003 which weighed with the Tribunal and the High Court, is as under:- Instruction No. 3/2003 SECTION 92 OF THE INCOME TAX ACT, 1961 TRANSFER PRICING COMPUTATION OF INCOME FROM INTERNATIONAL TRANSACTION HAVING REGARD TO ARM'S LENGTH PRICE UNDER SECTION 92 GUIDELINES TO TRANSFER PRICING OFFICERS AND ASSESSING OFFICERS TO OPERATIONALISE TRANSFER PRICING PROVISIONS AND TO HAVE PROCEDURAL UNIFORMITY. INSTRUCTION NO. 3/2003, DATED 20-05-2003 (SUPERSEDED BY INSTRUCTION NO.15/2015 (F.NO.500/9/2015-APA-II), DATED 16-10-2015) The provisions relating to transfer price contained in sections 92 to 92F of the Income-tax Act, have come into force with effect from assessment year 2002-03. In terms of the provisions, income from an international transaction is to be computed having regard to arm's length price between the associated enterprises. Further, in terms of Section 92C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction entered into by the taxpayer during the year and the associated enterprise with which such transaction is entered into, the nature of documents maintained and the method followed. Thus, the primary details regarding such international transactions would normally be available in the accountant's report. The Assessing Officer can arrive at prima facie belief on the basis of these details whether a reference is considered necessary. No detailed enquiries are needed at this stage and the Assessing Officer should not embark upon scrutinizing the correctness or otherwise of the price of the international transaction at this stage. In the initial years of implementation of these provisions and pending development of adequate database, it would be appropriate if a small number of cases are selected for scrutiny of transfer price and these are dealt with effectively. The Central Board of Direct Taxes, therefore, have decided that wherever the aggregate value of international transaction exceeds ₹ 5 crores, the case should be pricked up for scrutiny and reference under section 92CA be made to the TPO. If there are more than one transaction with an associated enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l depend upon the facts of the case and the factors mentioned in rules contained in rule 10C. The TPO after taking to account all relevant facts and data available to him shall determine arm's length price and pass a speaking order after obtaining the approval of the DIT (TP). The order should contain details of the data used, reasons for arriving at a certain price and the applicability of methods. It may be emphasized that the application of method including the application of the most appropriate method, the data used, factors governing the applicability of respective methods, computation of price under a given method will all be subjected to judicial scrutiny. It is, therefore, necessary that the order of the TPO contains adequate reasons on all these counts. Copies of the documents or the relevant data used in arriving at the arm's length price should be made available to the Assessing Officer for his records and use at subsequent stages of appellate or penal proceedings. (iii) Role of the Assessing Officer after receipt of arm's length price : Under sub-section (4) of section 92C, the Assessing Officer has to compute total income of the assessee having regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer Pricing Officer under section 92CA (3) Method applied Reference to any database adopted by TPO Date of despatch of the order of the A.O. ANNEXURE II Order under section 120, read with section 92CA of the Income-tax Act, 1961, dated April, 2003 In exercise of the power conferred by sub-section (1) and sub-section (2) of section 120 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby directs that the Transfer Pricing Officers mentioned in column 2 having their headquarters mentioned in column 3 shall exercise such powers and perform such function of Transfer Pricing Officers as mentioned in Section 92CA for the purpose of sections 92C and 92D of the Act, in respect of persons or classes of persons mentioned in column 5: 5. It was submitted by Mr. Mahabir Singh, learned Senior Advocate that the expression ..the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arm's length price in relation to the said international transaction or specified domestic transaction under Section 92C to the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it would now be upto the Assessing Officer to take appropriate steps in terms of Instruction No.3/2003. 63. In view of the above decision where the honourable Supreme Court held that in that particular case the matter ought to have been restored to the file of the assessing officer so that appropriate reference could be made to the transfer pricing Officer, we also restore the matter back to the file of the learned assessing officer so that appropriate reference could be made to the TPO. We leave all other issues open and also grant liberty to the assessee to agitate them before the learned assessing officer/TPO. The authorities below will pass an appropriate order after granting an opportunity of hearing to the assessee. Accordingly ground number three and four of the appeal of the assessee as well as ground number four of the appeal of the AO are partly allowed. 64. Ground number [5] of the appeal of the assessee is against the order of the learned CIT A in upholding the action of the learned assessing officer in making a disallowance of ₹ 8 96000 invoking the provisions of section 14 A of the income tax act. 65. However during the course of appellate proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AO that assessee has made payment of transmission and up linking charges of ₹ 145251704/- and out of which a sum of ₹ 78123855/- was paid to M/s. Intelsat Corporation USA. The ld Assessing Officer was of the view that above is deemed income of the recipient u/s 9(1) of the Act and therefore, the assessee was liable to deduct tax at source on such payment. Hence, he disallowed the above sum holding as under:- 4. Transmission and uplinking Charges In the P L Account the assessee had debited ₹ 14,52,51,704/- under the head Transmission and Uplinking Charges. In the notes to account the assessee has furnished the details of expenditure in foreign currency. It has been reported that ₹ 14,52,51,704 has been incurred under the head subscription, uplinking and news service charges. Vide order sheet dt.15.02.2013, the assesses was required to furnish the details regarding TDS on uplinking and transmission charges. The assessee in its reply dt. 11.03.2013 and 22.03.2013, submitted that the payment has been made to a foreign company and in view of the decision of Hon'ble ITAT Delhi, in DCIT v. PanAmSat International System Inc.103 TTJ 861 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in turn beam the signals to the viewers in their homes. The above services are like standard facility used for transmission of programs by various media companies. The assessee Company makes use of such facility during the year provided by the Intelsat Corporation. The assessee Company most respectfully submits the following points for favourable consideration on merits: The payments in question made to Intelsat Corporation are not a Royalty within the provisions of Act as they exist during the year in question. (A retrospective amendment is made in Section 9(1)(vi) by the Finance Act, 2012 to include consideration paid for the use or right to use of transmission by satellite within the ambit of the definition of Royalty ) Even after the above amendment in the Income Tax Act, 1961, there is no change in definition of the tern 'Royalty under the DTAA between the India - USA. Therefore, even today the payments in question could not be taxed as Royalty in the hands of recipient in view of the favourable position on this issue in relevant DTAA. These payments were made after obtaining the requisite certificates from the Chartered Accountant (CA) who certified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is unwarranted as the above provisions are applicable only in a situation where the expenses remain unpaid/payable as on 31st March of the previous year and no taxes have been deducted/deposited on the same, are not applicable in the present case. To support the above, reliance is placed on the decision in the case of Merilyn Shipping Transports v. Addl. CIT, 146 ITJ 1, ITAT (Vishakhapatnam) wherein it has been held that section 40a(ia) of the Act can be invoked only to disallow expenditure of the nature referred to therein which is shown as payable as on the date of balance sheet. It is admitted fact in present case that the above amount were paid during the year in the foreign currency as disclosed in the Audited Accounts of the year in question Therefore, the provision of section 40(a)(ia) of the Act could not be invoked in view of the decision in the case of Merilyn Shipping Transports (supra) as no expenses remained as payable as on March 31, 2009. Thus, in alternate on this account also no addition is warranted. The submission of assessee was duly considered and are not acceptable. The payments made under the head Transmission and uplinking charges are covered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atus of the legislation the Transmission and uplinking charges paid by the assessee without deducting any TDS would invite the consequences of provisions of section 40(a)(i). The assessee argument that no technical knowledge has been made available to it therefore it is not covered in the included services. The submission of the assessee is acceptable to the extent that no technical knowledge has been made available. However, for royalty the requirement of make available of technical knowledge is not required under the DTAA. It is only in the case of fee for technical services/include services. Therefore the clause regarding make available in the DTAA will not help the assesse in any way, from the liability of deducting TDS on Transmission and Uplinking charges. The decision of Honble ITAT Delhi in the case of PANM international system is also not applicable because the payment of transmission and uplinking charges has now been covered under the definition of royalty through amendment in Finance Act,2012. In the case of PANM International system the issue examined by the Honble ITAT was regarding making technical knowledge available for the TV Channels. Where in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court, the contention of the assessee is accepted. The AO is directed to drop the proposed disallowance. 59. Before us the ld DR relied upon the draft assessment order whereas the ld AR vehemently submitted that the issue is squarely covered by the decision of Hon'ble Delhi High Court in case of Intelsat Corporation dated 28.09.2012. He therefore stated that there is no error in the order of the ld DRP. 60. We have carefully considered the rival contentions and also perused the facts of the case as well as the decision of the Hon'ble Delhi High Court. We are convinced with the argument of the ld AR that the issue is squarely covered by the decision of Hon'ble jurisdictional high court. The ld DR could not controvert that how this issue is not squarely covered in favour of the assessee and he also could not show us any other judicial precedent so as to persuade us to disagree with the views of the ld DRP. Further merely because the revenue has filed an SLP before the hon'ble Supreme Court against the decision of Delhi High Court cannot be a reason for sustaining the disallowance. In view of this we do not find any infirmity in the direction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed as income from other sources instead of capital gain shown by the appellant in the return of income. Therefore ₹ 105789125/- was added as other income of the assessee. 74. On appeal before the learned CIT A he agreed with the finding of the learned assessing officer that the valuation report of shares of the company is not reliable. Therefore relying upon the decision of the honourable Supreme Court in 44 ITR 362 and 82 ITR 540 the order of the learned assessing officer taxing the excess of sale price over the cost of those shares as income from other sources instead of capital gain was upheld. Therefore assessee is in appeal before us. 75. The learned authorised representative submitted that the assessee has sold the shares which it has purchased and held for more than 13 months of an unlisted entity. He submitted that there is a transfer of a capital asset and therefore same should be held as transfer of a capital asset and capital gain is required to be charged. He submitted that without any evidence the learned assessing officer as well as the learned CIT A has held that the same is income from other sources. He referred to circular number 225/12/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shares is related to an issue pertaining to lifting of corporate veil and the transfer of unlisted share is made along with the control and management of the underlying business. In the present case before us the learned assessing officer could not prove that any of the three conditions mentioned in that circular applies. In fact the sale price of the shares is supported by the valuation report and also conform with provisions of FEMA. The learned assessing officer as well as the learned CIT A merely proceeded on the basis of an allegation that assessee wanted to show the higher profit in its books of account. It is not denied that the assessee was the owner of the shares, it held it for 13 months, there is no allegation that the price paid by the buyer was unfounded. In fact it was supported by the valuation report which was not controverted , except the conjectures and surmises. In view of this circular, we hold that the excess of consideration realised by the assessee on sale of the above shares is chargeable to tax as capital gain and not as income from other sources. In view of this ground number nine of the appeal of the assessee is allowed. 78. In the result, appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the ruled so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any extraordinary circumstances. 13. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 14. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruptio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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