TMI Blog2013 (1) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) -XXXI [ learned CIT (A) ] has erred in upholding the assessment under Section 143(3) of the Income-tax Act, 1961 ( Act ), on the following grounds. Ground No 1 The learned CIT (A) has erred in holding that Satellite Television Asian Region Advertising Sales BV [now known as International Global Networks By ] ( SAS By ) is a conduit for the Appellant and that the advertisement revenues earned by SAS BV are taxable in the hands of the Appellant. The Appellant respectfully submits that the above finding is erroneous and should be set aside. Ground No 2 Without prejudice to Ground 1, the learned CIT (A) has erred in taxing the advertisement income earned by SAS BV in the hands of the Appellant on an accrual basis. The Appellant respectfully submits that the above finding is erroneous and should be set aside. The Appellant craves leave to submit such further grounds at or before the hearing of the appeal, so as to enable the Income tax Appellate Tribunal to decide the appeal according to law. ITA/3709/M/04-AY 1999-2000 Based on the facts and circumstances of the case, Satellite Television Asian Region Limited (hereinafter referred to as the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961, ignoring the fact that: (a)Interest U/s 234B and 234C is in the nature of compensatory payment and is of penal in character. (b)Since the tax was not deducted at source in the case of assessee, it was obligatory on the part of assessee to pay advance tax as held by the ITAT in the case of DCIT Vs. Castrol Ltd. [ITA No.4055/ Bom/93 dtd. 23.07.2003]. (c)The tax was deducted in the case of the conduit company, STAR Sales BV and refund has been granted to that company along with interest. The charging of interest in the case of assessee is only to compensate the interest granted in the case of conduit company. The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the A.O. restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. ITA/4082/M/04 AY.1999-2000 (1)On the facts and in the circumstances of case and in law, the CIT(A) erred in directing to delete ₹ 1,48,97,094/- included in the total income of the assessee arising out of the agreement with NBC Asia CV Ltd., ignoring the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant prays that the order of the Ld.CIT(A)on the above grounds he set aside and that of the A.O. restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. ITA/5704/M/03-AY.2000-2001 (1)On the facts and in the circumstances of case and in law, the CIT(A) erred in directing to delete the addition made, on account of advertisement revenues received by SAS BV for A.Y. 2000-01, in the hands of the assessee, without appreciating the fact that it is necessary to keep the issue alive since the assessee has not accepted the stand of the department that the advertisement revenues to be taxed on accrual basis. (2)On the facts and in the circumstances of case and in law, the Ld.CIT(A) erred in deleting the interest charged u/s 234A,234B and23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - 3.First we would like to take up the appeals filed by the assessee. Briefly stated, the material facts are as under: Assessee-company, incorporated in Hong Kong, is primarily engaged in television broadcasting mainly through cable distributors in the Asian-region. During the period May, 1992 to May,1994, assessee company had entered into an agreement with Mediascope Associates ( Mediascope ),an independent third party Indian entity, wherein Mediascope was appointed as the agent of the assessee in India for sale of advertisement of the airtime on the various channels. As a result of dispute between the parties, above agreement between the assessee and Mediascope was terminated in May,1994.In order to settle the dispute with Mediascope, the Appellant entered into a settlement agreement. Under the terms of the agency agreement executed with Mediascope, the Appellant could not collect advertisements from certain identified clients in its own right other than through Mediascope.In the background of the dispute between Mediascope and the Appellant and the restrictive covenant of the agreement, it was decided by the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order, he held that the matter has been discussed in detail in the appeal order passed by him (order dtd.19.12.2003)in the case of SAS BV for the AY 1998-99.Referring to the reasons cited therein, he further held that it would be appropriate to tax the advertisement income from India in the hands of the assessee. In short, following the order for AY. 1998-99 in the case of SAS BV, he approved the finding of the AO that the SAS BV was a conduit of the appellant. However,in his order, FAA observed that the introduction of SAS BV in the commercial arrangements relating to the sale of advertisement air time in India was borne out of dispute with Mediascope. It was also held by him that the arrangement was not put in place with a view to avoid tax, since SAS BV had not claimed any tax benefits or offered income to tax in a manner more advantageous than it would have, if it was taxed in the hands of assessee. He also concurred with the view of the appellant that income from advertisement was to be assessed as per provisions of Circular 742 issued by the CBDT. But, he upheld the action of the AO in bringing to tax the receipts on accrual basis. 4.Before us, Authorised Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of STAR Limited. That is a question which can be decided after taking into account material on records in that case and after hearing the STAR Limited .The subject matter of appeal before us must be restricted to the appeal before us, and we should be careful in being within these limits. All we can say is that, on the basis of material produced before us in the case of this assessee, there is no good reason to come to the conclusion that the income from sale revenues of advertising time does not belong to the assessee. We leave it at that. 9.For the reasons set out above, we are of the considered view that the Assessing Officer was not quite justified in taxing the income from advertising time sales in India could not be taxed in the hands of the assessee. He ought to have taxed the same in the hand of the assessee-company. After perusing the orders of the Tribunal for both the years we are of the opinion that SAS BV cannot be held a conduit for the Appellant or a sham entity. In our opinion no income had accrued or arisen to the assessee-company under the head advertisement revenue during the AY under consideration. Therefore, respectfully following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising peculiarity and speciality of transactions held that the income should be accounted for on receipt basis. In view of the above discussion, we uphold the orders of id. CIT (A). We find that similar issue for assessment year 1994-95 was decided in favour of assessee by the ITAT G Bench in the case of M/s. Satellite Television(Star)Asian Region Ltd.(ITA1770/M/ 1998 order dated 18.6.2003).Respectfully following the above mentioned orders of the Tribunal, we decide Ground No.2 in favour of assessee. In the result, appeal filed by assessee for assessment year 1998-99 is allowed. ITA No.3709/M/2004.-AY.1999-2000 6.Out of the three effective grounds of appeal filed by the appellant first ground is against the order of the FAA wherein, he has held that International Global Networks BV was a conduit for the assessee. This ground is similar to Ground No.1 taken by assessee-company for AY.1998-99. In line with our decision taken for earlier AY. said ground is decided in favour of assessee. 7.The next ground of appeal relates to taxation of advertisement income in the hands of assessee on an accrual basis. We have decided the issue of taxing the advertisement inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO.AR submitted that assessee was a non-resident, that provisions of section 234 of the Act were not applicable to the appellant-company. He relied upon the case of NGC Network Asia LLC(313 ITR187) delivered by the Hon ble High court of Bombay. He further referred to the orders passed by the Tribunal in the case of Satellite Television Asian Region Limited(ITA 1770/M/98 dated 18.6.2003 and ITA.2872/M/2000 order dated 24.3.2004). 9.2.As we have held, in paragraph 4.1 that no income had accrued/arisen to the assessee during the assessment year consideration, therefore in our opinion interest u/s.234A, 234B and 234C of the Act was not chargeable for any of the AYs. for which AO has filed appeals. Besides, cases cited by the AR- especially NGC Network Asia (supra) also support the view taken by us. So, confirming the order of the FAA, we decide the grounds related to deletion of interest levied u/s. 234A,234B and 234C of the Act against the department for all the three assessment years under consideration. ITA4082/M/2004-1999-2000 10.Now,we would like to deal with other Grounds of appeals. Ground No.1 for the AY.19992000 pertains to deletion of addition amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready decided the issue while dealing with the ground no. 2 filed by the appellant for the AY.1998-99.We have held, in paragraphs 4,5,and 5.1that in the case under consideration income from advertisement revenue should be assessed in the hands of SAS BV and not in the hands of the appellant-company. Following the same Ground no.1 is decided against the AO. As a result, appeals filed by the AO for all the three AYs. stand dismissed Penalty Orders 12. AO has also filed appeals challenging the orders of the CIT(A)-Mumbai deleting the penalty imposed by him for the AYs. 1998-99 and 1999-2000,u/s.271(1)(c) of the Act for concealing the particulars of income. Grounds of Appeal for both the AYs. read as under : 1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A)erred in deleting penalty u/s. 271(1)(c) of the Act without appreciating that the assessee filed return of income declaring total income as NIL whereas A.As per agreement between SASBV and the assessee, the assessee was entitled for receipt of 98.5% of net advertisement revenue from India. B.This income has been accrued in India, was received by a sub-agent in India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration were exactly identical to the facts of the last AY.,that issue had been decided by him in favour of the assessee deleting the penalty. Therefore, penalty imposed by the AO was deleted by him. 12.4.Before us, DR relied upon the orders of the AO.AR submitted that assessee had a bona fide belief that income accrued on account of advertisement was to be taxed in the hands of group concern, that amount in question had suffered tax, that there was difference of opinion between the assessee and the AO about taxing the advertisement income, that penalty was rightly cancelled by the FAA as the issue before him was debatable. 12.5.We have heard the rival submissions and perused the material before us. We find that main ground for levying the penalty by the AO is that the appellant had floated SAS BV in a preplanned move to avoid payment of tax in India by availing the benefits of treaty between India and Netherlands. We have already held that SAS BV was not a conduit entity, that advertisement income was rightly assessed in the hands of SAS BV.It is found that SAS BV had filed return of income for the AY.1998-99 showing total income of ₹ 7,62,67,950/-.For computing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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