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2019 (2) TMI 34 - AT - Income TaxAttribution of profit to Indian entity - remuneration paid by the assessee to the Indian entity - whether at arm’s length price or not? - PE in India - India Mauritius DTAA - business connection - agent of independent status in terms of the provisions of Article 5(5) of the DTAA - assessee is engaged in the business of acquiring and allotting advertisement time and programme sponsorships in connection with ESPN and Star Sports channel in Television, which it acquires the advertisement time from ESPN Star Sports Singapore - Indian entity is also carrying out many other activities relating to transmission of all the assessee’s channel and also providing access to the cable operators to the downlink the channel through access code - Held that:- Indian entity has been appointed as independent representative for soliciting TV ad on the channels and to collect and remit advertisement charges to ESS Mauritius. It is only authorized to solicit television advertisement for the Indian Territory. The compensation part clearly shows that the commission would be paid @10% of net billed advertisement actually collected by it or received by ESS Mauritius for the advertisement solicited by the Indian entity. From the perusal of the transfer pricing order, in the case of ESPN India, it is seen that it carried various functions of other entities for the ESPN group like, distribution of ESPN Star Sports Channel in India for which it collects ‘subscription fees’ from the cable distributors. This activity of function is not carried out for the assessee but for different group entity. Only function carried out by the Indian entity is that it is doing solicitation and collection of advertisement revenue and remitting the same to the assessee. Qua this function, the remuneration paid by the assessee to the Indian entity which is subjected to tax in India is @10% which has been accepted to be at arm’s length. No other functions are carried out or there are any other transaction by the Indian entity vis-à-vis the assessee and all other functions of the ESPN India relate to distribution of the channel of other entities for which it is paid ‘subscription fee’. If one goes by the overall revenue earned by the Indian Entity, then transaction with the assessee is much less than 5%, as noted by the TPO in his order. The receipt of advertisement commission only has been received from the assessee. Thus, if the Indian entity has been remunerated at arm’s length price, then no further attribution of profit can be made. Thus as relying on DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) VERSUS MORGAN STANLEY AND COMPANY INC. [2007 (7) TMI 201 - SUPREME COURT] once the payment made by the assessee to the Indian entity have been accepted to be at arm’s length price then no further attribution is required to be done. Accordingly, the addition made on account of attribution of profit is directed to be deleted. - Decided in favour of assessee
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