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TMI Blog2015 (5) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... d not deduct tax u/s 195 and subsequently there can be no disallowance u/s 40(a)(i) despite the fact that the transponder charges being a consideration for "process" as clarified in terms of Explanation (6) to section 9 of the I.T. Act ? (4) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is correct in holding that the amount in question is not liable to tax in India and consequently the question of deduction of tax at a source u/s 195 does not arise despite the transfer of telecast right being a consideration for Royalty as clarified in Explanation (4) and (5) to section 9 of the I.T. Act ?" 2. The factual background in which these appeals have been brought by the Revenue are that the respondent-assessee is a Mauritius based company. The Revenue proceeded against it on the footing that it is engaged in the business of telecasting of TV channels such as B4U Music, MCM etc. It is the case of the Revenue that the income of the assessee from India consisted of collections from time slots given to advertisers from India through its agents. The assessee claimed that it did not have any permanent establishment in India and has no tax liability in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards purchase of films for which no details were submitted as to what are the costs incurred were treated as royalties. The exhibition and telecast price were intangible and could not be termed as goods and merchandise in respect of export of advertisement films. Such findings of the Assessing Officer could not have been disturbed by the Commissioner (Appeals) and by the Tribunal. Therefore, the Tribunal's orders raise the above questions and which are substantial question of law. 6. It is argued that even with regard to the Question (C), the assessee cannot be said to be relieved of the obligation of deducting tax under section 195 of the Income Tax Act, 1961. This could not be a finding and equally the relief from applicability of section 40(a)(i) when the transponder charges being a consideration for "process" as clarified in terms of explanation 6 to section 9 of the Income Tax Act, 1961. Thus, the finding that this amount is not liable to tax in India and consequently, the question of deduction of tax at source does not arise will also raise substantial question of law. 7. However, Mr. Mistri, learned senior counsel appearing on behalf of the assessee raised a prelimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/2005 together with Cross Objection No.118/Mum/2010. In such circumstances, the other two questions do not arise. Even with regard to those questions, the findings are that the amounts are not taxable in India. Therefore, none of the questions are substantial questions of law and the appeals deserve to be dismissed. 8. After hearing both sides and perusing with their assistance all the appeal paper-books, we are inclined to agree with Mr. Mistri. The Tribunal had before it the order passed on 8th November, 2004 by the Commissioner of Income Tax (Appeals). As far as that order is concerned, it is subject matter of the Revenue's Income Tax Appeal No.1599 of 2013. There, the Revenue raised the ground that the assessee was having a dependent agent viz. B4U and that the Commissioner erred in holding that it cannot be treated as such. Further, even if the B4U is held to be a dependent agent, it is being paid remuneration at arm's length. Therefore, further profits cannot be taxed in India. Insofar as these grounds are concerned, the admitted facts are that the assessee is a foreign company incorporated in Mauritius. As noted, it had filed its residency certificate and pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent agent. Nearly 4.69% of the total income of B4U India is commission / service income received from the assessee company and, therefore, also it cannot be termed as an dependent agent. As far as the alternate contentions are concerned, the First Appellate Authority held that the assessee and B4U India were dealing with each other on arm's length basis. 15% fee is supported by Circular No.742. Thus it was held that no further profits should be taxed in the hands of the assessee. 10. This conclusion of the Commissioner has been upheld by the Tribunal. It noted the rival contentions and in great details. The Tribunal concluded that after referring to the clauses in the agreement between the assessee and B4U that B4U India is not a decision maker nor it has the authority to conclude contracts (see paragraph 29). Further, the Revenue has not brought anything on record to prove that agent has such powers and from the agreement any such conclusion could not have been drawn. Barring this agreement, there is no material or evidence with the Assessing Officer to disprove the claim of the assessee that the agent has no power to conclude the contract. This finding is rendered on a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly pointed out that the requirement and in relation to computation of income from international transactions having regard to arm's length price has been put in place in Chapter-X listing special provisions relating to avoidance of tax by substituting section 92 to 92F by the Finance Act of 2001 with effect from 1st April, 2002. Therefore, such compliance has to be made with effect from assessment years 2002-03 relevant to which is the previous year commencing from 1st April, 2002. In any event, we find that the Tribunal has rightly dealt with the alternate argument by referring to the Revenue Circular 742. There, 15% is taken to be the basis for the arm's length price. Nothing contrary to the same having been brought on record by the Revenue before the Commissioner as also the Tribunal, it rightly concluded that the judgment of the Hon'ble Supreme Court in Morgan Stanley & Co. and the principle therein would apply. Similarly, the Division Bench judgment of this Court in the case of Set Satellite (Singapore) Pte. Ltd. v. Deputy Director of Income Tax (IT) & Anr. [2008] 307 ITR 265would conclude this aspect. Therefore, we are of the opinion that the Tribunal's concl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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