TMI Blog2015 (9) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... - Decided in favour of assessee Non-grant of TDS credit - Held that:- DRP has given direction to the Assessing Officer, however in the final assessment order Assessing Officer has not done so. Accordingly, we direct the Assessing Officer to give credit of TDS after verification of records. - Decided in favour of assessee - ITA No. 2870/Mum/2010, CO No. 13/Mum/2011 (Arising out of ITA No. 2870/Mum/2010, ITA No. 2523/Mum/2010, ITA No. 8272/Mum/2010 - - - Dated:- 28-8-2015 - SHRI AMIT SHUKLA AND SHRI GOPAL KEDIA, JJ. For The Appellant : Shri Narendra Kumar For The Respondent : Shri Percy Pardiwalla/Shri Nishant Thakkar ORDER PER AMIT SHUKLA, JM: The aforesaid cross appeals have been filed by the revenue and the assessee against impugned order dated 29th January, 2010 passed by CIT(A) -11, Mumbai for the assessment year 2005- 06; and final assessment order dated 01.10.2010 passed in pursuance of direction given by the DRP u/s 144C(5) and for the assessment year 2006-07. Since issues involved are common in both the years arising out of the identical set of facts, therefore, same were heard together and are being disposed off by way of this consolidated or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. The assessee s case was that since it does not have a Permanent Establishment (PE) in India in terms of Article 5 of India Singapore Treaty, therefore, the business income of the assessee is not taxable in India under Article 7. The alternative claim was that even if it was held that assessee has an agency PE in India, then also the remuneration have been made at arm s length, hence no further addition or income can be attributed. Regarding distribution revenue, raised vide ground no. 2 the same plea was taken. However, the Assessing Officer treated the MSM as PE of the assessee in India for marketing ad air time and assessed 10% of gross ad revenues amounting to ₹ 377,148,134/- in India. Regarding distribution activity, the Assessing Officer taxed it as royalty income under Article 12 and accordingly, same was taxed on a gross basis @ 15%. 6. The Ld. CIT(A), after discussing the entire issue at length and also relying upon the decision of Hon ble Bombay High Court in the case of the assessee for the assessment year 1999-2000 decided the issue in favour of the assessee after observing and holding as under :- I have considered the submissions of the Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected by MSM and remitted to the Appellant after deduction of its service fee and appropriate taxes. All business risks pertaining to the advertisement receipts are taken by and borne by the Appellant. MSM, as an agent carries out of the functions of canvassing sale of airtime and collection and remittance of advertisement revenues to the Appellant. It is submitted that order than the functions carried on the by the agent, i.e., MSM in India, no other functions of the Appellant are carried on in India. Considering the MSM is an agent of the Appellant in India, the appellant submitted that for such services provided by MSM, the Appellant pays an arm s length service fee remuneration to MSM. This is evidenced by the Transfer Pricing assessment order for the subject AY 2005-06 in the case of MSM, wherein the transfer pricing Officer of MSM, has held that arm s length remuneration has been paid by the Appellant to MSM in respect of its international transactions. I have considered the submissions of the Appellant. In my view the ratio laid down by the Supreme Court in Morgan Stanley s case which has been followed by the High Court in the Appellant s case for AY 1999-00 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and do not need further examination . 7. Regarding distribution revenue also, the Ld. CIT(A), though discussed the issue in detail that it is not royalty , decided the issue in favour of the assessee, following the past history of the assessee from assessment year 1999-2000 to 2004-05, wherein this issue was decided in favour of the assessee. The relevant observation and finding of the CIT(A) is as under :- I find considerable merit in the arguments put forth by the Appellant that subscription income is in the nature of business income and not royalty . Further, I have also noted that in the past, for AY 1999-00, AY 2000-01, AY 2002-03, the AO while completing the assessment had held distribution income to be in the nature of royalty . On appeal, it is seen that for the above mentioned years, my predecessors has taxed distribution revenues as business income. In respect for AY 2003-04 and AY 2004-05, the AO had also assessed distribution revenues as business income. This treatment of the AO was also upheld by the CIT(A) for the said two years. In view of the same, when there has been absolutely no change in the facts of the distribution activity of the Appellant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvertisement revenue, in view of para 33 of the Supreme Court decision in the case of Morgan Stanley, it is also important to determine whether the transfer pricing analysis appropriately reflects the functions and risks assumed by the enterprise. The AO in his remand report has discussed the activities carried out by the Appellant and the DA i.e. MSM in India in relation to the distribution business. The AO has observed that the DAPE has not role to play in the distribution activity undertaken by the DA. Further, the AO has observed that the Appellant in Singapore has a limited function to the extent that it uploads the signal from Singapore and in return receives a fixed sum from the DA on account of subscription. In this context the Appellant has submitted in respect of its distribution activity, the Appellant is engaged in the business of acquisition of audiovisual programmes including films, formation and operation of cable and satellite television channels and the marketing and distribution of such channels. The up linking operations of the Appellant are carried out from Singapore. In order to earn distribution revenues, the Appellant has appointed MSM as the sole distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue relating to ground no. 1, the same is squarely covered, however, so far as issue relating to royalty is concerned, he submitted that no proper finding have been given in the earlier years by any of the authorities. Further, now the issue of royalty has to be examined afresh. 10. In the rejoinder, the Ld. Senior Counsel submitted that in the earlier years this issue was not only decided in favour of the assessee but in the appeal filed before the High Court, the revenue has not challenged this issue. Hence, the issue of treating their distribution receipts as royalty income stands decided in favour of the assessee, which has attained finality. He further pointed out that in the case of SET India Pvt. Ltd, the Tribunal vide order dated 25.04.2012 in ITA No. 4372/Mum/2004 have decided this issue by holding that distribution fee is not in the nature of royalty but in the nature of business income . Further, the Tribunal in AY 2002-03 in assessee s own case has upheld the finding of the CIT(A) that the same has to be treated as business income . 11. After considering the rival contention and above facts, we find that, so far as the issue relating to addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved under Section 244pt the Act under Article 11(4) of the India-Singapore Treaty (the Treaty ), on the basis that the interest received is effectively connected with the alleged FE of the Appellant in India as against claim of the Appellant that same is not connected with the alleged FE and hence it is taxable under Article 11(2) of the Treaty. 4. without prejudice to above, even assuming that interest received is taxable for the year under consideration, failed to appreciate that once taxability of the Dependent Agent FE is extinguished, interest received under Section 244A It cannot be treated as effectively connected with the alleged FE. 5. without prejudice to above, even assuming that the interest received under Section 244A is effectively connected with the Appellant's PE in India, then so much of the interest that is attributable to the alleged Dependent Agent PE should only be taxed under Article 11(4) and balance interest should be taxed under Article 11(2) of the Treaty. The Appellant craves to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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