TMI Blog2016 (9) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... less there are some material differences in facts and circumstances. Therefore, based on the above cited reasoning we direct the DRP/TPO/AO to delete this addition. Determination of higher profitability for advertisement receipts received by STAR Ltd. - whether it was a Non-Associated Enterprise (Non-AE) receipt, hence, outside PSM - Held that:- We noticed merit in the submissions of the Ld. AR for the assessee, as the combined net profit as per the PSM under Rule 10B (1) (d) at 17.30% has been found to be at arm’s length except for the exclusion of 3 companies for 10% turnover filter applied by the TPO. On the present facts, all the international transactions in respect of the advertisement and distribution stream cannot be separated. We therefore set aside the orders of lower authorities on this issue and restored the same back to AO/TPO for deciding afresh in terms of our above discussion. Disallowance of foreign content fees and uplinking cost under Section 40(a)(ia) - Held that:- We noticed the merit in the submissions of the Ld. AR for the assessee, hence, in the light of the order of AO and the Hon’ble ITAT for A.Y. 2007-08 in the case of assessee that disallowance und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I AMIT SHUKLA, JM For The Assessee : Shri Porus Kaka/Divesh Chawla For The Revenue : Shri Rupinder Brar ORDER PER R.C.SHARMA (A.M) : The above captioned appeals have been preferred by different assesses against the direction of the Dispute Resolution Panel-1, Mumbai (in short DRP ), for the assessment years 2008-09. 2. Since the issues involved in all the appeals are common, therefore, appeals have been heard altogether and are being disposed off by this consolidated order. For the sake of convenience the grounds as well as facts mentioned in ITA No.7680/Mum/2012 have been taken into consideration for deciding the above appeals en mase . Grounds :- Based on the facts and circumstances of the case, Satellite Television Asian Region Limited (hereinafter referred to as the 'Appellant') respectfully craves leave to prefer an appeal against the order passed under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 ('Act') by the Deputy Director of Income-tax (International Taxation) - 2(1) ('AO') in pursuance of the directions issued by Dispute Resolution Panel - I (,DRP'), Mumbai, under Section 253 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and 22.57% (Rs 47,01,08,460) of the said revenues as assessed in the hands of STAR Group Entities in the assessment order. Ground number 10 erred in computing the arm's length price for the international transactions by ignoring the provisions of the Rule 10B(4) of the Rules, which authorizes usage of multiple year data of comparable companies for the purpose of determination of arm's length price under Section 92F of the Act. Ground number 11 erred in considering the financial results and data of the comparable companies which were not in existence in the public domain at the time of determination of the ALP profit rate as is mandated under Section 92F of the Act. Ground number 12 erred in computing the arm's length price for the international transactions without considering the 5 percent bandwidth available under the proviso to Section 92C(2) of the Act. Ground number 13 erred in adopting a divergent position with respect to adjustments made under Section 40(a)(i) of the Act for AY 2007-08 and AY 2008-09 and not granting a deduction for ₹ 1,10,35,39,414 disallowed in AY 2007-08 on which taxes were admittedly pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 25 erred in initiating penalty proceedings under Section 271A of the Act without appreciating the fact that the Appellant is a non-resident and not required-to maintain India specific books of accounts. Ground number 26 erred in initiating penalty proceedings under Section 271 B of the Act without appreciating the fact that the Appellant is a non-resident and accordingly, is not required to get the accounts audited. 3. Rival contentions have been heard and record perused. Facts in brief are that assessee-Star Limited, a foreign company in Hong Kong and part of News Crop Group, is engaged in the business of distribution of channel and advertising airtime at a global level. The assessee is an aggregator and distributor of channels which consolidates numerous channels into a network and negotiations carriage with the distribution platforms. It relies on the reputation of the STAR brand (which it develops) and its technical capability to effectively broadcast channels to negotiate favourable terms with distribution platforms. The assessee grants channel distribution rights to various distributors across Asia. Under the terms of distribution agreements granted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Network Limited; ii) Broadcast Worldwide Limited and iii) Jain Studios Limited. The TPO rejected these companies on the basis that their turnover was less than 10% of the turnover of the India revenue of Star group entities. The Ld. AR for the assessee stated that TPO has erroneously applied a one sided lower turnover margin. It is imperative to note that the assessee had not applied turnover filter while carrying out the benchmarking analysis while identifying functionally comparable Indian broadcasters. The TPO has considered the same benchmarking analysis, of functionally comparable india broadcasters, and rejected three comparables merely on the ground that their turnover was less than 10% of the turnover of Star group entities Indian revenue. If the low turnover filter is to be applied a high turnover filter shall also be consequently applied to exclude comparables i.e. Zee Entertainment Enterprise Limited. The Ld. AR has submitted that TPO has done cherry picking by applying a turnover filter. The turnover filter is a quantitative filter i.e. it ought to have been applied during the search process and that also not a one sided one but both high and low turnover before examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless there are some material differences in facts and circumstances. Therefore, based on the above cited reasoning we direct the DRP/TPO/AO to delete this addition. 3.5 The same and identical issues are involved in grounds Nos. 2 to 5 of ITA No. 7681/M/12, ITA No. 7682/M/12, ITA No. 7683/M/12, ITA No. 7684/M/12, and ITA No. 7679/M/12, all pertaining to A.Y 2008-09, therefore, these grounds cited, are allowed. 4. Ground No.5 to 9 relate to determination of higher profitability for advertisement receipts received by STAR Ltd. on the ground that it was a Non-Associated Enterprise (Non-AE) receipt, hence, outside PSM. 4.1 We have heard the rival contention and found that the TPO on the basis of directions of the DRP, while passing the final assessment order, did not apply Rule 10(i) in case of assessee for A.Y.2007-08 as all the revenues generated by the assessee during relevant year were from the transactions with AEs and the returned income of the assessee was accepted. 4.2 The DRP followed its order for assessment year 2007-08 on the reason of consistency. 4.3 Ld. AR for the assessee has submitted before us that the sale of advertisement airtime by STAR Ltd to AEs is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If it is a Non-AE transaction then the question of estimation cannot arise. The assessee also relied on the decision in the case of Globe One India Pvt Ltd. 44 Taxmann.com 100 ( ITAT Del). 4.4 On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand of the DRP/TPO,which we have already noted in earlier paras and is not being repeated for the sake of brevity. 4.5 We have heard the rival parties at length and considered the same carefully. We noticed merit in the submissions of the Ld. AR for the assessee, as the combined net profit as per the PSM under Rule 10B (1) (d) at 17.30% has been found to be at arm s length except for the exclusion of 3 companies for 10% turnover filter applied by the TPO. On the present facts, all the international transactions in respect of the advertisement and distribution stream cannot be separated. We therefore set aside the orders of lower authorities on this issue and restored the same back to AO/TPO for deciding afresh in terms of our above discussion. 4.6 In the result, the ground taken by the assessee is allowed for statistical purposes. 4.7 The same and identical issues are involved in ground No. 6 of ITA No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee has submitted that the stand of the Assessing Officer is wholly inconsistent with his own order for A.Y. 2007-08, wherein para 6 on page 5, he has noted the computation made by the assessee and the said computation has been upheld by the hon ble ITAT in case of STAR Ltd for A.Y. 2007-08. 6.2 The Ld. DR for the Revenue has fairly agreed on the submissions made by the Assessee and he reiterated the stand taken by the TPO and DRP. 6.3 We have heard both the parties on this issue, gone through the facts and circumstances of the case and perused the material on record. We noticed the merit in the submissions of the Ld. AR for the assessee, hence, in the light of the order of AO and the Hon ble ITAT for A.Y. 2007-08 in the case of assessee that disallowance under section 40(a) (i) of the Act uplifted the profitability and increasing the assessee s profit chargeable to tax in India. It is wholly inconsistent and contrary to Law, not to allow the reversal in the years when the taxes have been deducted and paid in accordance with section 40(a) (i) of the Act, merely on the erroneous contention that no disallowance had been made by him under section 40(a) (i) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal of the assessee is allowed on this ground. 7.5 Considering the same and identical issue we also allow the respective ground of Star group appeals in ITA Nos. 7681/M/12, 7682/M/12, 7683/M/12, 7684/M/12, 7679/M/12, for A.Y. 2008-09. 8. Ground No. 16 to 19 relate to Double disallowances of Transponder hire charges under section 40(a) (i) paid to Asia Sat. 8.1 The issue involved in these grounds as per assessee is that assessee has suo moto made disallowance U/s 40(a) (i) of the Act while computing PSM profit perentage and therefore it should not be disallowed further by AO. 8.2 The Ld. AR for the assessee has submitted that the assessee had already made disallowance under section 40 (a) (i) of the Act while computing PSM profit percentage and despite the same the AO also made further disallowance under section 40(a) (i) of the Act again, which is not justified. 8.3 The Ld. DR for the Revenue relied on the orders of lower authorities. 8.4 We have heard both the parties on this issue and gone through the facts and circumstances of the case. We noticed the merit in the proposition canvassed by the Ld. AR for the Assessee, as he submitted that the assessee had a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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