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TMI Blog2018 (10) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, Empower Industries India Limited; and Trijal Industries Ltd. which was submitted by the assessee by way of fresh search for comparables before DRP; and lastly, upholding the benefit of working capital adjustment. He submitted that similar comparables and issues were involved in the appeal for the assessment year 2006- 07 wherein this issue has been decided by the Tribunal in ITA No. 1204 del 2018 vide order dated 18.6.2018. On the other hand Ld. DR strongly relied upon the order of the TPO. 3. Brief facts and background of the case are that assessee is a subsidiary of Turner Broadcasting System Asia Pacific, Inc. ('TBSAP'). The Assessee Company is primarily engaged in the business of distribution of subscription rights of satellite channels of Cartoon Network, WB, CNN POGO and HBO (collectively referred as 'V' Channels') and advertisement inventory to be telecasted on TV Channels. The activities of the assessee are primarily driven towards promoting the channels and associated proprietary intangible assets on the return of income. The key functions performed by the assessee were as under:- i. Sub-distribution of distribution rights, advertisement airtime Rights (advertisem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parable was arrived at 1.32%. In so far as transaction of Promotional Licence Fee which was benchmarked by using CUP method, no adverse inference has been drawn by the TPO. The assessee's comparables with the updated margins as under:- S.No. Company Name Source OP/Sales(%) 1 Agro Tech Foods Ltd. P 3.51 2 Chloride International Ltd. P 1.42 3 Machino Techno Sales Ltd. P 1.99 4 SPS International Ltd. P -0.73 Mean 1.55 7. The TPO rejected the assessee's comparables and carried out own search and finally selected following comparable companies with a average margin of 14.43%:- S.No. Company Operating Margin (OP/Sales)(%) 1. Cyber Media India Online Limited 28.2 2. New Delhi Television Ltd. 6.89 3. Sporting & Outdoor Ad-agency Private Limited 20.42 4. Synergy Adlabs Media Limited (now known as Big Synergy Media Limited) 6.94 5. Essel Shyam Communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to give working capital adjustments. The relevant observation and the finding of the Tribunal reads as under:- "11. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as the material referred to before us. From the stage of the DRP, ten comparables have been selected with an average mean of 11.95% and based on such comparables adjustment of Rs. 10,07,35,464/- has been made in the distribution segment. The details of these comparable companies with this average margin have already been incorporated above. Out of the said comparable companies, seven comparables have been sought to be excluded by the assessee which are channel and contents owners who are full-fledged channel companies who owned and operate various TV channels and undertake content creation on their own. The Tribunal in assessee's own case for the Assessment Year 2007-08 and 2008-09 and also in Assessment Year 2006-07 have held that Satellite TV channels and cable network operators have significantly different operating models and provide earning model and once the Tribunal has held that such channel/content owner companies should not be included for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Mean 1.11% 12. In so far as the contention of the assessee that Trijal Industries Ltd. and Svam Software Ltd. should be included, the learned counsel first of all submitted that, these are software distribution companies and in the case of NGC India Ltd. (supra), the Tribunal has held that the companies engaged in distribution of software are also good comparables for benchmarking the distribution of TV channel companies. Further, in the subsequent years the DRP as well as the TPO have also accepted software distributors as a good comparable, therefore, it was contended that these two companies which are engaged in the software distribution should also be included. Even if Svam Software Ltd. which is a persistently loss company is removed, then it was submitted that Trijal Industries Ltd. should be accepted. 13. In so far as the aforesaid contention of the learned counsel that Software Distribution Company should be accepted, we agree in principle that such companies can be taken for comparability analysis, when there are no direct comparable dealing with distribution of satellite channels are available. Such an acceptability of software distribution companies in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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