TMI Blog2019 (5) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ll it is so, what should be the arm's length price of the transaction requires verification of primary facts which, as per AO s own version, is neither available in Form no.3CEB report nor in the course of proceedings before the Transfer Pricing Officer - the issues raised in additional grounds require verification / investigation into fresh facts which are not available on record - as noticed that identical additional grounds were raised by the Department before the Tribunal in the appeal filed in assessee s own case for assessment year 2006 07. Accrual of income - addition on account of commission income - HELD THAT:- Issue to be decided in favour of assessee as relying on assessee's own case [ 2009 (3) TMI 990 - BOMBAY HIGH COURT] Depreciation on computer peripherals @ 60% to be allowed as relying on assessee's own case. Addition u/s 68 - HELD THAT:- FAA has factually verified the claim of the assessee and has found that all the details relating to the Cable Operators who have made deposits with the assessee are available on record and have been duly reflected in the books of account of the assessee. Also recorded a finding of fact that not only the deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 8D(2). Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the objections of the assessee proceeded to compute disallowance by applying the provisions of rule 8D r/w section 14A of the Act for an amount of ₹ 58,94,863. The assessee challenged the aforesaid disallowance before the first appellate authority. 5. Learned Commissioner (Appeals) after considering the submissions of the assessee deleted the disallowance of interest expenditure of ₹ 13,92,363. Insofar as the other indirect expenditure is concerned, learned Commissioner (Appeals) did not accept assessee s contention that approximately an amount of ₹ 50,000, can be attributed towards earning exempt income of ₹ 11,07,268. He observed, the disallowance of other expenses has to be computed as per rule 8D. However, he observed, such disallowance has to be restricted to ₹ 45,02,500. 6. The learned Sr. Counsel for the assessee submitted, rule 8D of the rules having been introduced to the statute from 1st April 2008, is not applicable to the impugned assessment year. Therefore, computation of disallowance under ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verify assessee s claim that in the facts of assessee s case, disallowance under section 14A of the Act can be reasonably be computed @ 5% of the exempt income earned during the year. The Assessing Officer must decide the issue after due opportunity of being heard to the assessee. Ground is allowed for statistical purposes. ITA no.6030/Mum./2009 Revenue s Appeal 9. In ground no.1, the Department has challenged deletion of addition of ₹ 46,28,20,416, made by the Assessing Officer towards publicity expenses by the assessee. 10. As an off shoot of the aforesaid ground, the Department has raised the following additional grounds: i) On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals), Mumbai, erred in deleting the disallowance on account of advertisement and publicity expenses without considering that the said disallowance tantamount to addition on account of arm s length compensation receivable by the assessee from its foreign associated enterprise for the benefits accruing from these expenses and without appreciating tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o similar disallowance made by the Assessing Officer in assessment years 1997 98 to 1999 2000, the Assessing Officer ultimately concluded that only 15% out of the total expenditure incurred towards advertisement and publicity can be allowed as a deduction to the assessee. Accordingly, out of the total expenditure of ₹ 58,41,53,467, the Assessing Officer allowed an amount of ₹ 8,76,23,020, as wholly and exclusively incurred for the purpose of assessee s business under section 37(1) of the Act and the balance amount of ₹ 49,65,30,447, was disallowed. The assessee challenged the aforesaid disallowance before the first appellate authority. 13. After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) found that issue relating to identical disallowance made by the Assessing Officer in assessment years 1997 98, 1998 99 and 1999 2000, were decided in favour of the assessee by the Third Member of the Tribunal and the Hon'ble Jurisdictional High Court upheld such decision of the Tribunal. He also observed, in assessee s own case for assessment year 2000 01, 2001 02 and 2002 03, ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding assessee s appeals for assessment years 1997 98 to 1999 2000, there was difference of opinion between the Members of the Tribunal. While the Judicial Member decided the issue in favour of the assessee the Accountant Member upheld the disallowance made by the Assessing Officer. However, when the issue came up for consideration before the Third Member, he agreed with the Judicial member and the issue was ultimately decided in favour of the assessee. It is pertinent to mention, the aforesaid decision of the Tribunal in assessment year 1997 98 to 1999 2000 were challenged by the Department in appeal before the Hon'ble Jurisdictional High Court. While deciding the appeals of the Revenue in ITA no.165/2009, dated 24th March 2009, and ITAs no.282 and 283/2009, dated 8th April 2009, the Hon'ble Jurisdictional High Court upheld the decisions of the Tribunal by dismissing the appeals of the Revenue. Thereafter, from assessment years 2000 01 to 2004 05, the Tribunal has consistently decided the issue in favour of the assessee. In fact, in the latest order of the Tribunal for assessment year 2006 07, in ITAs no.4818 and 4675/Mum./2010, dated 1st April 2016, the Tribunal has deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... publicity expenditure incurred by the assessee falls within the definition of international transaction. He submitted, the Transfer Pricing Officer has accepted the margin shown by the assessee from marketing agency stream as well as distribution stream to be at arm's length. Further, he submitted, while deciding Department s appeal for assessment year 2006 07, the Tribunal refused to entertain identical additional grounds raised by the department. Therefore, he submitted, the additional grounds raised by the Revenue should not be admitted. 19. We have considered rival submissions and perused material on record. It is an undisputed fact that the advertisement and publicity expenses of ₹ 58,41,53,467, were paid to the third parties in India. The Assessing Officer himself has stated in the assessment order that advertisement and publicity expenditure was not part of assessee s Form no.3ECB report. He has also accepted that neither any reference was made to the Transfer Pricing Officer to determine the arm's length price of advertisement and publicity expenditure nor the Transfer Pricing Officer has proceeded to determine the arm's length price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertisement commission @ 15% on the total advertisement revenue obtained by it for the principal. He observed, as per the terms of contract, revenue accrues to the assessee as and when the advertisements are telecast. He observed, the assessee has changed the method of accounting from assessment year 1997 98 to show the commission income on receipt basis. Observing that in the preceding assessment years i.e., for the assessment years 1997 98 to 1999 2000, the Assessing Officer brought the commission income to tax on accrual basis, followed the same and made an addition of ₹ 2,37,64,235, to the income of the assessee. While deciding assessee s appeal on the issue, learned Commissioner (Appeals) found that subsequently, identical issue arising in assessee s own case in assessment years 1997 98 to 1999 2000 was decided in favour of the assessee by the Tribunal and the Hon'ble Jurisdictional High Court upheld such decision of the Tribunal. He further observed, in the subsequent assessment years also, the Tribunal decided the issue in favour of the assessee. Therefore, following the decision of the Tribunal and the Hon'ble Jurisdictional High Court, learned Commissioner (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2003 04 and 2004 05 and allowed depreciation @ 60% by treating the assets as computer peripherals. 27. We have considered rival submissions and perused material on record. Notably, while deciding identical issue in assessee s own case for assessment years 2003 04 and 2004 05, the Tribunal has upheld the decision of learned Commissioner (Appeals) in allowing assessee s claim of depreciation @ 60%. In fact, in the latest order of the Tribunal in assessee s own case for assessment year 2006 07 in ITA no.4675/Mum./2010, dated 1st April 2016, the Tribunal has upheld the decision of the learned Commissioner (Appeals) in allowing assessee s claim of depreciation @ 60%. Respectfully following the aforesaid decisions of the Tribunal in assessee s own case, we uphold the decision of the learned CIT(A) by dismissing the ground raised. 28. In ground no.4, the Revenue has challenged the deletion of addition made of ₹ 1,16,85,052, under section 68 of the Act. 29. Brief facts are, during the assessment proceedings, the Assessing Officer observed that while performing the functions as a distributor of STAR channels in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on receipt of set top boxes. He submitted, out of the amount of ₹ 19 crore of deposits received from Cable Operators, the Assessing Officer has rejected ₹ 1.68 crore without affording any opportunity to the assessee to furnish the PAN details, etc. Therefore, it cannot be said that the deletion made by learned Commissioner (Appeals) is improper. Further, he submitted, since the Department has not taken any specific ground relating to violation of rule 46A, it cannot say that learned Commissioner (Appeals) has not called for a remand report from the Assessing Officer. Without prejudice, learned Sr. Counsel submitted, no such addition has ever been made by the Assessing Officer subsequently. 33. We have considered rival submissions and perused material on record. Insofar as the primary facts are concerned, there is no dispute that while distributing television channels to the Cable Operators in India, the assessee provides de coder/set top boxes against which it receives certain deposits. As could be seen from the discussions made by the Assessing Officer, in a majority of cases the assessee had furnished the required details relating to the deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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