TMI Blog2019 (8) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... ng services in the nature of project identification, project counseling, pre feasibility reports, detailed project feasibility reports, infrastructure planning, market assessment, expansion, diversification and turn around strategies, skill development, project appraisals, asset valuation, HRD intervention, capacity building, etc. These services provided by the APTICO are in the nature of high end consultancy / project related services and hence APTICO cannot be compare as comparable to support to service providers. Companies functionally dissimilar with that of assessee need to be deselected from final list. International transaction of availing of management services - HELD THAT:- The management fee is allocated to each channel companies in the proportion of revenues generated by individual channel companies to the consolidated revenues of all the channel companies taken together. At the time of hearing the calculation for monthly invoice of the management fees paid to STAR Ltd. was sought and the details were filed vide Annexure 5. We noted from the information submitted by the assessee in its paper book and the fact that the management costs were allocated in the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f STAR mark for a tenure of two years on the basis of a valuation by third party valuer. SIPL, intended to pay the above payment in six installments. Considering the deferral in the payments, an interest component was considered to the overall value based on which the total value was determined to of USD 36.95 million. After consideration, the reserve bank refused to permit the assessee to pay the amount of US$ 36.95 Million and only approved all of USD 36.02 Million thereby excluding any interest on the value of brand license fees was approved basis the letter dated 01.08.2011 received by Deutsche Bank AG (authorized representative) from the Reserve Bank of India (RBI') providing approval for the payment of USD 36.02 million to be made by SIPI to STAR Ltd subject to non-payment of interest component. Once the payments including the amount have been approved by the competent authority (RBI), that had specifically considered the value of the brand license, fees paid for the STAR Mark and there cannot be any disallowance of expenses by the TPO that the assessee has not gained any benefits. In view of the above, we are of the view that no disallowance shall be made and we direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 40(a)(ia) rws 194J of 'Channel Placement Fees' - Whether definition of term 'process in Explanation 6 to section 9(1)(vi), by way of retrospective amendment is Clarificatory in nature and did not amend definition of royalty' per se ? - HELD THAT:- Assessee has rightly deducted tax at source under Section 194C of the Act and therefore it should not be treated as an assessee in default under the provisions of Section 201 - ITA No. 1901/Mum/2016, ITA No. 1048/Mum/2017, 1724/Mum/2016 - - - Dated:- 1-8-2019 - Sri Mahavir Singh, JM And Sri Manoj Kumar Aggarwal, AM Appellant by: S/shri Porus Kaka Divesh Chawla, ARs Respondent by: S/shri Lalit Krishan Singh Dehiya Manish Kumar Singh, DRs ORDER Mahavir Singh, These appeals are arising out of the different orders of Dispute Resolution Panel-2, Mumbai [in short DRP ], in objection Nos. 142, 284 vide direction dated 29.11.2016, 14.12.2015. The Assessments were framed by the Asst. Commissioner of Income Tax, Circle-16(1), Mumbai (in short ACIT/AO ) for the assessment years 2011-12 2012-13 vide order of different date 31.01.2017, 29.01.2016, under section 143(3) read with section 144C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tar Plus, Star One, Star Utsav, Star World, Star Movies and Channel V). Under the distribution activity, SIPL was engaged in providing services in connection with the distribution of the Channels in India to STAR Ltd. In consideration to the above services rendered by SIPL, STAR Ltd remunerated by way of cost plus 10% mark-up. 5. It was explained that the functions performed by SIPL as sub-agent are as follows: Advertisement publicity of channels Collection of distribution fees Purchase of Integrated Receiver and Decoder (IRD) boxes Subscriber Management System 6. The assessee was characterized as a low-risk service provider. Ld Counsel referred to page nos. 59 to 61 of the assessee paper book for the FAR of the distribution segment. Based on the activities performed and functional analysis of SIPL for distribution of channels and pursuant to a detailed search process; SIPL adopted business support service providers as functionally comparable to its activities in its TP study. The comparable companies selected by SIPL in its study report were after undertaking a detailed search process and by applying quantitative filters. The entire documentation wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 9. On the other hand, Ld CIT DR contended that though the assessee provides services for distribution of channels to Fox International Channels Asia Pacific Ltd (FICAPL) and to ESPN Star Sports (ESS) also, the TPO has made the adjustment only in respect of services provided to Star Ltd. The OP/OC of the assessee from this activity is claimed to be 10%. The assessee benchmarked these transactions against a set of 6 companies and incidentally the same set is used by the assessee to benchmark its activity of sale of advertising airtime also. The assessee had chosen unrelated concerns in the field of education, consultation, security service providers and concerns which are basically engaged in retail sector. These were clearly and functionally different from the activities of the assessee. Since the comparables of the assessee were not relevant (except IDC India Ltd) and since the assessee had not explained why the comparable set chosen for earlier years by the TPO did not figure in the assessee's TP study report. The TPO rejected the TP study report and took the set of comparables of AY 2010-11. (The DRP for AY 2010-I1 had approved the set in that year). The assessee has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities involve primarily the preparation of Diagnostic Study Reports (DSRs), Detailed Project Reports (DPRs) for Common Facility Centers (CFCs), handholding establishing Market Financial linkages, training capacity building, Technology Up-gradation, development of CFCs etc. It does not do physical development of industrial zones or building. The schedule II to its Profit Loss Account (Page 225 of the Assessee Paper Book) mentioned the income streams in detail. It has no major assets (schedule 3 on page 222 of the Paper Book). Its services are, therefore, same as that of a Marketing and Support Service provider and the company is a valid comparable. The Revenue also relied on the decision of the Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.) Ltd vs. DCIT [2015] 56 taxmann.com 417 (Delhi) wherein, it has been held that the mere fact that an entity makes high / extremely high profits does not, ipso facto, lead to its exclusion from list of comparables for purposes of determination of ALP. 11. As regards to TSR Darashaw Ltd Ld CIT DR argued that the AR has argued that this company is an entrepreneur and not an agent. This argument of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices such as cluster development, project development services, entrepreneurship development and training, asset reconstruction and management services, micro enterprises development, tourism and research studies, skill development, energy and environment management related services. APTICO also offers wide range of consulting services in the nature of project identification, project counseling, pre feasibility reports, detailed project feasibility reports, infrastructure planning, market assessment, expansion, diversification and turn around strategies, skill development, project appraisals, asset valuation, HRD intervention, capacity building, etc. These services provided by the APTICO are in the nature of high end consultancy / project related services and hence APTICO cannot be compare as comparable to support to service providers. Even, company has not provided for any segmental break up for the income earned from various revenue streams as it is not clear from its audited accounts. Further, APTICO receives subsidy from central and state financial institutions for certain assignments. In view of the above reasons, we are of the considered view that APTICO cannot be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and accordingly, the action of the learned ITO should be held as bad in law. In relation to international transactions undertaken by the Merged Entities. 15. Brief facts are that during the year under consideration SIML and V Partnership had entered into a franchise agreement with the assessee from 01.10.2010. Under the said agreement, SIML and V Partnership have granted the assessee an exclusive franchise right to broadcast ('Broadcasting Rights') Star World, Star Movies and Channel [V] channels ('Franchise Channels') in India, Bangladesh, Nepal, Bhutan, Pakistan and Sri Lanka ('Specified Territories'). The assessee has earned advertisement and distribution revenues from broadcasting of these Franchise Channels in the Specified Territories. The international transactions entered by the assessee were obtaining franchise rights, availing content procurement services and procurement of content from its AEs. Consequent to this agreement, the assessee has undertaken the economic analysis. The assessee in the TP study report for the AY 201112 has aggregated the above international transactions, adopting Transaction Net Margin Method (TNMM) as the Most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n production of television content for one of the channel company. Hence, the television segment of UTV is to be considered appropriate segment as comparable to that of SIPL s broadcasting segment. The learned Counsel stated that in AY 2003-04 SIPL was only an agent procuring content for its AEs. It was neither a broadcaster nor was the content producer as is the case today, i.e. from AY 2011-12 onwards SIPL is engaged as broadcaster of channels i.e. Star Plus, Star Gold, Channel V, etc. In AY 2003-04, the international transaction being benchmarked was not from channels owned/ franchised by SIPL as in the year under consideration. In the present year, SIPL procures and produces content for its own broadcasting business similar to UTV and hence, the assessee submitted that UTV is a comparable company and to be accepted. 18. The next comparable argued by the learned counsel is as regards to TPO rejected IBN 18 stating that the comparable company is consistent loss making company with accumulated losses and no dispute on functional comparability. In this regard the learned Counsel stated that the Broadcasting and Content segment from the consolidated financials has earned ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculars Financial year (Amounts in INR) 2007-08 2008-09 2009-10 2010-11 Operating Profit/ operating revenue (OP/ OR) (%) 31.93 1.27 36.15 21.00 Based on the above working, he argued that the company has earned operating profits in two out of three previous years. Thus, it is evident that Raj is not a consistent loss making company. He contradicted Ld CIT DR s argument that the Departmental Representative during the course of hearing made new arguments for registration of the comparable that were not contested by the TPO that the company is not comparable because it is also involved in movie productions and distribution business in the same broadcasting segment. He argued that the Departmental Representative is not allowed to travel beyond the order of the TPO and the AO, to make out some different case. Hence, it was urged that Raj should be considered as a comparable company to broadcasting segment of SIPL. 21. In regards to Broadcasting segment for merged entities (ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that UTV is not a broadcaster in a true sense for the purposes of comparability. This company has a TV Segment (page 617 of the Assessee Paper Book) but this segment is not of broadcasting. In this connection Ld CIT DR invited our attention to Page 562 of the Assessee Paper Book (Annual Accounts of UTV) which mention that the TV segment comprise of four main functions: (i) Production of TV Content. This is not done at all by the present assessee. UTV produces TV shows on commission business and this is pan of its TV segment. However, the assessee is not involved in any content production at all. (ii) Airtime sales (iii) Dubbing. This is not done by the assessee at all. Page 570 of the paper hook mentions that the company UTV in its TV segment includes dubbing revenues. It dubs channels of Disney, National Geographic. The History Channel, ND'FV Good Times, UTV Bindass, UTV Action etc. through a talent bank of over 500 voices. (iv) Broadcasting of four specialty genre channels. This is also a content production activity, which is distinct from the activity of the assessee. 24. Thus, the claim of the assessee that UTV should be considered as a comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal (P.) Ltd. Vs. ITO [2013] 37 taxmann.com 141 (Bangalore - Trib.) it has been held that while selecting a comparable RPT filter has to be on standalone basis and not on a consolidated basis. 26. As regards to Raj Television Network Ltd, Ld CIT DR stated that the TPO had rejected this company on account of being a continuous loss making company. (page 860 of Assessee Paper Book). The AR claimed that it is not a continuous loss making company and that in FY 2008-09 it had a minor profit of 1.27% though it is in loss since then. (page 872A of Assessee Paper Book). Further the company is not comparable because it is also involved in movie production and distribution business in the same broadcasting segment (Page 847-848 of Assessee Paper Book). Therefore, this company was rightly rejected by the TPO/DRP. He also referred to assessee's own case the ITAT had recently held that since comparables selected by TPO were content developers and, thus, there exited functional difference impugned addition made to ALP was to be set aside. The citation is Star India (P.) Ltd vs. ACIT [2016] 70 taxmann.com 272 (Mumbai - Trib.). 27. We have heard rival contentions and gone through fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit in the year under consideration i.e. FY 2010-11 relevant to AY 2011-12 and moreover, it is not a consistent/ persistent loss making entity at operating level for broadcasting segment. We have gone through the facts and gone through the table of the segmental profitability of the company over the period for FY 2007-08 to FY 2010-11, which is enclosed in assessee s paper book Page No. 872B. The consolidated financial results are also on page No. 776 of the assessee s paper book. The learned Counsel for the assessee also drew our attention to operating margins from FY 2007-08 to FY 2010-11 and a table capturing the segmental profitability of the company for the relevant year is provided at page No. 872B of the paper book. From these facts it is clear that the company has earned operating profits in the year under consideration in one out of three preceding previous years. Thus, it is evident that IBN 18 is not a consistent loss-making company. In view of these facts, we are of the view that functionally comparable companies should not be rejected unless they are persistent loss making as in the present case. Hence, we direct the AO / TPO to include this as comparable i.e. IBN 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying the following filters: Accumulated losses; Loss during the year; Extraordinary events (like amalgamation, merger, de-merger etc.) Functional comparability; Related party filter Your appellant prays that the following filters are not applicable and therefore the comparables selected by the Appellant and the transfer pricing analysis undertaken by the Appellant should be accepted and accordingly, the action of the learned Transfer Pricing Officer should be held as bad in law. Ground No. 4 Have erred in computing the ALP in respect of the international transactions as computed by the Appellant by ignoring the provisions of the Rule 10B(4) of the Income-tax Rules, 1962 ( Rules ), which authorizes usage of multiple year data of the comparable companies for the purpose of determination of the ALP under section 92F of the Act. Your Appellant prays that multiple year data should be considered for the purpose of benchmarking the international transactions of the Appellant with its Associated Enterprises ( AEs ) and the approach adopted by the learned Transfer Pricing Officer should be rejected. Ground No. 5 Have erred in considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inment Limited ('STEU) - 'Star Pitts' channel; STAR Asian Movies Limited ('SAML') -'Star Gold' channel: STAR Asia Region F Z LLC ('SARF') - 'Star One' and 'Star Utsav' channels; STAR international Movies Limited ('SIMI.') 'Star World' and 'Star Movies' channels; Channel V Music Networks Partnership Limited -'Channel V 34. The summary of the merger of channel companies with the assessee was explained by Ld Counsel that assessee along with STEL, SAML and SARF applied the scheme of merger with the Bombay High Court under section :39k and :394 of the Companies Act, 1956 to be effective from 01.04.2009. The Bombay High Court approved the scheme of merger vide his order dated 18.02. 2010. Post-approval from Bombay High Court and subsequent to approval from respective foreign country statutory compliances, on 30.04.2010 - SARF and as on 31.05.2010, STEL as well as SAML; (hereinafter referred as 'Merged Entities') merged into assessee with effect from 01.04. 2009. Post-merger in AY 2011-12, the assessee turned into broadcaster for these channels erstwhile owned by these Merged Entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hook. Therefore, it can be observed that the management charges were paid to STAR Ltd by Channel companies in prior years also and were accepted in the hands of STAR Ltd till AY 2011-12 and neither in the hands of Channel companies till AY 2010-11 who were making the payment of management services to STAR Ltd. 37. Ld Counsel again explained that pursuant to merger of three channel companies (i.e. STEL, SAML and SAR) with SlPL being effective from April 2010 / May 2010 respectively (with effect from 01.04.2009), effectively 2 months management charges have been paid by SIPL for the merged entities for the year under consideration and for complete 12 months for the AY 2010- 11. During AY 2010-11 such management services were availed by channel companies - STEL SAML, and STAR. However, given that STEL, SAML and STAR being merged with the assessee (w.e.f. 01.04.2009), the transactions are undertaken by the merged entities were reflected as transactions undertaken by the assessee in the AY 2010-I1. The assessee argued that the TPO did not dispute the management fee transaction during the TP proceedings of AY 2010-11 and the management fee transaction of merged entities with STAR Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific to assessee, which constitute direct-charge method as provided by the OECD Guidelines. But, Nalco Pacific, having been a group service centre for Nalco Asia Pacific group companies including assessee, did not render same/similar services to third parties (i.e. independent customers) during the relevant financial year and hence, Nalco Pacific, did not have the ability to demonstrate a separate basis for the charge by recording the work done and costs expended in fulfilling its third party contracts. Hence, in view of this, we are of the view that the application of direct-charge method, as desired by CIT(A), was not feasible for Nalco Pacific that rendered services only to the group companies. The only alternative pricing arrangement available to Nalco Pacific was indirect-charge method. Ld. Counsel referred to page no. 190 and 191 of the assessee's paper book, wherein 11 cost centre were engaged in rendering intra-group services to 14 group companies located in Australia, New Zealand, China, Malaysia, Taiwan, South Korea, Thailand, Japan, Philippines, Indonesia and India (i.e. the assessee) and the costs incurred by the respective cost centre were allocated to the group c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings of the channel companies and STAR Ltd., then on account of mere merger of channel companies with SIPI. Rest the nature of transactions remaining the same the arm s length price of management charge cannot be considered to be at 'Nil'. 42. Ld CIT DR argued that as per the TP Study Report, (given at page 89 of Assessee Paper Book), prior to the effective date of merger, the concerns namely STAR, STEL and SAML had availed certain management services from Star Ltd and that these transactions have been captured separately in the TP documentation maintained in the case of these three concerns. This has not been provided in the assessee's TP Study Report. The TPO noted that the TP Study of Star Ltd simply mentions that it has decided to charge cost plus 5% to India as management service charges but the TP Study does not provide the nature of the management services provided, the time sheets, the benefit derived etc. The TPO has given detailed reasons on pages 11-22 of his Order holding the ALP of such unknown services to be Nil. The DRP has exhaustively dealt with the matter in pages 21-28 of its Order. The same is relied on. Further the argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together. At the time of hearing the calculation for monthly invoice of the management fees paid to STAR Ltd. was sought and the details were filed vide Annexure 5. We noted from the information submitted by the assessee in its paper book and the fact that the management costs were allocated in the ratio of Revenue, which is an accepted methodology internationally and in several judicial precedents. The assessee placed its reliance on the decisions, which we have already discussed in the arguments of both the sides above, wherein allocation of management charges based on sales revenue were accepted as appropriate cost allocation methodology. 44. Another aspect also favour assessee that there is no intention to shift profits and to explain this it stated that the recipient AE (STAR Ltd) had been regularly assessed to tax in India and had duly offered this income to tax in India even for AY 2011-12. Therefore, the question of India tax base erosion does not arise as noted by the TPO. Another aspect is that even on the Principle of commercial expediency / business rationale of a particular expenditure incurred by an assessee for smooth functioning and furtherance of its business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency of expenses incurred by the Appellant for its business. Your Appellant prays that the transfer pricing analysis undertaken by the Appellant should be accepted and the Appellant should be allowed a deduction for the brand licensing lees paid to AE and accordingly, the transfer pricing adjustment should be held as had in law and thereby deleted. 46. Brief facts relating to the issue of adjustment in relation to international transaction of payment of brand license fees by disallowance of depreciation (adjustment value of ₹ 41,19,46,313/-) are that prior to the merger of the overseas channel companies [STEL. SAM L SAR -'merged entities] into the assessee, both STAR Ltd and Channel companies operated as entrepreneurs vis-a-vis the television business of the group with each entity contributing through their respective responsibilities and roles, towards earning of the subscription and the advertisement sales revenue from India. The channel companies owned an extensive inventory of content to be broadcasted. STAR Ltd, on the other hand, was an aggregator and distributor of channels and relied on the reputation of 'STAR' brand (which it develops) and its te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be broadcasted and had benefit of various channel brands which were distinct from the STAR name and logo (the benefits of which solely accrued to STAR Ltd. STAR Ltd, on the other hand, was all and distributor of channels and relied on reputation of 'STAR' brand (which it develops) and its technical capabilities to effectively broadcast channels and negotiate favorable terms with distribution platforms. As part of this business arrangement, STAR Ltd was remunerated 50% of the profits for its functions performed, risks undertaken and assets ('FAR) employed (including Star brand name). Channel companies, similarly, were held to be entitled to 50% of the broadcasting revenue for their ownership of content, etc. the Star marks and Star Corporate mark. Accordingly, during AY 2011-12, STAR ltd granted SIPL all right to use the Channel marks and Star corporate marks solely to be incorporated or contained in the applicable Channels for the Indian Territory. SIPI had obtained license to use the Star Mark for Iump sum consideration of USD 36.02 million (i.e. ₹ 1624 million). 50. We noted that the assessee placed reliance on the case law in case of N L C Nalco (India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the RBI, are at arm's length price. Accordingly, the addition is deleted and this issue of assessee's appeals is allowed. [Para 29] 51. Further Ld Counsel argued that the TPO/ DRP in their orders have not challenged the approach/ methodology adopted by the assessee in determining the value of the consideration to be made in connection with the licensing of brand. Against the TOP's contention that the lump sum payment was an afterthought to remit money out of India, the assessee contended that the external third party valuer was appointed as soon as the High court order approving the scheme of merger of channel companies was approved. On review of publicly available data, the assessee has identified various third-party franchise rates and brand licensing agreements in the Media Entertainment industry, which can be used to draw a reference for the case of the assessee including Network 18 Media Investments Ltd, which distributes TV channels MW, VI-11 and Nickelodeon in India pays an effective license fee of 6.53% of its revenue. (This can be verified from page 913 to 917 of the factual paper book of assessee for AY 2012-13). Even TV 18 Broadcast Ltd., which d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue authorities. TPO could not question the commercial viability of the expenses incurred by the assessee for its own business. The commercial viability of the expenses incurred, which were necessary to early on the business cannot be questioned. This has been decided by Hon'ble Delhi High Court in the case of CIT vs. EKL Appliances Limited (2012) 24 taxmann.com 199 (Delhi), ruling in favor of the Assessee has observed the following: - 21. The position emerging from the above decisions is that it is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred wholly and exclusively for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o why the valuer's report has no basis (see page 78) of the TPO Order. Sixthly the assessee had been in business since long and had been performing the same services as a sub-agent and it was never required to pay any such amounts. Therefore, the ploy of brand license fee is only a means to get funds out to the AE. The TPO has also gone into the business practices and has observed that the viewers are more careful about the content and not the brand. Seventhly, the TV channel market is ever growing and new entrants come on the basis of their strength of content and not for brand. A case in point is the manner in which the Republic TV has captured a significant market in last year. Eighthly the AR has stressed a lot upon the incomes and turnovers of later years to justify the agreement but what is of concern is whether at the time of entering into the agreement the same considerations were available or not. Later events cannot be used to justify a past irregularity. It is simply fortuitous. Ninthly the assessee was made responsible for promoting the brand which goes against the rationale of making the payment in the first place. The DRP has also rejected the arguments of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now? There is no transfer of the rights also. Normally royalty or license fee is never a percentage of cost or value of the intangible. It is always linked to its impact on the performance of the recipient company. This is not the case here because the present agreement is a colorable device. Without prejudice and as an alternative it can argued that the license fee be calculated for each year and allowed as a proportion every year. The valuation presumes maintenance functions by the assessee in India. The cost of such maintenance is also ad hoc. 57. After hearing both the sides, we noted that the consideration for the payment towards brand license was determined based on valuation of the brand by an independent valuer and the said payment towards brand license was capitalized in the books of accounts and depreciation was claimed under the Act only on yearly basis. The payment for the said consideration was also subjected to RBI approvals. Further, it would be relevant to note that the department has taxed the entire amount received by Star Ltd from the assessee in AY 2011-12. The TPO also accepted this FAR analysis between STAR Ltd and Channel companies in it is order for STAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 'STAR' name is a significant driver in the Indian television market and in the revenue earning potential of the channels, on account of the fact that the brand 'STAR' has a reputation for quality. Any new channel which is introduced in the market with the Star affiliation suffers lesser entry constraints as compared to other channels, significantly reducing the possible gestation cycle for the channel. The association of a channel with 'STAR' assists in offering channels to the cable operators as a bouquet. Also, the use of a common brand makes marketing exercise more feasible and effective. Thus, SIPL's channels are able to attract loyal Star customers and thereby garner higher Television Rating Points ('TRPs'). Higher TRPs enable the assessee to attract better prices from the sale of its advertisement airtime. 60. The brand is the communication interface between the consumers and the products. Facing the constantly evolving Television market and increasing consumer demands, the STAR brand has achieved a position of reliability and credibility in the market over the period. Thus, without this payment, it cannot be possible for SIPL to car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned DRP/ AO/ Transfer Pricing Officer had erred in considering the ALP of the international transaction relating to the payment of brand licensing fees to be INR Nil, without appreciating the facts of the case by: Rejecting the transfer pricing analysis undertaken by the Appellant including the third party comparable data identified by the Appellant; Not considering that Appellant has supported the claims with appropriate evidences including the valuation report by an independent valuer; and Challenging the commercial rationale and expediency of expenses incurred by the Appellant for its business. The learned DRP/ AO/ Transfer Pricing Officer in AY 2012-13 have erred in disallowing the depreciation claim of INR 32,76,58,611/- for the current year on the brand license fees without fresh application of mind. Your appellant prays that the transfer pricing analysis undertaken by the Appellant should be accepted and the Appellant should be allowed a depreciation claim for the current year on the brand license fees paid to AE and hence, the action of the learned Transfer Pricing Officer should be held as bad in law and thereby adjustment should be deleted. Ground Nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y yield tax-exempt income. f) have erred in not appreciating that the Appellant has not incurred any expenditure for earning exempt income. g) without prejudice to above, for the computation of disallowance under Section 14A of the Act, have erred in considering the value of all investments which are eligible for earning tax free income instead of the investments made during financial year (hereinafter referred to as FY') 2004-05 and thereafter, as the Appellant has availed interest bearing loan for the first time in FY 2004-05. h) without prejudice to above, have erred in considering the value of net current assets (i.e. current assets minus current liabilities) while computing the total assets under Rule 8D of the Rules. i) without prejudice to above, have erred in making a disallowance under Section 14A of the Act in respect of interest expenses without appreciating the fact inter-alia, that only owned funds and not any borrowed funds have been utilized by the Appellant for the purpose of making investments. Your Appellant prays that the disallowance under Section 14A read with Rule 8D of the Rules amounting to ₹ 38,01,755 should be deleted. 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the Hon ble Jurisdictional High Court, we direct the AO/ TPO to delete this addition. 67. The next issue in this appeal of assessee for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is against the order of AO/ DRP not allowing deduction of property tax reimbursed to Precision Components Private Limited. For this assessee raised the following ground No. 11: - Ground number 11 have erred in not allowing deduction for property tax amounting to ₹ 27,67,124 reimbursed to Precision Components Private Limited (hereinafter referred to as 'PCPL'). Your appellant prays that the property tax reimbursed to PCPL is business expenditure and the same should be allowed as a deduction under section 37(1) of the Act while computing the taxable income for subject AY. The learned DR heavily relied on the order of AO/DRP in this connection. 68. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted from the arguments of the both the sides, that this issue is covered by the decision of assessee s own case for AY 2006-07 in ITA No. 4818/Mum/2010 vide order dated 01.04.2016, wherein Tribunal has already remanded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the duty of the assessee to justify the payment. In view of the above, this issue required fresh examination at the end of Assessing Officer. Accordingly, we set aside the order of learned CIT(A) on this issue and restore this issue to the file of Assessing Officer for fresh examination. 69. Respectfully following the same, we set aside the order of lower authorities and restore the matter back to the file of the AO for afresh adjudication, this issue of assessee s appeal is allowed for statistical purposes. 70. This next issue of assessee s appeal for AY 2012-13 in ITA No. 1048/Mum/2017 is against the order of AO/ DRP not allowing deduction of property tax reimbursed to Precision Components Private Limited. For this assessee raised the following ground No. 11 :- Ground Number 11 have erred in not allowing deduction for property tax amounting to ₹ 27,66,898 reimbursed to PCPL. Your appellant prays that the property tax reimbursed to PCPL is business expenditure and the same should be allowed as a deduction under section 37(1) of the Act while computing the taxable income for subject AY. 71. We find that this issue is already taken into cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2011-12 in IT(TP)A No. 1901/Mum/2016 is against the order of DRP not allowing depreciation on cumulative addition made to lease hold improvements in earlier years. For this assessee has raised following ground No. 13 as under: - Ground number 13 have erred in not allowing depreciation on cumulative additions made to leasehold improvements in earlier years TP 10% of ₹ 3,70,54,570. Your Appellant prays to please direct the learned AO to allow depreciation of ₹ 37,05,457 on cumulative additions made to leasehold requirements in earlier years while computing taxable income. 77. We noted that the DRP has already directed the AO to verify from records whether in earlier years the additions made to leasehold agreements have been capitalized or not and in case the same is capitalized, allow depreciation accordingly. We find no infirmity in the directions. Hence, we direct the AO accordingly. 78. This next issue of assessee s appeal for AY 2012-13 in ITA No. 1048/Mum/2017 against the order of DRP not allowing depreciation on cumulative addition made to lease hold improvements in earlier years. For this assessee has raised following ground No. 23 as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er but the matter has been considered by the learned CIT(A) who allowed the same on the basis of the assessment held in the year of 2003-04, 2004-05 and 2005-06. We find no reason to interfere with the order passed by the learned CIT(A). Hence, the plea of the revenue is hereby declined. 82. Respectfully following Tribunal s decision in assessee s own case, we are of the view that the DRP has rightly directed the AO to allow depreciation at the rate of 60% on computer peripherals. This issue of Revenue s appeal is dismissed. 83. This next issue of assessee s appeal for AY 2012-13 in ITA No. 1048/Mum/2017 is as regards to allowability of depreciation of computer peripherals. For this assessee has raised the following grounds No.8 9: - Ground No. 9 Have erred in not allowing depreciation at the rate of 60% on computer peripherals (i.e. printer, scanner, etc._ Your appellant prays that depreciation at the rate of 60% should be allowed on computer peripherals (i.e. Printer, Scanner, etc.) Ground No. 10 Have erred in not appreciating that all items (i.e. printer, scanner, etc) which form a part or are connected or related to the computer are to be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 9,40,82,972/- as revenue in nature. Your appellant prays that the expenditure incurred on computer software amounting to ₹ 9,40,82,972/- should be allowed as revenue expenditure while computing total taxable income. 89. We find that this issue is already taken into consideration vide paras 85 to 87 of this order for earlier assessment year i.e. AY 2011-12 of revenue s appeal. The Ld. Counsel for the assessee as well Ld. DR also not argued because the issue is same and facts and circumstances are also same. The facts and circumstances are exactly identical in the present appeals on this issue, hence, taking a consistent view, we allow this issue of assessee s appeal in this year also. 90. The next issue in this appeal of Revenue s for AY 2011-12 in ITA No. 1724/Mum/2016 is as regards to DRP deleting the disallowance of Channel Placement Fee expenses. For this, Revenue has raised the following ground No. 3: - 3. On the facts and circumstances of the case and in law, whether the Hon'ble DRP was justified in directing to delete the disallowance u/s. 40(a)(ia) rws 194J of 'Channel Placement Fees' whereas the Hon'ble ITAT, 'L' Bench, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d following ground Nos. 14 to 21 as under: - Ground No 14 Have erred in holding payment of channel placement fees/ carriage fee as process royalty within the meaning of explanation 6 to Section 9(1)(vi) of the Act. Your appellant prays that payment of channel placement fees/ carriage fees is not in the nature of the process fees is not in the nature of process royalty as per Explanation 6 to Section 9(1)(vi) of the Act Ground Number 15 Have erred in making disallowance under section 40(a)(ia) of the Act of the entire channel placement fees paid by the Appellant amounting to ₹ 1,98,63,08,113/- by holding that the payment is subject to tax deduction at source under section 194J of the Act without appreciating the act that the appellant has correctly deducted tax at source under section 194C of the Act. Your appellant prays that payment of channel placement fees/ carriage fees is not liable to tax. Ground number 16 Have erred in not appreciating the submission of the Appellant that no disallowance under section 40(a)(ia) of the Act can be made in respect of channel placement fees/ carriage fees by holding the same as royalty in light of the retro ..... 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