TMI Blog2020 (10) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been held that if arm s length remuneration is paid to the dependent agent, nothing further remains to be attributed. Whether ESPN India constitutes PE of the assessee in India under DTAA between India and Mauritius on the principle that ESPN India was remunerated at arm s length by the assessee, which has been accepted by the Assessing Officer/TPO of ESPN India and also the assessee, then no further attribution of profits is to be made in the hands of the assessee. Interest under section 234B - HELD THAT:- Since, the assessee is foreign company then no interest is to be charged under section 234B of the Act as entire income of the non-resident entity is subject to tax deduction at source. Accordingly, the assessee is not liable to pay any advance tax and consequently no liability to pay interest under section 234B of the Act. In this regard, we find support from the ratio laid down in DIT vs Jacabs Civil Inroporated/Mitsubishi Corporation [ 2010 (8) TMI 37 - DELHI HIGH COURT] and in DCIT vs NGC Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT] wherein held that when a duty is cast on the payer to deduct and pay the tax at source, on payer s failure to do so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat without prejudice to the above ground, the ld. CIT(A) grossly erred in rejecting the contention of the appellant that where the purported PE is remunerated on an arm s length basis, no addition profits could be attributed to appellant s income. 5.2. That without prejudice to the above grounds, on facts and in law, the Ld. CIT(A) erred in upholding the action of the Ld. Assessing Officer in not applying the Circular No.23 dated July, 23, 1969 issued by the Central Board of Direct Taxes, where the transactions with ESPN India Have been held at arm s length by Transfer Pricing Officer. 6. That, without prejudice to the above and in the alternative, Ld. CIT(A) has grossly erred on the facts and circumstances of the case and in law in attributing 50% of the net profits of the appellant as the profits of the appellant from its Indian operations. 7. The Ld. CIT(A) erred in holding that interest under section 234B of the Act is consequential in nature, whereas the entire amount received by the respondent being subject to TDS, interest under section 234B is not leviable on it. 4. The Ld. AR for the assessee before us pointed out that in case ground of appeal No.5.1 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ad time for the assessee, ESPN India is also engaged in distribution of channel services in terms of its agreement with ESS Distribution (Mauritius) SNC 'et Compagnie ('ESSD') and also production services for ESPN Star Sports, Singapore CESS'). Thus, ESPN India is an agent of independent status under Article 5(5) of the DTAA and is acting in the ordinary course of business while dealing with the assessee. The Assessing Officer relied on the assessment orders for Assessment Years 2003-04, 2004-05 and 2007- 08 and rejected the contention of the assessee alleging that the assessee and ESPN India belonging to the same group and the business operations were intimately incorporated and interlinked; being part of same group they have common interest/goal. ESPN India is exclusively working for the assessee and the Assessing Officer held that the assessee had a dependent agent PE in the form of ESPN India under Articles 5(4) and 5(5) of the DTAA. The alternative plea of the assessee on without prejudice to its submission that there does not exist PE in India was submitted before the Ld. Assessing Officer that even if a PE is deemed to exist, no profit are attributable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its case, ESPN India is remunerated on arm s length basis and the transfer pricing assessment for relevant year have been completed, both in the hands of the assessee and ESPN India. Thus, the value of attributable income of the assessee in India would be restricted to the amount ESPN India receives from the assessee, being the arm s length value of the services performed in India in view of the aforesaid circulars and the decision of the Hon ble Supreme Court. Further, it was submitted that the Hon ble Supreme Court, in the above decision has laid down that if the PE is remunerated at an arm s length basis, taking into consideration all the risks, taking functions of the enterprises, then, there would be no further attribution of profits to the PE. Attention was invited to the concluding para 33 of the Morgan Stanley judgment. Further reliance was placed on BBC Worldwide Limited [2011] 203 taxman 54 (Del. HC) and other decisions. The CIT(A) vide para 7.12 observed that the issue of attribution of profit to the PE in India was decided in assessee s own case for Assessment Years 2003-04 and 2004-05 and relying on the same, he directed attribution of 50% of the net profits to the PE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of profit can be made in the hands of the assessee. He then took us through the decision of the Tribunal in assessee s own case relating to Assessment Years 2003-04 2004-05. He further placed reliance on the decision of the Hon ble Supreme Court DCIT(IT) vs Morgan Stanley Co. Inc. (Supra), BBC Worldwide Limited (supra) and various other decisions of the Hon ble Supreme Court, for the proposition that once the transactions are as per the arm s length principle then revenue cannot assess more in hands of the non-resident entities. He stated that if Indian entity was remunerated at arm s length, then no further attribution of profits can be made. He concluded this argument by saying that there were following proposition to be decided:- a. The plea of the assessee of Principal to Principal transaction was rejected by Assessing Officer/CIT(A). If the same is at Principal to Principal basis then no income can be assessed in India under garb of DAPE; b. On without prejudice basis, where Assessing Officer and CIT(A) had accepted the transaction to be at arm s length price, then no further attribution of profit is possible; and c. Under article 5(5) of Indo- Mauritius DTAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airtime is business income and in the absence of a PE of the assessee in India, the same is not taxable. The Assessing Officer relying upon the orders of Assessment Years 2003-04 and 2004-05 held the transaction to be principal to agent and not on Principal to Principal basis. Further, ESPN India was constituted to be dependent agent as per Article- 5(4) and not an independent agent as defined by Article 5(5) of the India- Mauritius DTAA. The Assessing Officer attributed part of the gross profits to the PE. The CIT(A) also held that ESPN India constitutes PE under the India-Mauritius DTAA. However, he allowed partial relief to the assessee on the attribution of income to the DAPE in India. 13. The case of the assessee before us is that without prejudice to its contention on there being PE or dependent agent PE or not, when ESPN India is remunerated at arm s length basis then no further attribution of profits can be made in the hands of the assessee in India. The TPO in the order relating to Assessment Years 2009-10 and 2011-12 has held that the international transaction of payment of advertising sales inventory cost to be at arm s length price. Copies of the orders of the TPO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the computation of the remuneration based on cost plus mark-up worked out at 29% on the operating costs of MSAS. This position is also accepted by the Assessing Officer in his order dated 29.12.06 (after the impugned ruling) and also by the transfer pricing officer vide order dated 22.9.06. As regards attribution of further profits to the PE of MSCo where the connection, the department has also to examine whether the PE has obtained services from the multinational transaction between the two are held to / be at arm's length, we hold that the ruling is correct in principle provided that an associated enterprise (that also constitutes a PE) is remunerated on arm's length basis taking into account all the risk- taking functions of the multinational enterprise. In such a case nothing further would be left to attribute to the PE. The situation would be different if the transfer pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a case, there would be need to attribute profits to the PE for those functions/risks that have not been considered. The entire exercise ultimately is to ascertain whether the service c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s remunerated at arm s length by the assessee, which has been accepted by the Assessing Officer/TPO of ESPN India and also the assessee, then no further attribution of profits is to be made in the hands of the assessee. Similar proposition has also been laid down by the Tribunal in assessee s own case for Assessment Years 2003-04 and 2004- 05. Accordingly, we hold so. Ground of appeal no.5.1 is thus decided and other grounds of appeal become academic. 17. The next issue raised in ground of appeal no. 7 is against the charging of interest under section 234B of the Act. Since, the assessee is foreign company then no interest is to be charged under section 234B of the Act as entire income of the non-resident entity is subject to tax deduction at source. Accordingly, the assessee is not liable to pay any advance tax and consequently no liability to pay interest under section 234B of the Act. In this regard, we find support from the ratio laid down in Hon ble Delhi High Court in DIT vs Jacabs Civil Inroporated/Mitsubishi Corporation [2011] 330 ITR 578 (Del.) and Hon ble Bombay High Court in DCIT vs NGC Network Asia LLC [2009] 313 ITR 0187 (Bom.), wherein the Hon ble High Courts ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
