TMI Blog2023 (4) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... munerated to the ZEEl, that does not make the service provider a fixed place permanent establishment of the assessee for this year, especially when, for this year, there is an agreement and remuneration for using such facilities are paid. For this year, facts clearly show that ZEEL is a service provider to the assessee. Non-payment, subsistence of any agreement for this facility in earlier years, is also not the case of the LD AO or the learned Dispute Resolution Panel. Further with respect to the claim of the learned departmental representative that if this play out facilities are not used by the assessee then from where the play out is being carried out. For this purpose the assessee has placed a lease agreement between the assessee and Gulf DTH FZ LLC which clearly says that there are two studio accommodation already available with the assessee of 3603 ft on the ground and Mezzanine Floor on rent in UAE for which the rent agreement is placed on record. Therefore, it is not the cases that play out facility is not available with the assessee other than at Noida. Further, it cannot be said that the play out facility is at the disposal of the assessee, no evidence exists for suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any impact on determination of Fixed Place permanent Establishment. Permanent establishment in respect of advertisement and distribution revenue - DRP confirmed so only because of the reason that the revenue has been continuously holding that the applicant has a permanent establishment in India - With respect to the advertisement agreement, though the subsequent amendments, gives an authority to enter into an agreement to an Indian entity on behalf of the assessee but those have not been habitually exercised by that entity. Therefore, the assessee does not have dependent agency permanent establishment in India. The Burden of proving that assessee has a Permanent Establishment in India and must suffer taxation from business generated from such PE is initially on the revenue as held by Assistant Director of Income tax V E Funds It Solutions Inc. [ 2017 (10) TMI 1011 - SUPREME COURT ] Now it cannot be grievance of the revenue that any information is withheld by the assessee. Thus, we hold that, assessee does not have either fixed place permanent establishment or dependent agent permanent establishment in India. Whether the assessee is entitled to the treaty benefits or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment in India but is remunerated at arm's-length, further tax liability in India would extinguish - As we hold that, though there is no such provision as it exists in India US DTAA, in Indo Mauritius DTAA, even for attributing further profit to the income of the assessee, the revenue is required to bring on record further functions performed, risks assumed and assets used along with capital infused. Before us, revenue could not bring on record any such fact. Therefore, we hold that no further tax liability arises in the hands of the assessee in India. TDS u/s 195 - disallowance of programming cost, transponder fees and up linking charges for non-deduction of tax at source - disallowance under section 40 (a) (i) - AO has disallowed these expenses holding that the payments made for acquisition of rights in respect of various content acquired by the assessee including live feed for broadcasting in India is in the nature of Royalty requiring tax deduction at source - HELD THAT:- DRP while disposing of the objection number 5 has held that the coordinate bench has decided the issue in favour of the assessee in earlier years and the order of the coordinate bench has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2011 12 held that there is no permanent establishment in respect to distribution revenue and issue of the same with respect to advertisement revenue is kept open. ii. However, the payment to its associated enterprises is at arm's-length, nothing further should be attributable to the assessee that can be taxed in India. iii. There is no change in the facts and circumstances of the case compared to assessment year 2011 12 that is subsequently followed for assessment year 2006 07 to assessment year 2010 11 and 2012 13. iv. Even otherwise, it was claimed that assessee does not have a fixed place of business in India not having any branch or office in India. The management and control of assessee is situated outside India and is managed by independent directors. v. Assessee is also a tax resident of Mauritius. Further, the agent of the assessee Taj India does not have any authority to conclude contracts in the name of the assessee. vi. It further relied on several judicial precedents to submit that none of the functions and activities is performed in India except collection of advertisement revenue from Indian advertisers and distribution revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in its absolute discretion. f. Clause 10 of the agreement mentions that the assessee may assign or transfer without the prior written permission of Taj India, the whole or any part of its rights to any party in its absolute discretion. g. It can be seen that a major part of the risk in terms of market risk and technology risk are borne by the Taj India. Further measure of the revenue is from advertisement and subscription of the assessee comes through the Indian viewership which is undoubtedly linked with the permanent establishment i.e., Taj India. ii. The learned AO also rejected the argument of the assessee that if remuneration is paid to the dependent agent in source country India at arm‟s-length price, no further profits can be attributed to the source country. AO was of the view that it is conceptually wrong. iii. She referred to the reports on the Attribution of Profits to Permanent Establishment‟; she held that single taxpayer approach has many conceptual problems. After discussing the above report, she held that a consensus has been arrived at internationally that if remuneration is paid to dependent agent, even in those cases, fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting down the broad guidelines under which the contracts to be made, served, the importance of Taj India in concluding the contracts cannot be ignored. According to her it is the later [Taj India] that is responsible for all the negotiations in India and its activities in India are devoted exclusively on behalf of the assessee company. vi. Therefore, Taj India has authority to conclude contracts in the name of the assessee and the authority is exercised in India habitually and repeatedly. Hence the assessee has a Permanent Establishment in India within the meaning of article 5(4) (i) of The Double Taxation Avoidance Agreement. vii. On distribution income, She further referred to the distribution agreement between the assessee and Taj India and held that it is clear that Taj India has exclusive right to represent the assessee before the distribution systems/cable operators and negotiate and procure cable distribution license agreement for the service, the term of which shall be determined by Taj India as authorized by the assessee. The distribution revenue collected by Taj India shall be shared in the ratio of 86 x 14 by the assessee and Taj India respectively. vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 04 until assessment year 2011 12. Against these orders, the revenue has filed an appeal before the Honourable High Court, which is pending. However, each assessment proceedings for each year are separate and a principle of rest judicata does not apply. Accordingly, all these payments are disallowable under section 40 (a) (i) of the act. xi. Accordingly, She held that the total profit of the business is US$ 4,839,582 out of which disallowance of expenditure under section 40 (a) (i) of the act is required to be made with respect to the programming cost of US$ 10,814,810, transponder fees of US$ 1,793,183, up linking charges of US$ 1,790,261 totaling to US$ 143,98,254. Therefore, the business income is US$ 19,237,836. Business income attributable to India was assumed at 81.8% at the exchange rate of ₹ 64.8386 per US dollar was determined at Rs. 102,03,35,860/- . xii. There is also an issue of chargeability of capital gain on sale of Global Sports Business by Assessee to Sony Pictures Network [India] Private Limited [SONY] in this case. During the year under consideration the assessee has sold sports broadcasting business and all assets, right, title and interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual report for 2017 has categorically stated that its board has approved sale of sports broadcasting business comprising of assets and rights relating to Ten brand of sports channel held in Taj TV Limited Mauritius, a step down subsidiary of the company and sale of entire equity stake in the Indian subsidiary handling sports business viz. Taj Television (India) Private Limited [ Taj India] to Sony group at an aggregated all-cash consideration of US$ 385 million. ZEE in its annual reports of 2018 further noted that second phase of sale of sports broadcasting business was concluded upon receipt of aggregate consideration of US$ 366.32 million after certain adjustment as per the terms of agreement. On 31 August 2016, Zee made announcement at stock exchange disclosing material events of sale of sports broadcasting business. Further, on 20 February 2017, Zee filed to the Bombay stock exchange and National stock exchange of further update on sale of sports broadcasting business. The AO further referred information available in public domain that showed that purchaser has applied to The Competition Commission of India [CCI] to receive approval for the said transfer/transaction. The Compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of the assessee to the purchaser. The assets‟ means the assets of the seller relating to or used to operate the sports broadcasting business including all movable assets, all current assets, and all other assets, tangible or intangible of whatsoever nature and where so ever situated, each of which relates to all is used in sports broadcasting business. Assessee does not have any immovable property exclusively for conduct of its sports broadcasting business. Therefore, assessee has transferred all the rights and title is an interest in the sports broadcasting business including but not limited to agreements with various sports bodies to broadcast matches, trademarks being Ten sports logo, name etc and other intellectual properties defined under the business purchase agreement. On the basis of the definition of the trademark, the learned AO noted that out of 272 such trademarks of that business , 158 trademarks are with respect to Indian territory [ Schedule 3 of the BPA ] . This shows that the said agreement had indeed transferred a significant right of the assessee in relation to India. The AO further look at clause of the BPA on purchase consideration and noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the date of transfer. d) As the assessee has transferred assets, rights, title and interest in and to the sports broadcasting business by means of a Business Purchase Agreement dated 31/8/2016 and it has also been established that the said business has territorial nexus with India and that the said transfer is covered by the provision of The Income Tax Act, she invoking the provisions of section 9 (1) read with section 5, held that that any income accruing or arising in India ,directly or indirectly or from business connection in India shall be taxable in India. e) With respect to the eligibility of assessee for the benefit of Double Taxation Avoidance Agreement, it was noted that assessee is a company Incorporated under the laws of Mauritius and it runs and operates its business from Mauritius. The assessee has claimed that it is a tax resident in Mauritius and satisfies the condition under section 90 (4) of The Income Tax Act for being eligible to claim the benefit of tax treaty between India and Mauritius. Further, the claim of the assessee is that the issue is squarely covered under the provisions of article 13(4) of the DTAA. The AO was of the view that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of acquisition of US$ 7,893,917 was deducted and long-term capital gain on sale of sports broadcasting business division of US$ 330,506,083 was worked out. The same was converted at exchange rate of SBI TT Buying rate of US dollar as on 31/8/2016 and capital gain chargeable to tax in India was worked out that ₹ 22,137,594,895/ . xxii. Thus, Draft Order u/s 144C of the Act was passed on 27/12/2019 where the ld. AO computed the income of the assessee as under :- Sr No Particulars INR 1 Business income from Broadcasting of channels from India holding that assessee has a DAPE 102,03,35,860/- 2 Capital gain on slump sale of Global Broadcasting business of Assessee chargeable to tax in India as per the Income tax Act as well as per DTAA and benefit of DTAA is not available to the assessee 2213,75,94,895/- 3 Income from Other sources being Interest on Income tax Refund 18,55,93,487/- Total income 2234,35,24,242/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT A in earlier years, there is no change on the facts and circumstances of the case and therefore the action of the learned assessing officer was confirmed holding that Taj TV Ltd has income chargeable to tax in India in respect of advertisement and distribution revenue as it has a business connection and permanent establishment in India. iv. With respect to objection number 4 being an alternative submission that the permanent establishment has been compensated at arm‟s-length in respect of various services provided in India and therefore no further attribution can be made, the action of the learned assessing officer was upheld holding that without benchmarking of all functions of the permanent establishment for generating advertisement revenue it cannot be presumed that the payment made to the agent was at arm‟s-length. It held that even before the DRP applicant did not contradict the findings of the AO with the help of the necessary evidence. So, objection number 4 was also rejected. v. With respect to the objection number 5 about disallowing the programming cost by holding that the same is royalty chargeable to tax and under section 195 of the act t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty forming part of the business property of the alleged permanent establishment. c. The DRP / AO failed to appreciate that the gain on transfer of sports broadcasting business is not chargeable to tax in India in view of Article 13(4) of the Treaty. 2. The DRP erred in upholding the action of the AO in taxing profit on advertisement and distribution revenues collected from India computed at 102,03,35,861/- without appreciating fact that the Appellant neither has any business connection in India nor fixed place or agency permanent establishment in India and, therefore, the said revenues are neither chargeable to tax under the provisions of the Act or under the Treaty; 3. The DRP/AO failed to appreciate that even assuming without admitting that the Appellant has a permanent establishment in India, arm's length consideration paid to the advertising agent, distributor and other service providers in India would extinguish any further tax liability arising in the hands of the Appellant in India; 4. The DRP erred in upholding the action of the AO in treating Programming Cost of US$ 10,814,810 for acquiring telecasting rights as royalty and, consequently, dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able Delhi High Court in case of CUB Pty Ltd versus Union of India 71 taxmann.com 315. iii. Further submitted that even otherwise where the situs of the undertaking is located ought to be based upon where the operations and activities‟ are carried on. Merely because the channels are viewable in India amongst other countries, it cannot be said that the undertaking is situated in India. Further it was also claimed if the channels are viewed in more than one country, it cannot be said that situs of the business is in multiple countries. iv. The assessee further claimed that assessee is a company Incorporated in Mauritius and is engaged in satellite television broadcasting business. The business process of the assessee‟s operations that are broadcasting, selling, up linking, management, finance and books of accounts are all undertaken outside India. The assessee does not have any branch, respective bank account, books of account or control existing in India or any fixed place of business in India. It was also submitted by the assessee that all principal activities carried out in connection with the global sports broadcasting undertaking are performed outside Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were resident of India during the year under consideration, all the board meetings of the Board of Directors were held outside India, the directors at those board meetings took the significant decisions and therefore 'head and brain‟ of the assessee also resides outside India. xii. It was also the claim of the assessee that all significant contracts were negotiated, finalized, and executed outside India. These facts were brought to the notice of the learned assessing officer as per letter dated 23/10/2019 and same are not disputed. xiii. With respect to the observation of the AO that most of the registered trademarks are registered in India, assessee submitted that because some of the trademarks registered in India, it would not mean that undertaking is situated in India. Specific reference was made to the decision of the Honourable Delhi High Court in case of CUB Pty Ltd ( Supra). xiv. Therefore, since the operation of the undertaking are carried out outside India, gain on global sports broadcasting business is a transfer of capital asset situated outside India and hence, there cannot be said to be any income accrued or arising in India and accordingly can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia or not. Therefore, in the present case, since the assessee is a residence of Mauritius, the gains are taxable in Mauritius. Therefore even otherwise, assuming while denying, that the global sports broadcasting undertaking is situated in India, still, in view of article 13 (4) of DTAA, gains would be taxable only in Mauritius. xviii. With respect to the denial of treaty benefit in the present assessment year, alleging that assessee is a puppet, and run by its Parent ZEE, as assessee has not taken its decisions independently, it was submitted that all the decisions of the assessee have been taken independently in meeting. Mr. Anil is a non-resident and a director of ATL media Ltd, was authorized to enter into the necessary agreements for executing the sale of the global sports broadcasting undertaking. The involvement of ATL Ltd and ZEE is merely in terms of being a shareholder. The disclosure to the various stock exchanges is mandated because the holding company is a listed entity and any material transaction of its subsidiaries required to be disclosed to the stock exchange as per Stock Exchange Listing Agreements, which are mandatory compliances as per SEBI Act. It was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y permanent establishment in India, there is no question of alienation of permanent establishment or any alienation of movable property of the alleged permanent establishment forming part of the business property. xxii. With Respect to PE , assessee submitted that that there is a subscription agreement‟ and advertisement agreement‟ with Taj India. The Honourable Bombay High Court in assessee‟s own case for assessment year 2004 05 and 2005 06 has held that Taj India was acting independently, its distribution rights and the entire agreement was on principal to principal‟ basis and therefore it does not constitute a permanent establishment of the assessee with respect to subscription agreement/ revenue. xxiii. With respect to the advertisement agreement, it was submitted that Taj India would constitute a permanent establishment only if (1) it has the authority to conclude contract binding the appellant and (2) it habitually exercises such authority. Assessee submitted that Taj India, in line with the Ministry of information and broadcasting guidelines has been given the authority to conclude contract, which has not at all been exercised and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rajesh Shetty and Mr. Vijay Parab , assessee submitted that Mr. Rajesh is CEO of Taj India, which was engaged as a distributor and Mr. Vijay was an employee of ZEE engaged as a production executive. The services provided by these individuals were in connection to the services provided by their employer entities to the assessee and they were under the control and management of their respective employers. Therefore, the reliance on the LinkedIn profile is misplaced. xxix. Even otherwise it was submitted that the revenue‟s claim was with respect to the applicability of article 13 (2) is with respect to Taj India as a permanent establishment of the assessee in India and not with reference to the Zee entertainment Ltd., xxx. The assessee submitted that even if the allegation of the revenue of Taj India constituting a dependent agent permanent establishment is presumed to be correct, still the provisions of article 13 (2) cannot be invoked as that article is applicable only in case of fixed place of permanent establishment and does not apply to dependent agent permanent establishment. The assessee led an example that if a foreign bank having various branches in India, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that burden is on the revenue to establish that any income or gain arising on sale of sports broadcasting business is taxable under the Treaty in view of the decision of Motorola incorporation (special bench) and Right florist private limited. xxxvi. The revenue other than by making a bald assertion on surmises and conjunctures has not established the same. 011. In view of this, the assessee submitted that that global sports business sold by the assessee, capital gain arising therefrom is not chargeable to tax in India. 012. With respect to the ground number 2 regarding taxing advertisement and subscription income to the extent of Rs. 1,020,334,861/ the learned authorized representative submitted that assessee does not have a permanent establishment in India. The said issue is recurring issue and has been decided in favour of the assessee in the earlier years. The learned authorized representative submitted the various decisions in the assessee‟s own case by the coordinate bench wherein it has been held that advertisement and subscription income does not satisfy the test of business connection and therefore cannot be charged to tax in India. Further, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transponder fees does not amount to royalty and further in absence of any permanent establishment or business connection in India it is not taxable in India. Submission of revenue 018. The learned special counsel first referred to the background of the assessee that assessee is a company engaged in the business of telecasting of TV channels, which are owned by it. It is wholly owned subsidiary of ATL media Ltd Mauritius [ATL] that in turn is a wholly owned subsidiary of ZEE entertainment Enterprises Ltd [ ZEE] an Indian company. i. The assessee was Incorporated in the British Virgin Islands on 21/6/2000 and thereafter assessee got itself registered by continuation in Mauritius and obtained a Global Business License 1 in terms of The Financial Services Commission Act 2007. The learned counsel further submitted that as assessee is a registered Mauritian company and at the time of its registration in Mauritius, it was governed by The Financial Services Development Act 2001, which was later changed to Financial Services Commission Act 2007. However prior to financial services development act which came into being in 2001, companies such as the assessee were governe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusive agent i.e. Taj India for soliciting orders for placement of advertisements on the channel and forwarding them, collecting advertisement revenue and behalf of Taj among other things. According to clause 5 (a) of the advertisement agreement, Taj India has denied any right authority to assume or create in writing or otherwise any obligation of any kind, express or implied in the name of on behalf of the assessee unless expressly authorized by Taj. However in addendum dated 27/4/2006 the above 5 (a) is turned on its head entirely and the Taj India is provided with the right and authority to creating writing or otherwise an obligation of any kind, express or implied in the name of an on behalf of the assessee relating to activities undertaken in India. It was further stated that clause 5 (b) of the advertisement agency agreement provided that Taj India agrees to submit all proposed agreements and contracts in respect of services and periodic budget of all costs and expenses to be incurred in connection with the services to the assessee for the assessee's approval which shall be granted or rejected by the assessee. This clause was also deleted by the addendum dated 23/1/2008. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to the applicability of article 13 (2) or article 13 (4) of The Double Taxation Avoidance Agreement, the learned departmental representative submitted that the case of the learned AO is that gain derived by the assessee are covered under article 13 (2) of the Double Taxation Avoidance Agreement In which case the applicability of article 13 (4) becomes fully irrelevant. vii. He submitted that according to article 13 (2) of the Double Taxation Avoidance Agreement provides that if there is a permanent establishment in India and there is an alienation of permanent establishment itself, then in such case the gain arising therefrom are liable to be taxed in India. It was submitted that assessee during the course of hearing submitted that the permanent establishment in the context of article 13 (2) means only fixed place permanent establishment. This argument may be true to a certain extent, but it cannot be suggested that if an entity is operating through an agency permanent establishment and that business is validated on as is where is basis as a slump sale together with the transfer of agent itself with all his belongings, rights, titles, and interest, yet article 13 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned special counsel, the transfer of the sports broadcasting business has territorial nexus with India. xiii. It was also the claim of the learned departmental representative that clause 9 of schedule 6 extracted that the assessee has obtained permission from its affiliates to use its premises from where it is operating. Further, no written agreement has been entered into in this regard. He further submits that according to clause 19 of schedule 6 of the agreement clearly states that the play out is done from Noida only and from no other place in the world. He further referred to clause 12.1 of schedule 6 read with schedule 9 saying that it implies that the robust IT system is in place in Noida, which is being transferred under the business purchase agreement. Therefore, according to him the assessee operates from India. xiv. He submitted that the overall implication of the sale of broadcasting business in India has to be seen in light of what is stated in the clause 2, schedule 2 of the business purchase agreement where the transfer of equity shares of Taj India to Sony is contemporaneous and meant to happen concurrently with the transfer of sports business of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, the title of the transfer pricing study report refers to India operation and therefore transfer pricing study report is dealing with only those assets, which are employed in India. Thus, Assessee has assets in India is clearly inferred. xx. The learned special counsel further referred to the audited financial statements and submitted that the depreciation and employees‟ cost has been charged to the India operation and therefore it cannot be believed that the assessee does not have any asset in India , now it cannot be said that those assets have not been used for operation in India. If that is so than how assessee claimed depreciation on account of the India operation and further it is nowhere stated as to where the employees are located, if not in India. xxi. He further referred to the claim of the assessee that the play out facility belong to ZEE entertainment Ltd and it was outsourced to that company for a consideration and therefore ZEE entertainment Ltd could not be regarded as a permanent establishment of the assessee. He further referred to the argument of the assessee that facility of ZEE entertainment Ltd was not transferred and therefore article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e permanent establishment or of the permanent establishment itself. If the intent was to restrict its application to only fixed place permanent establishment, the Double Taxation Avoidance Agreement would certainly say so, more so because the Double Taxation Avoidance Agreement itself contains a wider definition of permanent establishment. xxiv. He further referred to the clause 9 and 19 of schedule 6 of the business purchase agreement with respect to properties and technical arrangements and submitted that the appellant does not have any immovable property of its own in Noida, but it has got permission from its affiliates to use the premises and this clearly shows that there is a fixed place which is being used by the assessee. It clearly shows that wherefrom the assessee is operating. Accordingly, he submitted that the business operations are being carried on from this premises, which belongs to the affiliates but is made available to the appellant for its business operation. No payments are made for the use of this premise. He further submitted that there is a stipulation in the agreement that the purchaser will use this premises and it shall not be required to make any pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Of Income Tax (International Taxation) Mumbai Versus Morgan Stanley And Company Incorporation (2007) 7SCC 1 is inappropriate for the reason that there is a fundamental difference between the Double Taxation Avoidance Agreement Between India and the United States and the DTAA between India and Mauritius. According to him, the paragraph number 5 of article 5 of the Indo US DTAA contemplates that the agency would not emerge if the agent is paid at arm's-length basis. Thus if the enterprises is not paid at arm's-length, he shall not be considered as an agent of independent status. Then he referred to the paragraph number 5 of article 5 of the India Mauritius Double Taxation Avoidance Agreement stating that it is differently worded and whether or not the payment is made on arm's-length basis, if the activities of the agents are devoted exclusively or almost exclusively on behalf of that enterprises, sale agent would not be considered as an agent of the independent status and would constitute agency permanent establishment for the foreign enterprises. He further submitted that it is not at all in dispute that Taj India is an exclusive agent and is working fully for the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance Agreement. xxxi. He further submitted that the assessee has fairly conceded during the hearing that in the event of transfer of permanent establishment itself, article 13 (2) of the Double Taxation Avoidance Agreement gets attracted. Therefore according to him the appellant's permanent establishment exists in India in no uncertain terms and thus article 13 (2) gets attracted on account of transfer of permanent establishment of the assessee to Sony. He submitted that it is so because the transfer of Taj India by the parent company as an integral part of the main transaction supports the proposition of the revenue. xxxii. He further referred to the several decisions of the coordinate bench which is rendered in case of the assessee holding that assessee does not have a permanent establishment in India, he submitted that the facts as brought out on record for this assessment year are totally different from those in earlier years and therefore the decisions rendered by the coordinate bench would not be applicable for the year under consideration. xxxiii. He further submitted that the principle of res Judicata does not apply in tax proceedings and therefore each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e policy guidelines of Telecom regulatory authority for up linking and down linking of channels was never placed before the bench. g) The earlier year orders of the coordinate bench have gone by the streams of revenue for determining the status of the permanent establishment. He submitted that permanent establishment and its determination is dependent on functions and mainly the business operations that are done from a place either through the enterprises owned employees all through other persons or through the agent etc. The determining factor for permanent establishment is the place, the business operations, and the functions but can never be dependent upon the streams of the income. He therefore submitted that the orders of the coordinate bench, which has referred only the income streams of the agent to determine the status of the permanent establishment, is not correct. h) The issue of the capital gain is arising for the first time in this year and therefore the fresh examination of the facts needs to be done for this year. For the earlier years, facts are only related to the income streams. Here the assets need to be examined and that too capital asset. i) The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh further stated that it is consolidating its operation into its facility in Noida. Therefore, it is clear that the assessee shifted its operations from Dubai long back and now it operates from Noida for carrying out its functions. He submitted that it is also evident by reading the clause 19 of schedule 6 of the business purchase agreement. xli. He categorically submitted that that the operation of the assessee is not situated in any other place outside India. For this proposition he submitted that the assessee even after repeated queries has not been able to indicate from where, if not in India, the operations of the assessee is being carried out. Mere stating that assessee is still maintaining some properties in Dubai and rent agreement was filed in support of this contention cannot help the case of the assessee. Assessee need to show that wherefrom the business operations are being carried on. Therefore, in absence of any material to even remotely suggest that broadcasting of the channel is being done from Dubai or any other place except Noida is established. He therefore submitted that as the business is certainly a capital asset within the meaning of section 2 (14) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its back by its parent ZEE entertainment Ltd. He submits that the assessee's board approved the sale consideration as notified to it by the parent. There is no discussion on valuation report or any independent decisions taken by the board of the assessee. Therefore, he submits that the assessee acted as a puppet‟ in the hands of its parent and did not have any involvement in the decision-making process or in deciding the nature and quantum of sale consideration. Therefore, there is not an iota of evidence, which even remotely suggest that the assessee was involved in negotiations at any stage. He further referred to the minutes of the meeting of ZEE entertainment Ltd stating that it was held on the same date on which the business purchase agreement was signed and therefore it establishes that the decision to sale the broadcasting business was communicated to assessee by its parent only. He further referred to the income tax return filed by the assessee showing the names of the directors of the assessee company. He submits that though assessee has 4 directors, however the agreement of business purchase was signed by some other person on behalf of both the assessee as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territories to Sony is a colourable device, which has been frowned upon by the Honourable Supreme Court even in the case of Azadi Bachao Andolan. Therefore, according to him, the learned assessing officer is justified in taking note of the non-existence of the corporate veil, which has not been torn out by the revenue, but the assessee itself, its ultimate parent and making the assessee company disentitled for any treaty benefits. He submits that once the corporate structure is derecognized, the income becomes chargeable to tax in India, as the benefit of the treaty would no longer be available. Therefore, income attributable to the Indian territory is chargeable to tax in India even though the arrangement/transaction has been so arranged to acquire a legal form that allows it to evade taxes on the said income. xliv. Accordingly he concluded his submission on ground number 1 stating that that capital gain arising on the slump sale of global business sports of the assessee is chargeable to tax in India as per the Income Tax Act as well as per DTAA despite the fact that agent of the assessee is paid remuneration at arm's-length. xlv. With respect to ground number 2 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legation of the learned departmental representative that the critical functions of the undertaking are functioning from India and therefore undertaking is situated in India and the premises of Zee entertainment Ltd constitute fixed place of permanent establishment. It was further stated that the learned departmental representative has specifically referred to the slump sale agreement to allege that the assessee is owner of the various assets and the same are located in India that the assessee is the owner of various information technology assets and the same are located in India. It was further stated that the transfer pricing study report shows that the assessee's production and transmission facility are situated at Noida. It was also the claim of the learned departmental representative that an offshore company like assessee, cannot hold any immovable property in Mauritius and therefore the assessee has an immovable property in India. 021. In rebuttal of the same learned authorized representative submitted that i. assessee is engaged in the business of satellite television broadcasting of sports events taking place outside India. The production facility lies at the plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Zee entertainment Enterprises Ltd. Production has always been outside India while the play out facility for quality maintenance is availed from the ZEE entertainment Enterprises Ltd. The agreement does not contemplate to have Zee entertainment Enterprises Ltd as establishment of any permanent or enduring nature in India at the disposal of the appellant. Therefore, it cannot be said to be a permanent establishment in India merely because it provides the services to the assessee. ix. Transmission services have been availed from third party service providers like Intelsat Corporation and that the transmission happens outside India and not at the facility of the Zee enterprises entertainment Ltd. x. With respect to the applicability of MAURITIUS OFFSHORE BUSINESS ACT (MOBA), learned authorized representative submitted that the appellant is registered under The Financial Services Development Act, 2001 and the provisions of Mauritius Offshore Business Act do not apply to it. It was further stated that MOBA applies to activities approved in section 34 of the act and not the activities of the assessee. It was even otherwise submitted that that act was repealed by the Financial Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permanent establishment in India. xiii. It was submitted that the Honourable Bombay High Court in assessee's own case for the assessment year 2004 05 and 2005 06 has categorically held that Taj India was acting independently for its distribution rights and entire agreement was on principal-to-principal basis and therefore there was not a permanent establishment of the assessee. Therefore, reference to schedule 7 of the share purchase agreement is irrelevant. xiv. It was further stated that Taj India has entered into contract for distribution of channels in India but the same was on principal-to-principal basis. xv. It was further stated that the revenue failed to appreciate that the argument of the assessee that Taj India has not concluded contracts was with respect to the advertisement revenue and hence Taj India does not constitute a permanent establishment for advertisement revenue segment as well. xvi. It was further submitted that whether the Taj India constitutes a permanent establishment of the assessee for distribution (subscription income) has been settled by the Honourable Bombay High Court in favour of the assessee and therefore the revenue n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of authorized bank signatories for the period relevant to the transaction. It was submitted that the assessee as per letter dated 27/12/2019 had submitted point -wise reply wherein in point number 1 it has categorically mentioned that the assessee has not obtained any valuation report for the purposes of sale of its global sports broadcasting undertaking and nor any valuations are required under the Indian foreign exchange regulations or any other statute. This is a transaction between two unrelated parties. Those parties are competitors and the consideration has been determined based on the negotiation entered into between the parties that are concluded. Therefore, the question of filing any valuation report does not arise. It was categorically mentioned that assessee has not obtained any valuation report. If the assessee has not taken any such report, there is no question of filing of such valuation report. With respect to the submission of the audited financial data of India operation along with the segmental accounts of the company relevant for computation of income was submitted to the learned assessing officer on 3/12/2019 as per submission dated 19/12/2019. He specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the assessee's paper book it was submitted together with the copies of the board resolution which are taken on record and also referred in the draft assessment order. According to that it is evident that Mr. Anil Maurya is a tax resident of Mauritius who is a director of ATL Mauritius, holding company of the assessee and he is jointly authorized to operate along with the other directors of Taj Ltd since 30/11/2015. He specifically referred to that letter and submitted that there are two classes of the signatory jointly operate the bank account. One is Mr. Anil Murya and another one is any of the four persons including two directors of the assessee company. He submitted that even otherwise it does not make any adverse reference that a person of the holding company is made the joint signatory to the banking operation of the assessee. Therefore, it was submitted that the learned assessing officer has proceeded on the factual incorrect basis to make the above allegations. xxiv. With respect to the orders of the coordinate bench in earlier years, the learned authorized this representative submitted that there is no misrepresentation of facts from the side of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnel. It is engaged in the business bringing to the Indian sub continents and Middle East the best in sports programming and production. The assessee is having a Tax Residency Certificate [ TRC] issued by the Director-General, Mauritius Revenue Authority having a validity period from 25 March 2016 24 March 2017 stating that the assessee is registered in Mauritius on 12 July 2002, is a company resident in Mauritius for income tax purposes under the income tax act. Its certificate of Registration By Continuation was issued to the assessee on 12 July 2002 by The Registrar Of Companies, Mauritius. Assessee has also Global Business License Category 1 issued on 15 July 2002 for a validity period of 15 July 2002 14 July 2003 under section 20 (5) of The Financial Services Development Act 2001. According to that, the company was entitled to conduct such business or activities as a set out in the application and supplementary document submitted. 024. It has appointed an another entity Taj Television India Private Limited (Taj TV), a closely held Indian company which is engaged in the commissioning and marketing of sports programs events and distribution and dissemination of TV channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome, it stated that without prejudice to its income is not liable to tax in India the company showed its indicated taxable income from its Indian operations stating that net profit before tax as per the profit and loss account is ₹ 4,620,563/ , to which it considered several items not allowable as deduction of ₹ 340,136 and reduced the allowable items of expenses allowable on payment basis of ₹ 121,117/- resulting into gross business income of ₹ 313,791,751 which was reduced by forward business losses of assessment year 2011 12 of the same amount. Even from income from other sources, unabsorbed depreciation of earlier years was claimed and net taxable income of only ₹ 48,015,879/ was shown. Along with the return of income balance sheet of India operations of the assessee for the year ended on 31st of March 2017 was drawn wherein in the balance sheet in the current assets only trade and other receivables amounting to US$ 19,593,547, trade and other creditors of US$ 15,797,564. No other assets and liabilities were shown. The share of net profit and loss are allocated to India operation of US$ 4620,563 was shown. With respect to the breakup of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, (A) distribution and broadcasting sports content as part of the linear feeds of the channels and all ancillary activities associated with the broadcast, play out and distribution of linear channel in the territory (other than in Pakistan) and (B) distribution of the channels across all media platforms capable of carrying and distribution in a linear feed of a television channel in the territory (other than in Pakistan) and (C) syndicated sports content to 3rd parties across all media platforms in the territory (other than in Pakistan). Other than the business of sports broadcasting business, all other businesses were categorized as a retained business and were not part of this agreement. Pakistan business was also not part of this agreement. The channels undertaking means all undertakings of the seller pertaining to or used in connection with the sports broadcasting business and existing as on the closing date includes all the assets, contracts, permits and licenses, intellectual property, all employees, the records, the insurance policies, claims and rights, all goodwill and other intangibles as well as all information technology systems to the extent those are used solely by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s affiliates and not otherwise. iii. As per schedule 3 there were 272 trademarks registered in the name of the assessee registered in various jurisdictions including India. Out of this, 158 trademarks are registered in India. Other specific indemnities between the parties and five employees which are directly employed by the seller in relation to the sports broadcasting business and who are associated with the sports broadcasting business were listed. These 5 employees are based at Mauritius. Others are various general warranties between the parties. According to clause 8 and 9, it is stated that the sports broadcasting business is the sole and exclusive property of the seller and other than the seller no other person has any right or interest in the sports broadcasting business. The seller owns all of the assets necessary to conduct the business of sports broadcasting business and there are no arrangements with any other person that creates any encumbrance or the right to acquire any other rights in relation to any part of the assets. The properties were also not leased out or licensed to others but the seller has obtained the necessary permission from its affiliates to use t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company. 033. On 31 August 2016 and agreement was entered into by Zee entertainment Enterprises Ltd as the seller and Sony pictures network India private limited as the purchaser titled as The Share Sale And Purchase Agreement where the seller holding 100 % of the outstanding share capital of Taj Television (India) Private Limited were sold for USD 76 Lacs. 034. On 1 March 2017, assessee confirmed to the buyer about the closing of the transaction. According to that closing date purchase consideration amounts to US$ 322.7 million received by the assessee and purchase of sports broadcasting business by Aqua holdings investments private limited is complete and now the buyer is the lawful owner of the sports broadcasting business. 035. Assessee has entered into an advertising sales agency agreement on 4 May 2002 by which assessee appointed Taj Television ( India) Private Limited as its advertising sales agent. The details of the agreement as well as the subsequent addendum thereto are as under:- i. The assessee has an agreement with Taj television India private limited titled as advertising sales agency agreement dated 4 May 2002. According to that assessee appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses to be incurred in connection with the services (including, without limitation, Taj India is estimated major marketing costs), to Taj fourth Taj approval which approval shall be granted or rejected by Taj within a reasonable time after such submission. However, if Taj does not grant or rejected approval within a reasonable period of time, and decides to keep its approval on hold, it will intimate Taj India accordingly. Taj (and not Taj India) shall be responsible for confirming all agreements relating to the services and the sale of advertising time for the channel and for directly booking advertising time for exit addition on the channel. Taj shall confirm all advertising time and book all advertising time agreements within a reasonable time of its receipt thereof from Taj India. iii. On 27 April 2006, an addendum to the advertising sales agency agreement entered into between assessee and Taj television India private limited was entered into. According to that clause 5 (a) of the agreement was replaced with effect from 1 April 2006 as under:- in providing the services pursuant to this agreement, Taj India shall have the right and authority to assume or create, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OF INCOME TAX (INTERNATIONAL TAXATION) v. TAJ TV LTD. [2020] 425 ITR 141 (Bom) for assessment year 2004-05 , 2005-06 (February 6, 2020) upheld the order of the coordinate bench holding as under:- 24. The Tribunal noted that the first appellate authority, after due deliberation, had returned a finding of fact that Taj India was not acting as agent of the assessee but it had obtained the right of distribution of the channel for itself and subsequently, it had entered into contracts with other parties in its own name in which the assessee was not a party. The distribution of the revenue between the assessee and Taj India was in the ratio of 60 : 40 and the entire relationship was on principal-to-principal basis. The Tribunal noted that this finding by the first appellate authority is corroborated by the terms and conditions of the distribution agreement as well as the sub- distributor agreement. After examining the requirement of article 5 of the Double Taxation Avoidance Agreement to constitute agency permanent establishment, the Tribunal actually held that none of the conditions as stipulated in article 5(4) was applicable because Taj India was acting independently qua its dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is situated in Mauritius because, all the meetings of the board of directors were held outside India, (2) the main activity of telecasting is carried on by it outside India, (3) all the significant contracts are finalized and executed outside India, (4) all the employees of assessee are based outside India. 041. It is also the claim of the assessee that agent is paid at arm's-length and therefore, even if there is a permanent establishment of the assessee, no further profits can be attributed to the assessee with respect to the advertisement and distribution income. This is refuted by the revenue submitting that there is a stark difference between the article 5 (4) of The Double Taxation Avoidance Agreement of India and Mauritius. There is no such clause that if the dependent agent is remunerated at arm's-length, nothing is required further to be attributed to the assessee as income. Indo US double taxation agreement provided in article 5 (5) as under:- 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inate bench in 77 taxmann.com 355 for assessment year 2006 07 to 2008 09 dated 23 December 2016 has categorically held that no income could be said to be attributable to assessee, a foreign entity , in India from its Indian subsidiary when transfer pricing officer had accepted that the transaction between them was at arm‟s-length. The Double Taxation Avoidance Agreement before the Honourable Bombay High Court in case of Set satellite (Singapore) PT Ltd was with respect of India Singapore DTAA and in case of B 4U international Holdings Ltd case, it was India Mauritius DTAA. We are also concerned in this case with India Mauritius DTAA. However, this issue could only arise when we reach the decision that whether the assessee has a dependent agent permanent establishment or not. For the time being, this issue is parked separately 044. Therefore, first it needs to be established whether the assessee has a Dependent Agent permanent establishment in India or not. For assessment year 2003 04 to 2005 06 coordinate bench in Additional Director Of Income Tax Versus Taj Tv Limited 161 ITD 339 (Mumbai) dated 5/7/2016 has decided the issue that the distribution revenue in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isement revenue, the Taj India does not constitute agency permanent establishment and further as the AE has been remunerated at arm‟s-length price, the addition was deleted. Further in the same appeal, where the learned CIT A following the decision of the coordinate bench in assessee‟s own case held that distribution income stream does not have a permanent establishment in India, coordinate bench following the decision of the coordinate bench in assessee‟s own case for earlier year held that assessee does not have a permanent establishment in India with respect to distribution income. Further for assessment year 2012 13 in ITA number 6588/M/2019 and 6741/M/2019 dated 22/3/2022 the coordinate bench when the learned CIT A held against the assessee holding that in respect of advertisement revenue assessee has a permanent establishment and against the revenue on permanent establishment with respect to the distribution revenue. In this order, at paragraph number 11 there was a specific reference made by the learned departmental representative with respect to the addendum in distribution agreement where Taj India had been granted an authority to enter into an agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt establishment with respect to the distribution income. Therefore, even in case of advertisement of revenue, it was held that assessee does not have permanent establishment. This decision has not been challenged by the revenue by filing the miscellaneous application before the ITAT or before the honourable High Court. Therefore, the decision taken in that case will have a binding precedent. 045. Now the challenge has been made by revenue before us is with respect to the binding precedent of those decisions. It is specifically argued that principles of res Judicata does not apply and each year is a separate assessment year. Further, it is also the claim that all those decisions have been obtained on account of misrepresentation and concealment of vital facts. 046. The first challenge was with respect to the fixed place of business of the assessee in India at its disposal which was referred to in clause 9 of schedule 6 of the business purchase agreement dated 31/8/2016 was never disclosed to the ITAT or the revenue authorities below. Further, it was also not stated that that a share purchase agreement has been entered into with Sony where Sony was stepping into the shoes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered by the coordinate bench with respect to advertisement sales agency agreement. There is no amendment with respect to the channel subscription agreement produced before us by either party. Hence, on this ground, it cannot be said that this fact was concealed before the ITAT. Contrary to this, these agreements and its addendum were produced by the learned departmental representative. 048. The next argument was that that the policy guidelines of TRAI for up linking and down linking of channel was never placed before the coordinate bench. We find that when the addendums to the agreement, which resulted only because of the guidelines of down linking and up linking of the channel, was considered by the coordinate bench, we find no reason that non-production of these guidelines results into misrepresentation of facts or concealment of and evidence. Even otherwise, such policy guidelines are available in public domain. When there are amendments to agreements are available with the assessing officer and the learned departmental representative, he could have asked the reasons for the amendments to the agreement. Failure of learned AO to make necessary enquiries cannot be used again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the learned AO which are as under:- 5.3 fixed place permanent establishment 5.3.1 the assessee has contended that during the year under consideration there is no change in the facts and circumstances of the case and that it has neither a fixed place of business in India not having any branch/office et cetera. In India as defined in paragraph number 1 and 2 of article 5 of the DTAA between India and Mauritius. The assessee has further contended that management and control of Taj is situated outside India. The assessee‟s contention is factually incorrect. As discussed in paragraph number 3 above, that during the year under consideration, A) the assessee had shifted its play out and production facilities to India. In addition, that there is no play out of the channels anywhere else in the world. The assessee company pays play out fees to its associated enterprises ZEE for use of its premises for Channel play out. The assessee has paid the play out fees to its associated enterprises ZEEL and it is duly reported in its transfer pricing study report for assessment year 2017 18. This is further corroborated by LinkedIn profiles of some senior personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the applicant through which the business of the applicant is being carried on. OECD commentary at note 5 of commentary on article 5 clearly says that:- 5 . It is immaterial how long an enterprise of a contracting state operates in the other contracting state if it does not do so at a distinct place, but this does not mean that the equipment constituting the place of business has to be actually fixed to the soil on which it stands. It is enough that the man remains on a particular site. Further, there is no requirement of ownership of the space of equipment, which constitutes PE. Note 4.1 of the same commentary also clarifies that there is no requirement of legal right. It states that:- 4.1 As noted above, the mere fact that an enterprise has a certain amount of space at its disposal which is used for business activities are sufficient to constitute a place of business. No formal legal right to use that place is therefore required. Thus, for instance, a permanent establishment could exist where an enterprise illegally occupied a certain location where it carried on its business. In a recent Supreme Court ruling in the case of Formula One Word Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transported by the taxpayer was considered as permanent establishment in Germany despite the fact that there were no employees, and the pipeline was operated automatically in Germany, by the German Federal tax court. In another case, a German company installed a server in a rented premise in Switzerland, which started computer programs and dealt with German companies' Swiss clients. The same server was functioning without involvement of any human beings and was managed by Swiss affiliates German company. The German tax court of first instance, Holstein held that the server amounted to fixed place permanent establishment of German company insisted land and it is not necessary that the server has to be operated by Newman beings. (II 1224/97 dated 6 September 2001 (FG, Holstein)). 5.3.3 Hence, it is not relevant whether the said premises was leased out and not actually owned by the assessee. It is also not relevant that the assessee may or may not have acquired the said premises for the entire year. What is relevant is that the assessee has a fixed place with a certain degree of permanence available to it for running its play out activities related to its channels in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e personnel are not employees of the assessee and have no connection with the transactions in question and therefore reliance on their LinkedIn profile is misplaced. viii. Therefore, it cannot be interpreted that Taj has control over play out facility and hence it cannot be deemed the fixed place permanent establishment of Taj in India as per the India Mauritius DTAA. 056. The above objections raised by the assessee before the learned dispute resolution panel as per Para number 8.12 at page number 15 of 82 of the directions of the learned dispute resolution panel. This was specifically against the fixed place permanent establishment alleged by the learned AO. 057. The learned Dispute Resolution Panel in paragraph number 10.3 while dealing with the territorial nexus with India made the reference of the finding of the learned AO however has categorically dealt with only the dependent agent permanent establishment of the assessee with respect to the advertisement and distribution revenue only. Therefore, it is apparent that the learned dispute resolution panel did not render any reasoned direction on fixed place permanent establishment of the assessee. 058. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n avoidance agreement. 059. Argument of the assessee is that the agreement does not contemplate ZEEL to have an establishment/place of permanent or enduring nature in India at the disposal of the assessee. That company has merely provided services to the assessee from their premises using their own assets. The premises were not at the disposal of the assessee. None of the assessee's employees has travelled to India during the year and therefore it does not constitute a fixed place permanent establishment of the assessee in India. Assessee heavily relied on the decision of honourable Supreme Court in case of ADIT V E Funds IT Solutions Inc. 86 taxmann.com 240 (SC). 060. We have carefully considered these contentions with respect to the fixed place permanent establishment of assessee. It is to be noted that ZEEL is carrying out play out facilities not only for the assessee but also for many other broadcasters. It is not for this year but for past several years, ZEEL is providing the service of play out station. During this year, undisputedly there is an agreement for payment of services of play out facilities. No doubt, the agreement was made on 19/4/2017, which is given ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, ZEEL is carrying out its own business and not the business of the assessee. Even otherwise production is separate from play out services availed from ZEEL and further transmission services have been availed from third-party service providers, which happens outside India and not at the facility of ZEEL. 061. One of the most important tests while determining the existence of fixed place permanent establishment is the business connection test. The definition of the permanent establishment requires a specific connection between the business activity and the fixed place of business. This condition is titled as the business connection test. It is always necessary to first determine whose business activity is conducted through the place of business. It is necessary, in order to apply the business connection test, to identify the party whose business activity is carried on at the place of business i.e. in this case play out is. The need for this test cannot be undermined when the activity performed through the place of the business may not be the business of the taxpayer but of somebody else. Undoubtedly, the play out are the place of business. However, can it be said that that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain activities. There is no quarrel on the issue that when testing the connection between the business and the place of the business i.e. the business connection test, the business activity of the enterprises does not have to involve human beings or any decision-making activity as long as the activities are performed there. Thus, fully automatic machinery, computers etc. may comply with the business connection test. This is also clear by reading paragraph number 41 of the commentary on article 5 of OECD. Therefore, we find that reliance on that portion of the book is misplaced because it applies only when the business of the assessee is carried out by such equipments. It is nobody's case that playout activities do not require human efforts. In this case, business is not of the assessee that is being carried out from that play out facilities , but it is used for carrying out the business of ZEEL. The learned AO has further referred to page number 56 and 57 of that book which dealt with the permanent establishment with respect to server, data centre, and computer Reservation Systems. The reliance on the same is also rejected for the same reason that it is not the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the assessee or not. It is undisputed that assessee holds a valid tax resident certificate granted by the Mauritius tax authorities from financial year 2002 03 till date. Revenue has challenged the fact that assessee is run and controlled by ZEEL. This is submitted because of the language of resolution as well as disclosure made by ZEEL to the stock exchange. The fact shows that assessee was originally promoted by UAE based Bukhatir investment Ltd and is running sports broadcasting division since 2002 from Mauritius. It became the wholly owned subsidiary of ATL media Ltd only in 2010. The business of the assessee has been run for more than 15 years; it was never the allegation of the revenue that the business is run by parent company and not by the assessee. Since then for all these years, the Treaty provisions have been applied by the revenue for determination of taxable income of the assessee. The disclosures to the stock exchange are mandated by the listing agreement of ZEEL as the ultimate parent is listed on Bombay stock exchange and National stock exchange. The challenge to the treaty benefits of the assessee is only for the reason to bring the taxation of capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablishment in India, either in the form of a fixed place permanent establishment or dependent agency permanent establishment, article 13 (2) of DTAA does not apply. 073. According to article 13 (4) of DTAA when any property other than the property is covered in earlier articles, gain arising on alienation of such property would be chargeable to tax only in the state of residence of the alienator. It may also include movable property, which is not forming part of the business property of permanent establishment or fixed base available to the alienator. As the alienator is a resident of Mauritius, according to us the capital gain on sale of global broadcasting business shall be chargeable to tax only in Mauritius and not in India. 074. Accordingly, we hold that the gain of ₹ 17,902,115,124/ on sale of sports broadcasting undertaking by the assessee is not chargeable to tax in India. Hence, ground number 1 of the appeal is allowed. 075. Ground number 2 of the appeal is with respect to the taxing advertisement and subscription income of ₹ 1,020,335,861. The fact shows that the assessee's businesses of telecasting of sports channels are carried out from outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee including live feed for broadcasting in India is in the nature of Royalty requiring tax deduction at source and therefore, as assessee has failed to deduct tax at source, disallowance was made under section 40(a) (i) of the act. The learned dispute resolution panel while disposing of the objection number 5 has held that the coordinate bench has decided the issue in favour of the assessee in earlier years and the order of the coordinate bench has not been accepted by the Department by preferring an appeal under section 260A of the act and therefore to keep the issue alive no directions were issued to the learned assessing officer. As the learned dispute resolution panel has accepted that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee's own case in earlier years, we do not find any reason to deviate from the same, accordingly we direct the learned assessing officer to delete this disallowance. Accordingly, ground number 4 of the appeal is allowed. 079. Ground number 5 of the appeal is with respect to disallowance of transponder fees of US$ 1,793,183 and up linking charges of US$ 1,790,261 on account of non-deduction of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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