2022 (12) TMI 1204 - AT - Income Tax

TP Adjustment - determination of the arm s length price of deemed international transactions of television content production fees received from the broadcasters - HELD THAT - For determination of arm s length price of the deemed international transactions, it is important to go through the agreement entered between the AE and domestic third-party. The said agreement and confirmation have been filed for first time before us, which being crucial and important for adjudicating the issue dispute, same are admitted as additional evidence in terms of Rule 29 of ITAT Rules, 1963 and issue-in-dispute involved in relation to adjustment to the deemed international transactions is restored back to the file of the Ld. AO/TPO for deciding afresh after providing adequate opportunity of being heard to the assessee. The ground of the appeal of the assessee accordingly allowed for statistical purposes.

Summary

Issues:
1. Determination of total taxable loss
2. Rejection of transfer pricing analysis and adjustment of deemed international transaction
3. Rejection of documentary evidence
4. Observations on production budget and benefit to Associate Enterprise
5. Consideration of format rights fee receivable by Associate Enterprise
6. Transfer pricing adjustment in contravention of DRP directions
7. Recovery of cost of production from deemed AEs
8. Initiation of penalty proceedings under section 271(1)(c) of the Act

Analysis:
1. The appeal was against the final assessment order for the assessment year 2015-16. The grounds raised by the assessee included errors in determining the total taxable loss, rejection of transfer pricing analysis, rejection of documentary evidence, observations on production budget, consideration of format rights fee, transfer pricing adjustment, recovery of cost of production, and initiation of penalty proceedings.

2. The assessee did not press some grounds, which were dismissed as infructuous. Regarding other grounds, the counsel requested admission of additional evidence related to deemed international transactions of television content production fees. The additional evidence included confirmation from Fremantle Media Ltd and format agreements with third-party broadcasters. The issue was restored back to the Ld. AO/TPO for fresh consideration based on the new evidence.

3. The admission of additional crucial evidence was allowed by the tribunal under Rule 29 of ITAT Rules, 1963. The issue related to adjustment of deemed international transactions was sent back to the assessing officer for a fresh decision after providing a hearing to the assessee. Grounds 2 to 5 of the appeal were allowed for statistical purposes.

4. The appeal was allowed partly for statistical purposes, and the order was pronounced in open court on 19/05/2022. The detailed analysis of each issue highlighted the errors made in the assessment and the subsequent corrective actions taken by the tribunal to ensure a fair and thorough review of the case.