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TMI Blog2019 (8) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment to STAR Ltd, had determined the total value of brand license to be of USD : 36.02 million for the use of 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 gaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in nature instead of capital allowed. Disallowance u/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 X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 was stated to be done in accordance with section 92D of the Act read with Rule 10B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices 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 not given any other comparables. The AR has argued that the there are some Principal Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject 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 assessee is not relevant because the assessee is also an entrepreneur. What has to be seen is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment 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 as comparable to the assessee and we direct the AO to exclude this company from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 Appropriate Method ('MAM') and comparing the margins earned by the assessee under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operating profit in the year under consideration i.e. FY 201011 relevant to AY 2011-12. According to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 (adjustment value of ₹ 62,108,738), Ld Counsel stated the facts that during the year under consideration, pursuant to merger of three channel companies (i.e. STEL, SAML and SAR) with SIPL being effective from April 2009/May 2009 respectively, effectively 2 months' transactions were being reflected as transaction undertaken by assessee. Based on functional and risk profile of the transactions undertaken by merged channel companies TNMM was selected as the most appropriate method. Since these transactions were entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is misplaced. The DRP on page 17 of its Order had also noted that UTV does not have any independent broadcasting segment. 25. As regards to IBN 18 Broadcast Ltd Ld CIT DR argued that the assessee had considered the broadcasting segment of this company as a comparable. The TPO had rejected the same due to consistent loss making by the company (see page 676 of Paper Rook which is the standalone result of the company as part of the Director's report). Also see page 726. He contradicted the argument of Ld AR that the Broadcasti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 facts and circumstances of the case. We noted that this comparable companies in broadcasting segment in regard to UTV Software Communication Limited, which is in television segment is an India based integrated media company engaged in broadcasting of television channels, television content production and has developed into a media as an entertainment company. It operates in the segments of television, movies, games and interactive segments. The details are given in assessee's paper book pages are 570 to 573 and page No. 616. We are in agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion 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 Broadcasting Ltd. 29. We have considered this comparable i.e. Raj Television Network and noted that TPO/ DRP rejected Raj on the basis that it is consistent loss making company and not disputed on functional comparability. We noted this fact from the profit and loss account of the company as provided in page no 866 of the assessee paper book. The said company has earned income from broadcasting activities and there is no issue that Raj's Broadcasting segment is comparable to the assessee. Another fact brought on record that Raj has ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P 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 financial results/ data of the comparable companies which are not in existence in the public domain at the time of determination of the arm's length price as is mandate under section 92F of the Act. Your Appellant prays that the data considered by the Appellant in determination of the Arm's length price should be considered for the purpose of benchmarking the international transactions of the Appellant with its AEs and the approach adopted by the learned Transfer Pricing Officer should be rejected." 31. 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 ..... 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 (i.e. Star Plus, Star One, Star Cold and Star Utsav). During AY 2011-12, the assessee carried on the distribution activity for the merged entities till 30.04.2010 in case of STAR and 31.05.2010 in case of STEL and SAML. Prior to the merger, STAR Ltd charged a service fee of cost plus 5% mark-up for the provision of management services to the Channel Companies. During AY 2011-12 the merged entities have paid a combined service fee of ₹ 35,638,917 as consideration for availing services from STAR Ltd. 35. As the effective date of merger was 01.04.2009 Star Ltd had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 was accepted to be at ALP. It was further stated that for the previous assessment years, the transactions of STAR Ltd and channel companies (pail of Star group companies) were being assessed by TPO's in the respective assessment years. The transaction of management charges has been accepted to be at arm's length during the assessment proceedings of STAR Ltd. in AY 2011-12 and all previous assessment proceedings of channel companies as well as in STAR Ltd. 38. Hence, the above activities are management and administration activities undertaken for STAR Ltd and the channel c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod, 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 companies based on percentage of sales agreed between Nalco Pacific and the group companies. For instance, the assessee, under the agreement, agreed a net remittance to Nalco Pacific for the intra-group services up to a maximum of 2% of net sales for each calendar year. This method of allocation has been approved by the OECD Guidelines. Accordingly, the second ground of CIT(A) that the intra-group service charge under the agreement between the assessee and Nalco Pacific was fixed not with reference to any particular service and the intra-group service charge was calculated at a fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee that the AO cannot question the benefit derived by the assessee is also misplaced. The Delhi High Court in the case of CIT vs. Cushman & Weikfield (India) Pvt. Ltd (2014) 46 taxmann.com 317 (Delhi) has held that this can be done. In the present case the DRP has also applied itself to the issue and held against the assessee. The Management Services Agreement relied upon by the assessee (refer Pages 873 of the assessee paper Book) is of no assistance. This agreement between entities under their old names in fact mentions that the Management Service Agreement stands terminated ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 is the prerogative of the assessee. The reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue authorities. We are of the view that the TPO cannot question the commercial viability of the expenses incurred by the assessee for its own business and the commercial viability of the expenses incurred by the assessee which were necessary to carry on the business cannot be questioned. Even the transactions of management charges have always been accepted to be at arm's length in the previous assessment proceedings of the channel compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 technical capabilities to effectively broadcast channels and negotiate favorable terms with distribution platforms. During these years, the assessee acted as an agent for the channel companies and rendered services in connection with these channels. Pursuant to the merger, the ownership of the channels held by the Merged Entities (i.e. Star Plus, Star Utsav, Star One and Star Gold) moved to the assessee, and effectively, the assessee became the broadcaster of these channels. However, to broadcast them under the STAR brand and logo, the assessee had to obtain a license to use th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Ltd. vs. DCIT - [2016] 71 taxmann.com 57 (Kolkata Tribunal) wherein 'NIL' arm's length price as determined by TPO was disregarded and royalty paid @ 2% of net sales, approved by RBI under the automatic approval scheme was considered to be at arm's length. The relevant extract is reproduced below for easy reference: "In the instant case, TPO was authorised to determine, by order in writing, the arm's length price of an international transaction in accordance with section 92C(3). The TPO mentioned in his order that during the course of hearing in response to no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 distributes channel CNBC-TVi8 and CNN-IBN, pays an effective franchise fee of 5.14% of its revenue to a third-party entity (This can be verified from page no 918 to 920 of the factual paper book of assessee for AY 2012-13) and Playboy Entertainment Group, Inc. receives a brand royalty of 2.5% of the net sales earned by a joint venture - The Playboy Japan Inc. set up to operate a subscriber based television channel in Japan (Refer page 921 to 925 of the factual paper book for AY 2012-13) 52. He further explained from the facts that the effective rate of brand license fees for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 paragraphs which we have quoted above. 22. Even Rule 10B(1)(a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditure was unremunerated or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee at pages 30-31 of its Order, which is also relied on. 55. During the course of the hearing the DR has argued that in earlier years Star Ltd was charged 50% of its income as brand royalty and this was claimed as evidence that the brand licensing fee is justified. However, the attention of the ITAT was invited to the establish that 50% that the treatment of an amount in the hand of another person is not determinative of the allowability of an expense in the hands of the first person. This can be explained with the help of various examples as will he done orally. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Ltd for AY 2008-09 which was considered as appropriate while upholding the profit split of 50:50 mechanisms as appropriate on basis of the same. The said order of the TPO forms part of the legal paper book (refer case law at Sr. no. 30 of legal paper book of assessee for ÀY 2012-13). After considering the FAR analysis, the TPO concluded and accepted profit split of (50:50 i.e. profit split of 50% to channel companies and 50% to Star Ltd) at page 13 of the order (refer case law at sr. no. : 30 of legal paper book for ÀY 2012-13). 58. In light of the said obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 carry on the business. Further, where SIPL were to decide that the channels that came within its ownership shall he treated as completely new channels and broadcasted with a new look and re- branding approach, the same would not have come without a substantial additional cost and effort. Not only would the assessee be needed to expend money but would also need to develop new strategies for promoting its channel, creating awareness amongst viewers and work towards achieving brand loyalty and credibility. Thus, since SIPL could not run its operations without the Star bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Number 7 The learned Transfer Pricing Officer during the year under consideration has erred in exceeding the jurisdiction in determining the transaction at NIL taking the view that the Appellant did not derive any benefits from payment of brand licensing fees. Ground No. 8 The learned Transfer Pricing Officer, during the year under consideration, has erred in exceeding his jurisprudence by disallowing depreciation, which is under the purview of the learned Assessing Officer." 63. We find that this issue is already taken into consideration vide paras 45 to 61 of this or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering 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. The learned Counsel for the assessee stated that the assessee has not earned any exempt income and hence, no disallowance can be made by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. This fact is noted by AO in its order and the contentions of the assessee were also before AO as well as before DRP. We note that this issue is squarely covered by the decision of Hon'ble Bombay High Court, Nagpur Bench in the case of Pr. CIT vs. Ballarpur Industries Limited in Income Tax Appeal No. 51 of 2016, wherein this issue has been considered and finally following the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty 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 matter back to the file of the AO by observing as under: - "7. According, to this issue the matter of controversy is that whether, the learned CIT(A) has erred in upholding the disallowance of ₹ 30,63,248/- represented the expenditure incurred by the Appellant in respect of reimbursement of property taxes to Precision Component(P) Ltd.(PCPL). It is argued by the assessee that in accordance with the letter dated 01.04.2001 to the PCPL, the assessee company was under obligation to pay that property tax and the said tax was paid. Therefore, the expenditure to the tune of ₹ 30,63,248/- is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideration vide paras 67 to 69 of this order for earlier assessment year i.e. AY 2011-12. 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. 72. 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 in not allowing depreciation in relation to computer software held as capital in nature in earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under: - "23. Have erred in not allowing depreciation on cumulative additions made to leasehold improvements in earlier years @10% of ₹ 33,34,911/-. Your appellant prays to please direct the learned AO to allow depreciation of ₹ 33,34,911 on cumulative additions made to leasehold requirement in earlier years while computing taxable income." 79. We find that this issue is already taken into consideration vide paras 76 & 77 of this order for earlier assessment year i.e. AY 2011-12. 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 ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 treated as computer and eligible for depreciation at the rate of 60%. Your appellant prays that the above form a part or are connected or related to the computer are to be treated as computer and eligible for depreciation at the rate of 60%." 84. We find that this issue is already taken into consideration vide paras 80 to 81 of this order for earlier assessment year i.e. AY 2011-12 in revenue's appeal. 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 85. The next issue in this appeal of Revenue's for AY 2011-12 in ITA No. 1724/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal 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, in its order dated 28.03.20 14 in the case of ADIT(I7)2(2), Mumbai Vs. Viacom 18 Media Pvt. Ltd. answered in the affirmative, the following questions of law raised by the Department - i) 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, yes; and ii) Whether payments made for use/ right to use of 'process' are 'royalty' in terms of the Income-tax Act, 1961- Held Yes." 91. We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We noted that the DRP has considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J 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 retrospective amendment to the provisions of Section 9(1)(vi) of the Act. Your appellant prays that payment of channel placement fees/ carriage fees is not in the nature of process royalty basis retrospective amendment to Section 9(1)(vi) of the act. Ground Number 17 Have erred in not appreciating that the disallwonce under section 40(a)(Ia) of the Act cannot be made in case of alleged short deduction of tax deducted at source (TDS). Your appellant prays that no disallowance under section 40(a)(ia) of the Act can be made in case of short deduction of TDS. Ground No. 18 have erred in appreciating that the disallowance under section 40(a)(ia) of the Act should not be made where the taxes so deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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