9911796707
TMI Blog2020 (6) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... diture under section 40 (a) (ia) - sale of advertisement time on its various channels, this advertisement time is sold generally through advertisement agencies - HELD THAT:- As decided in assessee s own case for assessment year 2009 10 [ 2017 (7) TMI 867 - ITAT DELHI] referring to issue is of treatment of commission paid to the advertising agencies AO is directed to not to make this addition in the assessment order. Expenditure on obtaining license for use of accounting software - revenue or capital expenditure - HELD THAT:- This issue has already been decided while deciding the appeal of the revenue wherein following the order of the coordinate bench for assessment year 2009 10 [ 2017 (7) TMI 867 - ITAT DELHI] the software expenditure disallowed by the learned assessing officer deleted. Therefore this ground of appeal of the assessee deserves to be allowed. Even otherwise the assessee has not purchased the software but has purchased the license to use this software for its accounting purposes. That is not capital expenditure but revenue expenditure. In view of this ground of the assessee is allowed. TPA - ALP of the corporate Guarantee - non making reference to the TPO - HELD THAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Maharishi, Accountant Member For the Assessee : Shri Sachit Jolly, Adv, Shri Rohit Garg, Adv, Shri Siddharth Joshi, Adv For the Revenue : Shri H. K. Choudhary, CIT DR ORDER PER PRASHANT MAHARISHI, A. M 1. These are the cross appeals filed by the assessee, M/s New Delhi Television Ltd (the appellant) in ITA number 3865/Del/2014 and The Asst Commissioner Of Income Tax, Circle 13 (1), New Delhi (The Learned AO) in ITA number 3996/Del/2014 for Assessment Year 2008 - 09 against the order of The Commissioner Of Income Tax (Appeals) - XX, New Delhi (The Learned CIT - A) wherein, the appeal filed by the appellant against the order passed under section 143 (3) of The Income Tax Act, 1961 (The Act) dated 3/8/2012 was partly allowed. 2. The assessee has raised the following grounds of appeal in ITA No. 3865/Del/2014 for the Assessment Year 2008-09:- "1. That on facts and in law the Commissioner of Income Tax (Appeals) {hereinafter referred to as "CIT(A)" erred in not appreciating that the order of assessment dated 3rd August 2008 passed by the Assistant Commissioner of Income Tax, Circle-13(1), New Delhi {hereinafter referred to as the "AO"} under section 143(3) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) erred in sustaining disallowance made by the AO without appreciating the fact that no exempt income was derived by the appellant in the year under consideration. 5.3 That on facts and in law the CIT (A) erred in not appreciating that no expenditure was incurred by the assessee in order to earn any income which is exempt from tax. 5.4 That on facts and in law the CIT(A) erred in not appreciating that investments in group companies and others were made by the appellant only from non-interest bearing funds. 6. That on facts and in law the CIT (A) erred in upholding the disallowance made by the AO of ₹ 7,38,43,516/- being the transmission and up linking charges paid to M/s Intelsat Corporation by invoking provisions of section 40(a)(i) of the Act. 6.1 That on facts and in law the CIT(A) erred in upholding that the transmission and up-linking charges paid to M/s Intelsat Corporation are chargeable to tax in India as income from "Royalty" so defined under section 9(1 )(vi) of the Act and under the relevant Agreement for Avoidance of Double Taxation (AADT). 6.2 That on facts and in law the CIT(A) erred in holding that by virtue of Article 3(2) of the India-US A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal on the issue and the matter is sub-judice. 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance of commission of ₹ 45,53,30,999/- u/s 40(a)(ia) of the Act by relying on the decision of the DRP in the assessee's own case for the AY 2009-10 ignoring the fact ignoring the fact that he revenue is already in appeal on the issue and the matter is sub-judice. 3.1 On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the above disallowance by ignoring the fact that the space for the advertisements was sold through agents and that the assessee and its agencies had relationship of principal and agent and as such the payments were liable for deduction of tax at source. 4. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of ₹ 18,72,00,000/- on account of Corporate Guarantee Charges by relying on the decision of Hon'ble DRP in assessee's own case in the AY 2009-10 ignoring the fact that the department is already in appeal against the order and the decision is still pending." 4. Briefly, the fact shows tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gain on sales of shares of Astra Avani networks Limited 105789125 confirmed 7. We first proceed to decide the ITA number 3996/Del/2014 filed by the learned assessing officer. 8. The first ground of appeal is that during the year under consideration the appellant charged expenses amounting to ₹ 118343111 under the head employee stock option expenses to its profit and loss account. The employees were covered under the ESOP 2004 scheme of the appellant. In its computation of taxable income, the appellant added back sum of ₹ 1 18343111 being the amount debited to profit and loss account and claimed deduction of ₹ 1 78656690/- which was recalculated as the expenses incurred on account of ESOP . The assessee computed the claim as per the securities and Exchange Board of India guidelines which mandated that the difference between the market price and the price at which the option is exercised by the employee is to be debited to the profit and loss account as it is a ‗benefit' conferred on the employee which could not be taken back by the employer company. The learned assessing officer disallowed the above expenditure stating that these expenses are notional e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 35 taxmann.com 335. Therefore he directed the learned assessing officer to consider the above expenditure as deductible expenditure under section 37 (1) of the act and the assessing officer was directed to work out the amount of ESOP expenses to be allowed in assessment year 2008 - 09 in accordance with the decision of the special bench of the tribunal. Thus he deleted the disallowance accordingly. 10. The learned departmental representative supported the order of the learned assessing officer and submitted that ESOPs expenditure are notional expenditure. 11. The learned authorised representative submitted that the above issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in assessee's own case for assessment year 2006 - 07 and 2007 - 08. 12. We've carefully considered the rival contention and perused the orders of the lower authorities. We find that identical issue is covered in favour of the assessee by the decision of the honourable Delhi High Court in assessee's own case for assessment year 2006 - 07 and 2007 - 08. The order of the honourable High Court for assessment year 2007 - 08 reported in 99 taxmann.com 401 (Delhi)/[ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees is to be debited to the profit and loss . . . the Tribunal in its order stated that it was a benefit conferred on the employee. So far as the company is concerned, once the option was given and exercised by the employee, the liability in this behalf got ascertained. This was recognised by the SEBI and the entire employees stock option plan was governed by the guidelines issued by the SEBI. On the facts thus found, the Tribunal held that it was not a case of contingent liability depending on the various factors on which the assessee had no control. The expenditure in this behalf was an ascertained liability, thus the expenditure incurred being on lines of the SEBI Guidelines, there could be no interference in the relief granted by the assessing authority for the expenditure arising on account of the employees' stock option plan. This expenditure incurred as per the SEBI Guidelines and granted by the Officer could not be considered as erroneous one calling for the exercise of jurisdiction under section 263 of the Act." 4. The Special Bench ruling in Biocon Ltd. (supra) considered the matter rather elaborately and also examined all the previous decisions. It scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , mean any privilege, service, facility or amenity directly or indirectly provided by an employer to his employees (including former employees) by reason of their employment'. Charging section 115WA of this Chapter provides that : 'In addition to the Income-tax charged under this Act, there shall be charged for every assessment year . . .'fringe benefit tax in respect of fringe benefits provided or deemed to have been provided by an employee to his employees during the previous year'. Section 115WB gives meaning to the expression 'fringe benefits'. Sub-section (1) provides that for the purposes of this Chapter, 'fringe benefits' means any consideration for employment as provided under clauses (a) to (d). Clause (d), which is relevant for our purpose, states that: 'any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees)' shall be taken as fringe benefit. The Explanation to this clause clarifies that for the purposes of this clause,-(i) 'specified security' means the securities as defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability is incapable of proper quantification at that stage and is dischargeable at a future date. It follows that the deduction for an expense is allowable on incurring of liability and the same cannot be disturbed simply because of some difficulty in the proper quantification. A line of distinction needs to be drawn between a situation in which a liability is not incurred and a situation in which the liability is incurred but its quantification is not possible at the material time. Whereas in the first case, there cannot be any question of allowing deduction, in the second case, deduction has to be allowed for a sum determined on some rational basis representing the amount of liability incurred." 5. Having regard to the above discussion, especially that the previous order dated July 12, 2016 in ITA No. 366 of 2016 had considered the same items of expenditure, under section 34, we are of the opinion that no question of law arises. The appeal is accordingly dismissed." 13. In view of this, we dismiss ground number [1] of the appeal of the learned assessing officer. 14. The second [2] ground of appeal is against the order of the learned CIT Appeal in reducing the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer. 17. The learned departmental representative vehemently supported the order of the learned assessing officer and held that when the software is held to be capital expenditure, only depreciation is allowable thereon and it cannot be revenue expenditure. 18. The learned authorised representative vehemently supported the order of the learned CIT - A and stated that the order of the learned CIT - A follows the order of the learned Dispute Resolution Panel in assessee's own case for assessment year 2009 - 10 which was also upheld by the coordinate bench. He therefore submitted that the issue is squarely covered in favour of the assessee. 19. We have carefully considered the rival contention and perused the orders of the lower authorities. Identical issue arose in case of the assessee for assessment year 2009 - 10 [2017] 83 taxmann.com 282 (Delhi - Trib.)/[2017] 189 TTJ 1 (Delhi - Trib.) wherein the coordinate bench decided the issue as under:- "61. Ground No. 3 of the appeal of the Revenue is against direction of the ld DRP to delete the disallowance of ₹ 8245612/- on account of software expenses. During the year the assessee has incurred expenditure of ₹ 3243 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure under the head upgradation of software and other software amounting to ₹ 2,07,009/- and 5,58,006/- respectively is held as allowable deduction during the year. AO is directed to delete the addition made in this regard. " Therefore, DRP is also of the view that these expenditures are revenue in nature and hence allowable. AO is directed not to make this addition in assessment order. Objection 1 is treated as disposed off." 62. The ld DR relied upon the order of the ld Assessing Officer whereas the ld AR relied upon the orders of the ld DRP. 63. We have carefully considered the rival contentions. The assessee has been allowed the identical claim in earlier years by the ld CIT(A) and based on that decision the ld DRP was also of the view that the above expenditure incurred by the assessee is revenue in nature. The ld DR could not controvert that why the order of the ld DRP is erroneous. In view of this we do not find any infirmity in the direction issued by the ld DRP. In the result we confirm the direction of the DRP. In view of this ground No. 3 of the appeal of the revenue is dismissed." As there is no change in the facts and circumstances of the case, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch in assessee's own case for assessment year 2009 - 10 and therefore the issue is squarely covered in favour of the assessee. 23. We have carefully considered the rival contention and find that the issue is squarely covered by the decision of the coordinate bench in assessee's own case for assessment year 2009 - 10 wherein it has been held as under:- "54. The assessee preferred objection before the ld Dispute Resolution Panel who vide direction dated 31.12.2013 vide para No. 6 has held as under:- '6. Disallowance of commission paid u/s 40(a)(ia) amounting to ₹ 41,54,41,111/- The AO has disallowed the sum on the ground that the assessee should have deducted tax on the gross amount received by the advertisement agency. On the other hand, the assessee had stated that its case is squarely covered by the decision of the jurisdictional High Court in the case of CIT v. Living Media India Ltd. and in the case of JagranPrakashan Ltd. v. DCIT [345 ITR 288 (2012)] of the Allahabad High Court. The AO has tried to differentiate the decision in the case of Living Media India Ltd. by stating that the assessee is in electronic media whereas the decision quoted is on the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [2013] 35 taxmann.com 105/359 ITR 106. He therefore stated that there is no error in the order of the ld DRP. 56. We have carefully considered the rival contentions and also perused the facts of the case as well as the decision of the Hon'ble Delhi High Court. We are convinced with the argument of the ld AR that the issue is squarely covered by the decision of Hon'ble jurisdictional high court. The ld DR could not controvert that how this issue is not squarely covered in favour of the assessee and he also could not show us any other judicial precedent so as to persuade us to disagree with the views of the ld DRP. Further merely because the revenue has filed an SLP before the hon'ble Supreme Court against the decision of Delhi High Court cannot be a reason for sustaining the disallowance. In view of this we do not find any infirmity in the direction of the ld DRP in directing the ld Assessing Officer to delete the disallowance commission paid amounting to ₹ 415441111/-. In the result the ground No. 1 of the appeal of the Revenue is dismissed." 24. Therefore in view of the decision of the coordinate bench in assessee's own case for assessment year 2009 - 10 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [2017] 86 taxmann.com 158 (Delhi - Trib.) However keep the issue alive this ground is contested. 30. The learned departmental representative vehemently supported the order of the learned CIT - A and submitted that the order is not barred by limitation. 31. We have carefully considered the rival contention and perused the orders of the lower authorities. The identical issue has been decided by the coordinate bench where the accountant member is the author of that decision in AT & T Global Network Services (India) (P.) Ltd. v. Dy. CIT [2017] 86 taxmann.com 158 (Delhi - Trib.) dated 18.09.2017 wherein the issue of the limitation was decided. This order of the coordinate bench was challenged before the honourable Delhi High Court. Honourable Delhi High Court in [2018] 97 taxmann.com 462 (Delhi)/[2018] 258 Taxman 197 (Delhi) approved the order of the coordinate bench. In view of this ground number [1] of the appeal of the assessee is dismissed. 32. Ground number [2] of the appeal is against the order of the learned CIT - A in upholding the disallowance of ₹ 2216476/- incurred by the appellant for obtaining license for use of accounting software holding that same were capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the corporate Guarantee. 34. Ld AO noted that during the year NDTV network plc United Kingdom [ subsidiary of appellant] has raised step up coupon Bonds 100 million US dollars. NDTV [ appellant] is an ultimate holding company of NDTV network plc. For raising the step-up coupon bonds, a corporate guarantee was given by NDTV Ltd. The assessee was asked to explain why the transaction of giving a corporate guarantee to subsidiary may not be treated as international transaction and Consequently, why the adjustment of the arm's length price of the guarantee should not be made. 35. Assessee explained on 28 May 2012 that no corporate guarantee was issued by the assessee for the above impugned transaction. Assessee also informed that the audited accounts of the assessee company states that the appellant company has merely given an undertaking to provide a corporate guarantee for and behalf of the NDTV Network PLC United Kingdom company as and when required. However, no such corporate guarantee was ever issued by the appellant. Therefore, question of any benefit in the hands of the assessee does not arise. It was also stated that it is not an international transaction. 36. Further on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue. The AO also noted that no services could be said to be received wherein associated enterprises for reasons of its affiliation alone has a credit rating higher than it would if it were unaffiliated but an intragroup services would usually exists when the higher credit rating was due to a guarantee by another group member or where the enterprise benefited from the groups reputation deriving from global marketing and public relations campaign. Therefore, he held that assessee company has provided the guarantee to its associated enterprise for raising a step-up coupon bonds. The transaction has resulted in to a direct benefit to its associated enterprise and therefore there is an active promotion of the multinational groups attributes which positively enhances the profit-making potential of particular members of the group. Thereafter, he referred to the various judicial pronouncements on the issue and rejected claim of the assessee that it has only gave an undertaking and no corporate guarantee has been given and the bonds have been enashed prior to the three years after the closing date therefore the company has not entered into a corporate guarantee. He referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a) to (d) of subsection (3) of section 92C of the act before referring the case to the TPO for the following reasons:- (i) proceedings under section 92C and 92CA are quite independent of and distinct from each other and the proceedings under section 92CA (1) of the act are not dependent on the proceedings under section 92C (3) of the act (ii) the provisions of section 92C (3) of the act confers power on the AO to determine the ALP himself where the circumstances mentioned in clause (a) to (d) of the subsection exist. In such cases, the AO is not bound to refer the case of the assessee to the TPO. On the other hand, the AO may refer the case of the assessee to the TPO if he considers it necessary or expedient to do so. (iii) The expression necessary or expedient is quite distinct from an independent of the circumstances mentioned in section 92C (3). Considering the facts of the case, I hold that the AO can himself determine the ALP of corporate guarantee under section 92C (3) without making reference to the TPO. Thus the action of the AO is upheld." 42. Further with respect to the determination of the arm's length price, he referred to the order of the learned Dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement. According to clause .2 of that appendix, guarantee in relation to bondholders redemption was mentioned that the parent company (appellant) undertakes to enter into, by not letter then 120 days prior to date i.e. three years after the closing date, a guarantee pursuant to which the parent company will guarantee the due and punctual payment of the outstanding amount of the bonds due and payable following receipt of a put notice in accordance with the condition number 9.6. It is further mentioned that however, until such time as the parent company gives a notice of extension of the guarantee to the trustee in accordance with condition 19, in the even to of default by the company in payment of the outstanding amount to bondholders due and payable under condition number 9.6, holders of bonds then outstanding shall only be entitled to direct recourse under the guarantee against the parent company in respect of 40% of the specified sum. He submitted that therefore the ld CIT (A) restricted the addition to the extent of 40 % of the addition made by the ld AO. He therefore submitted that such that it never came to happen as bonds were redeemed by the subsidiary company. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer pricing officer did not make any transfer pricing adjustment, however, the learned assessing officer has made the adjustment. He stated that honourable Bombay High Court in Income Tax Appeal Number 281 of 2016 in case of The Principal Commissioner Of Income Tax Versus S G Asia Shareholdings (India) Private Limited dated 27 August 2018 held that for determining the arm's length price of an international transaction the assessing officer should make a reference to the transfer pricing officer which is also governed by the CBDT circular. The honourable High Court also held that once the circular goes unchallenged and binds the revenue, then in the absence of all these, the tribunal held that the assessing officer order cannot be sustained and he could not have proceeded to make the transfer pricing adjustment. He therefore submitted that the adjustment made by the learned assessing officer who is not empowered to do so cannot make any adjustment on account of arm's length price of the corporate guarantee. 46. He further referred to the fact that the special bench was constituted wherein it was submitted by the assessee that the assessee only gave an undertaking and not a corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result into an international transactions. He further referred to the explanation 1 of section 92B and submitted that the transactions relating to lending and guarantee does not have any impact on the profit and loss account of that year and also very subsequent years. There is no contemplation of any future date or effect arising on such profit and loss account. Hence, there is no international transaction established by ld AO even otherwise. None exists. 48. He further stated that as per agreement dated 24/5/2007 the Jefferies international was an underwriter of hundred percent of the subscription. He submitted that when the subscription of the hundred million US dollar issued by the subsidiary is fully underwritten, there is no reason to give any guarantee by the appellant to its subsidiary company. 49. He further referred to the annual account of New Delhi television Ltd wherein in Note No [5] in schedule B ‗Notes to Accounts' it is mentioned that on 30 May 2007, NNPLC has raised funds by issuing hundred million dollar coupon convertible bonds due in 2012 (redeemable at a premium of 7.5%). In connection with this, the company has given an undertaking to provide a corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be any reason of giving a corporate guarantee. He submitted that nobody gives a corporate guarantee for security of his own money. He submitted that this notice was challenged by the assessee which was decided by the honourable Delhi High Court in 84 taxman.com 136 (Delhi) wherein the revenue itself is contested that this money belongs to the appellant only. He extensively referred to the various contentions raised by the revenue therein. He therefore submitted that on this count also the addition made by the learned assessing officer cannot sustain. 53. In view of the above submission he submitted that that the addition made by the learned assessing officer is not sustainable on law as well as on the facts of the case. 54. The learned CIT DR supported the orders of the lower authorities. He submitted that there is no error in the order of the learned assessing officer in determining the arm's length price of an international transaction. He referred to assessment order para number 7.1 and 7.2 of the assessing officer wherein the learned assessing officer specifically referred the matter to the learned transfer pricing Officer. He submitted that when the learned transfer pricin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uture date. It is amounting to issuing the guarantee today itself. He submitted so because of the reason that the assessee could not have backed out of this undertaking issued by it to the investors. He therefore submitted that giving an undertaking to give a corporate guarantee at a future date is itself a corporate guarantee. He further referred to the financial of the subsidiary company and submitted that that company in absence of the guarantee or undertaking by the appellant could not have garnered $ 100 million on its own. 59. He further referred to the subscription agreement and submitted that if the assessee is not to be involved in the whole financial transaction of the subscription of the convertible bonds of $ 100 Million, there was no reason that the name of the appellant could have been taken as one of the parties to the subscription agreement. He submitted that inclusion of the name of the appellant as one of the parties in the subscription agreement itself shows that assessee is issuing an undertaking to guarantee the recovery of the sum of the investors. He therefore submitted that this is also an international transaction. 60. Referring to the order of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, therefore, while computing the assessment under Section 143(3) of the Income Tax Act, 1961 ('the Act', for short), by his order dated 27.12.2007 made an addition of ₹ 2,89,82,746/- under Section 92 of the Act. (B) The respondent being aggrieved preferred an appeal before the CIT(A)1, who by his order dated 16.02.2009 confirmed the addition made by the Assessing Officer and dismissed the appeal. The matter was carried further by filing ITA No.2399/Mum/2009 before the Tribunal. (C) The Tribunal by its order dated 22.04.2015 set aside the findings rendered by the first two authorities and held that transfer pricing adjustment made by the Assessing Officer was contrary to the mandatory instructions issued by CBDT2 in its Instruction No.3/2003 dated 20.05.2003. While allowing the appeal, the Tribunal observed as under:- "16.1 After considering the entire judicial discussion discussed hereinabove, in our considered opinion, the mandatory instructions issued by the Central Board of Direct Taxes cannot be brushed aside lightly. By not making reference to the Transfer Pricing Officer, the AO has breached the mandatory instructions issued by the CBDT thereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be computed having regard to arm's length price between the associated enterprises. Further, in terms of Section 92CA, a Transfer Pricing Officer, on a reference received from the Assessing Officer, is required to determine arm's length price of an international transaction by an order and the Assessing Officer is required to compute the income having regard to the price so determined by the TPO. The notification regarding jurisdiction of TPOs and their controlling officers have been issued by the Central Board of Direct Taxes and the copies thereof are enclosed for ready reference as Annexure II. In order to maintain uniformity of procedure and to ensure that work in this important area proceeds smoothly and effectively, the following guidelines are hereby issued: (i) Reference to Transfer Pricing Officer (TPO):- The Power to determine arm's length price in an international transaction is contained in sub-section (3) of section 92C. However, section 92CA provides that where the Assessing Officer considers it necessary or expedient so to do, he may refer the computation of arm's length price in relation to an international transaction to the TPO. Sub-section (3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference under section 92CA be made to the TPO. If there are more than one transaction with an associated enterprise or there are transactions with more than one associated enterprises the aggregate value of which exceeds ₹ 5 crores the transaction should be referred to TPO. Before making reference to the TPO, the Assessing Officer has to seek approval of the Commissioner/Director as contemplated under the Act. Under the provisions of section 92CA reference is in relation to the international transaction. Hence all transactions have to be explicitly mentioned in the letter of reference. Since the case will be selected for scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment. The threshold limit of ₹ 5 crores will be reviewed depending upon the workload of the TPOs. The work relating to selection of cases for scrutiny and reference to TPO on the above basis in respect of pending returns filed for the assessment year 2002-03 should be completed by June 30, 2003. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under sub-section (4) of section 92C, the Assessing Officer has to compute total income of the assessee having regards to the arm's length price so determined by the TPO. While sub-section (4) of section 92CA clearly provides that such computation of income will be made having regard to the arm's length price so determined by the TPO, it is imperative that a formal opportunity is given to the taxpayer before making adjustments to the total income. The opportunity with regard to the determination of arm's length price has already been given by the TPO and, therefore, opportunity by the Assessing Officer, for final determination of income under sub-section (4) of section 92C, read with sub-section (4) of section 92CA is to be given by the Assessing Officer. (iv) Maintenance of database: It is to be ensured by the DIT (Transfer Pricing) that the reference received from the Assessing Officer is dealt with expeditiously so as to leave the Assessing Officer with sufficient time to offer an opportunity of being heard of the taxpayer before computing the income and completing the assessment. In order to ensure that all the references are attended to timely and effectively, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPO3. 6. However, the following expressions employed in Instruction No.3/2003 put the matter in a different perspective: - "… ...The Assessing Officer can arrive at prima facie belief on the basis of these details whether a reference is considered necessary. No detailed enquiries are needed at this stage and the Assessing Officer should not embark upon scrutinizing the correctness or otherwise of the price of the international transaction at this stage… … If there are more than one transaction with an associated enterprise or there are transactions with more than one associated enterprise the aggregate value of which exceeds ₹ 5 crores, the transactions should be referred to the TPO. … … Since the case will be selected for scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment. ** ** ** (vi) Role of the Assessing Officer after receipt of "arm's length price": Under sub-section (4) of section 92C, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heminvest ltd. This fact has not been disputed by the learned departmental representative. Honourable Delhi High Court in Cheminvest Ltd versus CIT 378 ITR 33 and held that:- "23. In the context of the facts enumerated hereinbefore the court answers the question framed by holding that the expression "does not form part of the total income" in section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, section 14A will not apply if no exempt income is received or receivable during the relevant previous year." 66. Thus as there is no exempt income is received or receivable during the relevant previous year in the case of the assessee for this year, the disallowance under section 14 A cannot be made. Accordingly we allow ground number [5] of the appeal of the assessee and direct the learned assessing officer to delete the disallowance of ₹ 8 96000/-. 67. Ground number [6] of the appeal of the assessee is against the order of the learned CIT - A wherein he has uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng charges for the non-deduction of TDS u/s 40(1)(ia) paid to Intelsat? Please note that we have already given the details of transmission and uplinking charges to your honour vide our submission dated 11th March 2013. We reiterate that the provisions of TDS/withholding taxes were fully complied with. The payments were made after obtaining the requisite certificates from the Chartered Accountant as defined in the explanation to section 288B of the Income Tax Act'1961. Copies of Form 15CA/CB issued by an independent chartered accountant were also placed before you. We respectfully submit that there should not be any disallowance on account of non-deduction of TDS/withholding taxes from the payments made to Intelsat Corporation, we are giving below a brief note on the same: During the year under consideration, the assessee Company booked the expense of ₹ 7,81,23,855/- on account of transponder services received from M/s Intelsat Corporation (Intelsat) in terms of its agreement for the use of satellite (transponder capacity). Before we proceed to our specific submission and a fact of the case, we here-in-below submits the nature of transaction entered between the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a non-resident company incorporated under the laws of USA and is a tax resident of USA and, therefore, the provisions of DTAA entered between India and USA are applicable on Intelsat which are more beneficial to Intelsat. For the year in question, the revenue of transmission and up-linking facilities in the hands of Intelsat Corporation were already held not taxable by the Honble Delhi High Court vide order dated 28/9/2012. The issue whether the recipient of such charges is liable to tax in India is also settled by the Jurisdictional High Court in the case of Asia Satellite Telecommunications Co. Ltd. v. DIT, (332 ITR 340) in favour of the taxpayer. Similarly, such charges were also held not liable to tax in India in view of Article 12(3) of DTAA entered between India and USA in the case of DCIT v. PanAmSat International System Inc (103 TTJ 861 (Delhi). In view of the facts and the legal position stated above, it is clear that the assessee Company had no liability to deduct tax on such payments under section 195 of the Act which provides that any person would liable to deduct tax if the payments made to non-resident are chargeable to tax. When it has already been held be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to accrue or arise in India.... (vi) income by way of royalty payable by- (a) The Government; or (b) A person who is a resident, except where the royalty is payable in respect of any right,property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or.... (c) Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of , any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process s or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976, and the agreement is approved by the Central Government. 87a. Explanation 6 - For the removal of doubts, it is hereby clarified that the expression "process" includes and shall be deemed to have always included transmission by satellite (including up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave always included transmission by satellite (including up-linking , amplification, conversion for down-linkiong of any signal). Since the transmission and uplinking charges are covered under the definition of royalty as define under the provision of section 9 therefore any payment made in respect of royalty to a person who is not resident in India , will also be a income deemed or accrue or arising in India. As the expense of transmission and uplinking charges of ₹ 7,81,23,855/- to M/s Intelsat corporation is a deemed income which has arisen in India therefore, the assesse was liable to deduct TDS on this payment, under the provision of section 195 therefore, this payment of transmission and uplinking charges to M/s Intelsat Corporation is not allowable under the provisions of section 4 (a)(i). I am satisfied that the assesse has furnished inaccurate particulars of its income and has concealed its correct income on this issue, therefore, penalty proceedings u/s 271 (1)(C) of I.Tax Act have been separately been initiated." 58. Aggrieved by the draft order of the ld Assessing Officer assessee preferred objection before the ld DRP who vide para No. 7 of its direction di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2009 - 10, we direct learned assessing officer to delete the disallowance of ₹ 73843516/- on account of non-deduction of tax at source on Transmission and uplinking charges. Accordingly ground number [6], [7] and [8] of the appeal are allowed. 71. [9]th ground of appeal is with respect to the order of the learned CIT - A in upholding the action of the assessing officer in re characterizing the income declared by the appellant as capital gain pursuant to sale of 212500 shares of M/s Astrao Awani Networks Limited as income from other sources and making an addition of ₹ 1 05789125/-. 72. During the year under consideration the assessee has shown income from capital gain amounting to ₹ 105789125/- on sale of shares of Astro awani Networks Limited. The learned assessing officer noted from the para number [3] of the ‗Notes to accounts' of the assessee that assessee has sold its investment in the above company for ₹ 115681000/- to ND TV Emerging Market BV. These shares were acquired by the assessee for ₹ 46.55 per share in February 2007 and on the basis of the valuation report the assessee sold in the month of March 2008 at ₹ 544.38 per sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the action of the learned assessing officer in taxing it as income from other sources is not in consonance with the provisions of the income tax act. 76. The learned CIT DR vehemently supported the orders of the lower authorities. He submitted that when the assessee has purchased the shares before 13 months at miniscule price of a consistent loss-making company and subsequently sold to the subsidiary at a phenomenal price itself shows that it is not a transfer of a capital asset but it is a device to show the higher profit in the books of the company. He therefore supported the reasoning is of the lower authorities. 77. We have carefully considered the rival contentions and perused the orders of the lower authorities. On examination of the facts it is apparent that assessee has sold shares which were purchased by it before 13 months of a company and subsequently sold at substantially higher price to the associate concern of the assessee and disclosed the same as capital gain. It is the shares of an unlisted company which were transferred by the assessee. It is not in dispute that those shares were shown as a capital asset by the company. The CBDT circular dated 2/5/2006 speaks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- 11. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 19th February 2020, this order thereon is being pronounced today on the day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5) The pronouncement may be in any of the following manners:- (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon'ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6-5-2020 read with order dated 23-3-2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that "In case the limitation has expired after 15.03.2020 then the period from 15-3-2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown". Hon'ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, "It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly". The extraordinary steps taken suo motu by Hon'ble jurisdictional High Court and Hon'ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words "ordinarily", in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
