2010 (5) TMI 949

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..... the assessee are as follows: Ground No. 1 The learned CIT(A) has erred in holding that the appellant is a conduit for Satellite Television Asian Region Limited ( Star Ltd. ). Ground No. 2 The learned CIT(A) has erred in holding that the Star India Pvt Ltd is a dependent agent of Star Limited. Ground No. 3 Having held in Ground No. 1 of appeal that the appellant is a conduit of Star Ltd, the learned CIT(A) has not considered it relevant to adjudicate on the balance grounds of appeal as detailed below: (i) concluding that the appellant has a permanent establishment in India under the double taxation avoidance agreement executed between India and the Netherlands ( Netherlands treaty ); (ii) without prejudice .....

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..... of CBDT circular no. 23, where a non resident s sale to Indian customers are secured through an agent, the assessment in India of the income arising from the said transaction will be restricted to amount of profit which is attributable to the agents services. No doubt, this circular is now withdrawn with effect from 22nd October 2009 but a withdrawal of the circular, as is the settled legal position, is only prospective in nature. In the relevant period, the circular was very much in force and cannot be ignored. Now, whether the advertising revenues are taxed in the hands of the assessee company or in the hands of the STAR Limited, there is no dispute that the advertising revenues are generated through the commission agent i.e. Star India .....

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..... sregard the existence of the assessee company and proceed to tax the entire advertising revenue in the hands of its parent company. It is difficult to understand the reasoning adopted by the CIT(A) who has observed that given the facts of case, it would be more appropriate to tax the income in the hands of the STAR Limited. He exercised a choice which was not available to him. What is to be taxed in the hands of STAR Limited is to be decided when the assessment of STAR Limited is finalized, and how can any finding be given against STAR Limited without even hearing the said assessee. The course of action adopted by the CIT (A), in taxing the income in the hands of the STAR Hong Kong rather than doing so in the hands of the assessee, does n .....

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